CNY FINANCIAL CORPORATION

                              STOCK OPTION PLAN FOR

                        DIRECTORS, OFFICERS AND EMPLOYEES



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                                   ARTICLE I
                                    PURPOSE

Section 1.1 General Purpose of the Plan .................................  1

                                  ARTICLE II
                                  DEFINITIONS

Section 2.1 Bank.......................................................... 1
Section 2.2 Banking Regulations........................................... 1
Section 2.3 Board......................................................... 1
Section 2.4 Change in Control............................................. 1
Section 2.5 Code.......................................................... 2
Section 2.6 Committee..................................................... 2
Section 2.7 Company......................................................  2
Section 2.8 Disability.................................................... 2
Section 2.9 Disinterested Board Member.................................... 2
Section 2.10 Effective Date............................................... 2
Section 2.11 Eligible Director............................................ 2
Section 2.12 Eligible Employee............................................ 2
Section 2.13 Employer....................................................  2
Section 2.14 Exchange Act ................................................ 2
Section 2.15 Exercise Price .............................................. 2
Section 2.16 Fair Market Value ........................................... 2
Section 2.17 Family Member ............................................... 2
Section 2.18 Incentive Stock Option....................................... 2
Section 2.19 Limited Stock Appreciation Right ............................ 2
Section 2.20 Non-Profit Organization...................................... 3
Section 2.21 Non-Qualified Stock Option................................... 3
Section 2.22 Option....................................................... 3
Section 2.23 Option Period................................................ 3
Section 2.24 Person....................................................... 3
Section 2.25 Plan......................................................... 3
Section 2.26 Retirement................................................... 3
Section 2.27 Share........................................................ 3
Section 2.28 Termination for Cause........................................ 3

                                  ARTICLE III
                               AVAILABLE SHARES

Section 3.1 Available Shares.............................................. 3

                                  ARTICLE IV
                                ADMINISTRATION

Section 4.1 Committee .................................................... 4
Section 4.2 Committee Action ............................................. 4
Section 4.3 Committee Responsibilities.................................... 4

                                   ARTICLE V
                     STOCK OPTIONS FOR ELIGIBLE DIRECTORS

Section 5.1 In General ................................................... 4
Section 5.2 Exercise Price ............................................... 4
Section 5.3 Option Period  ............................................... 5
Section 5.4 Future Eligible Directors..................................... 5

                                  ARTICLE VI
                     STOCK OPTIONS FOR ELIGIBLE EMPLOYEES

Section 6.1 Number of Shares ............................................. 5
Section 6.2 Grant of Options ............................................. 5
Section 6.3 Exercise Price ............................................... 6
Section 6.4 Option Period ................................................ 6
Section 6.5 Vesting Provisions ........................................... 6
Section 6.6 Additional Restrictions on Incentive Stock Options............ 7

                                  ARTICLE VII
                             OPTIONS - IN GENERAL

Section 7.1 Method of Exercise ........................................... 7
Section 7.2 Limitations on Options ....................................... 8
Section 7.3 Limited Stock Appreciation Rights............................. 8
Section 7.4 Expiration Upon Voluntary Resignation......................... 9
Section 7.5 Accelerated Vesting........................................... 9

                                 ARTICLE VIII
                           AMENDMENT AND TERMINATION

Section 8.1 Termination .................................................. 9
Section 8.2 Amendment .................................................... 9
Section 8.3 Adjustments in the Event of a Business Reorganization......... 9

                                  ARTICLE IX
                                 MISCELLANEOUS

Section 9.1 Status as an Employee Benefit Plan........................... 10
Section 9.2 No Right to Continued Employment............................. 10
Section 9.3 Construction of Language .................................... 10
Section 9.4 Governing Law ............................................... 10
Section 9.5 Headings .................................................... 10
Section 9.6 Non-Alienation of Benefits .................................. 10
Section 9.7 Taxes ....................................................... 11
Section 9.8 Approval of Stockholders .................................... 11
Section 9.9 Notices...................................................... 11

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                   CNY FINANCIAL CORPORATION STOCK OPTION PLAN
                      FOR DIRECTORS, OFFICERS AND EMPLOYEES

                                    ARTICLE I
                                     PURPOSE

SECTION 1.1 GENERAL PURPOSE OF THE PLAN.

      The purpose of the Plan is to promote the growth and  profitability of CNY
FINANCIAL  CORPORATION (the "Company") by providing eligible directors,  certain
key officers and employees of the Company,  and its affiliates with an incentive
to achieve  corporate  objectives,  and by  allowing  the Company to attract and
retain  individuals  of outstanding  competence by offering such  individuals an
equity interest in the Company.

                                   ARTICLE II
                                   DEFINITIONS

      The  following  definitions  shall  apply for the  purposes  of this Plan,
unless a different meaning is plainly indicated by the context:

SECTION 2.1 BANK means Cortland Savings Bank, a New York State chartered savings
bank, and any successor thereto.

SECTION 2.2 BANKING  REGULATIONS  means the  regulations  issued by the New York
State Banking Board, the New York State  Superintendent  of Banks or the Federal
Deposit  Insurance  Corporation  and  applicable  to the  Plan,  the Bank or the
Company.

SECTION 2.3 BOARD means the board of directors of the Company.

SECTION 2.4 CHANGE IN CONTROL means any of the following events:

      (a) the  occurrence  of any event upon which any "person" (as such term is
used in sections  13(d) and 14(d) of the  Securities  Exchange  Act of 1934,  as
amended ("Exchange  Act")),  other than (A) a trustee or other fiduciary holding
securities  under  an  employee  benefit  plan  maintained  for the  benefit  of
employees of an Employer;  (B) a corporation owned,  directly or indirectly,  by
the stockholders of the Company in  substantially  the same proportions as their
ownership of stock of the  Company;  or (C) any group  constituting  a person in
which employees of the Company are substantial members,  becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated  under the Exchange Act),  directly
or indirectly,  of securities issued by the Company  representing 25% or more of
the combined voting power of all of the Company's then  outstanding  securities;
or

      (b) the occurrence of any event upon which the individuals who on the date
the Plan is  adopted  by the Board  are  members  of the  Board,  together  with
individuals  whose  election  by the Board or  nomination  for  election  by the
Company's  stockholders  was  approved  by  the  affirmative  vote  of at  least
two-thirds of the members of the Board then in office who were either members of
the Board on the date this Plan is adopted or whose  nomination  or election was
previously  so  approved,  cease for any reason to  constitute a majority of the
members of the Board, but excluding, for this purpose, any such individual whose
initial  assumption  of office  is in  connection  with an actual or  threatened
election  contest  relating to the election of directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A  promulgated  under the Exchange
Act); or

      (c) the stockholders of the Company approve either:

           (i)  a  merger  or  consolidation  of  the  Company  with  any  other
corporation,  other than a merger or  consolidation  following which both of the
following conditions are satisfied:

                (A)  either  (1)  the  members  of  the  Board  of  the  Company
immediately prior to such merger or consolidation constitute at least a majority
of the members of the  governing  body of the  institution  resulting  from such
merger or  consolidation;  or (2) the stockholders of the Company own securities
of the institution resulting from such merger or consolidation  representing 80%
or more of the combined  voting power of all such  securities  of the  resulting
institution  then  outstanding in  substantially  the same  proportions as their
ownership of voting securities of the Company  immediately before such merger or
consolidation; and

                (B) the entity which  results from such merger or  consolidation
expressly  agrees in writing to assume and  perform  the  Company's  obligations
under the Plan; or

           (ii) a plan of complete  liquidation  of the Company or an  agreement
for the sale or  disposition by the Company of all or  substantially  all of its
assets; and

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      (d) any event that would be  described  in section  2.4(a),  (b) or (c) if
"the Bank" were substituted for "the Company" therein.

SECTION 2.5 CODE means the Internal Revenue Code of 1986, as amended  (including
the corresponding provisions of any succeeding law).

SECTION 2.6 COMMITTEE means the Human Resources Committee of the Company or such
other committee of the Company as the Board shall designate.

SECTION 2.7 COMPANY means CNY Financial Corporation, a corporation organized and
existing under the laws of the State of Delaware, and any successor thereto.

SECTION  2.8  DISABILITY  means a  condition  of  total  incapacity,  mental  or
physical,  for further performance of duty with the Employer which the Committee
shall have determined,  on the basis of competent medical evidence, is likely to
be permanent.

SECTION 2.9  DISINTERESTED  BOARD  MEMBER means a member of the Board who (a) is
not a current  employee of the Company or a  subsidiary,  and (b)  satisfies all
other  requirements  which may be necessary so that the Plan  qualifies  for the
maximum  available  benefits under Section 162(m) of the Code and any applicable
rules of the Securities and Exchange Commission under Section 16 of the Exchange
Act.

SECTION  2.10  EFFECTIVE  DATE means the date on which this Plan is  approved by
stockholders  pursuant to section 9.8 hereof,  provided,  however,  that if this
Plan is  approved  by a majority  of the votes cast at the meeting at which this
Plan is  presented  to  stockholders  for  approval but not by a majority of the
votes  eligible to be cast at such meeting,  then  Effective Date shall mean the
later of October 7, 1999, or the date of such stockholder approval.

SECTION 2.11  ELIGIBLE  DIRECTOR  means a member of the board of directors of an
Employer who is not also an employee of an Employer.

SECTION  2.12  ELIGIBLE  EMPLOYEE  means any  employee  whom the  Committee  may
determine to be a key officer or employee of an Employer and select to receive a
grant of an Option pursuant to the Plan.

SECTION 2.13 EMPLOYER means the Company, the Bank and any successor thereto and,
with the prior  approval of the Board,  and subject to such terms and conditions
as may be  imposed  by the  Board,  any other  savings  bank,  savings  and loan
association,   bank,  corporation,   financial  institution  or  other  business
organization or institution.  With respect to any Eligible  Employer or Eligible
Director,  the Employer  shall mean the entity which employs such person or upon
whose board of directors such person serves.

SECTION 2.14 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

SECTION 2.15 EXERCISE PRICE means the price per Share at which Shares subject to
an Option may be purchased upon exercise of the Option, determined in accordance
with section 5.2 or section 6.3, as applicable.

SECTION  2.16 FAIR MARKET  VALUE  means,  with respect to a Share on a specified
date:

      (a) the final reported sales price on the date in question (or if there is
no reported sale on such date, on the last  preceding date on which any reported
sale occurred) as reported in the principal  consolidated  reporting system with
respect to  securities  listed or  admitted to trading on the  principal  United
States  securities  exchange  on which the  Shares  are  listed or  admitted  to
trading; or

      (b) if the  Shares  are not  listed or  admitted  to  trading  on any such
exchange,  the closing bid quotation with respect to a Share on such date on the
National  Association of Securities Dealers Automated  Quotations System, or, if
no such  quotation  is  provided,  on another  similar  system,  selected by the
Committee, then in use; or

      (c) if sections 2.16(a) and (b) are not applicable,  the fair market value
of a Share as the Committee may determine.

SECTION  2.17 FAMILY  MEMBER  means the spouse,  parent,  child or sibling of an
Eligible Director or Eligible Employee.

SECTION 2.18  INCENTIVE  STOCK  OPTION means a right to purchase  Shares that is
granted to Eligible Employees pursuant to section 6.1, that is designated by the
Committee  to be an  Incentive  Stock Option and that is intended to satisfy the
requirements of section 422 of the Code.

SECTION 2.19 LIMITED STOCK  APPRECIATION RIGHT means a right granted pursuant to
section 7.3.

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SECTION 2.20 NON-PROFIT ORGANIZATION means any organization which is exempt from
federal income tax under section  501(c)(3),  (4), (5), (6), (7), (8) or (10) of
the Code.

SECTION 2.21 NON-QUALIFIED STOCK OPTION means a right to purchase Shares that is
granted pursuant to section 5.1 or 6.2. For Eligible  Employees,  an Option will
be a Non-Qualified  Stock Option if (a) it is not designated by the Committee to
be an Incentive  Stock Option,  or (b) it does not satisfy the  requirements  of
section 422 of the Code.

SECTION 2.22 OPTION means  either an Incentive  Stock Option or a  Non-Qualified
Stock Option.

SECTION  2.23  OPTION  PERIOD  means the  period  during  which an Option may be
exercised, determined in accordance with section 5.3 or 6.4, as applicable.

SECTION 2.24 PERSON means an individual, a corporation,  a bank, a savings bank,
a savings and loan  association,  a financial  institution,  a  partnership,  an
association,  a  joint-stock  company,  a trust,  an estate,  an  unincorporated
organization and any other business organization or institution.

SECTION 2.25 PLAN means this Stock Option Plan for Outside  Directors,  Officers
and Employees, as amended from time to time.

SECTION  2.26  RETIREMENT  means  retirement  at or after  the  normal  or early
retirement date set forth in any tax-qualified  retirement plan of the Employer,
but if not defined in any such plan,  or if defined in manner less  advantageous
to an Eligible Employee, the term shall mean retirement at or after reaching age
58.

SECTION 2.27 SHARE means a share of Common Stock,  par value $.01 per share,  of
the Company.

SECTION 2.28 TERMINATION FOR CAUSE means one of the following:

         (a) For an Eligible Employee, "Termination for Cause" means termination
of employment with the Employer upon the occurrence of any of the following: (i)
the employee  intentionally  engages in dishonest conduct in connection with his
performance  of services  for the  Employer  resulting  in his  conviction  of a
felony;  (ii) the employee is convicted of, or pleads guilty or nolo  contendere
to,  a felony  or any  crime  involving  moral  turpitude;  (iii)  the  employee
willfully  fails or refuses  to  perform  his  duties  under any  employment  or
retention  agreement  and  fails to cure  such  breach  within  sixty  (60) days
following  written notice thereof from the Employer;  (iv) the employee breaches
his fiduciary  duties to the Employer for personal  profit;  (v) the  employee's
material willful breach or violation of any law, rule or regulation  (other than
traffic  violations  or similar  offenses),  or final cease and desist  order in
connection  with his  performance  of  services  for the  Employer;  or (vi) the
removal of the  employee  from  service  with the  Employer as the result of any
proceeding  for  removal by the New York  Superintendent  of Banks,  the Federal
Deposit  Insurance  Corporation  or any  other  bank  regulatory  agency  having
jurisdiction over the Employer. Such individual shall not be deemed to have been
discharged for cause unless and until he shall have received a written notice of
termination  from the Board,  which notice shall be given to such individual not
later than five (5)  business  days after the board of directors of the Employer
adopts,  and shall be accompanied  by, a resolution duly approved by affirmative
vote of a majority of the entire board of directors of the Employer finding that
in the good faith  opinion of the board of  directors  of the  Employer  grounds
exist for discharging the individual for cause.  Such resolution must be adopted
at a meeting  called and held for such  purpose not less than  fifteen (15) days
nor more than thirty (30) days after notice to the individual.  At such meeting,
there shall be a  reasonable  opportunity  for the  individual  to make oral and
written  presentations to the members of the board of directors of the Employer,
on his own behalf, or through a representative, who may be his legal counsel, to
refute the grounds for the proposed determination.

         (b) For an Eligible Director,  removal as a director in accordance with
the  provisions of applicable  law and the bylaws and charter or  certificate of
incorporation  of the entity of which the  person is a director  after a finding
that the  Eligible  Director  has  engaged in any of the  conduct  specified  in
section 2.28(a)(i) through (vi).

                                   ARTICLE III
                                AVAILABLE SHARES

SECTION 3.1 AVAILABLE SHARES.

      Subject to section 8.3,  Options for not more than  535,662  Shares may be
granted under this Plan in the aggregate,  provided, however, that if any option
is granted and  thereafter  expires,  terminates  or is forfeited  without being
exercised in full, then the number of unexercised  Shares covered by such Option
at the time of expiration, termination or forfeiture shall then be available for
the grant of Option under this Plan.

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                                   ARTICLE IV
                                 ADMINISTRATION

SECTION 4.1 COMMITTEE.

      The Plan shall be  administered  by the  Committee,  all of whose  members
shall be Disinterested  Board Members.  If the Committee  consists of fewer than
two Disinterested  Board Members,  then the Board shall appoint to the Committee
such additional Disinterested Board Members as shall be necessary to provide for
a  Committee  consisting  of at least  two  Disinterested  Board  Members.  Said
Committee  shall  constitute  a  compensation  committee as that term is used in
section 162(m) of the Code, and the regulations  thereunder,  and such committee
shall have the authority described therein.  If, for any reason, a member of the
Committee is not or ceases to be a Disinterested  Board Member,  then any action
taken by such  person as a member of said  Committee  shall be void and shall be
disregarded for all purposes.  Said person shall be retroactively  deemed not to
have  been a  member  of  said  Committee  since  said  person  ceased  being  a
Disinterested Board Member.

SECTION 4.2 COMMITTEE ACTION.

      The Committee shall hold such meetings,  and may make such  administrative
rules and  regulations,  as it may deem proper. A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the members
of the Committee  present at a meeting at which a quorum is present,  as well as
actions taken pursuant to the unanimous written consent of all of the members of
the Committee  without  holding a meeting,  shall be deemed to be actions of the
Committee.  All actions of the Committee shall be final and conclusive and shall
be binding upon the Company and all other interested parties. Any Person dealing
with the Committee  shall be fully protected in relying upon any written notice,
instruction,  direction or other  communication  signed by the  secretary of the
Committee and one member of the Committee, by two members of the Committee or by
a representative of the Committee authorized to sign the same in its behalf.

SECTION 4.3 COMMITTEE RESPONSIBILITIES.

      Subject to the terms and  conditions of the Plan and such  limitations  as
may be  imposed  from  time  to  time  by the  Board,  the  Committee  shall  be
responsible for the overall  management and administration of the Plan and shall
have such  authority as shall be necessary or  appropriate in order to carry out
its responsibilities, including, without limitation, the authority:

      (a) to interpret  and construe the Plan,  and to determine  the answers to
all questions that may arise under the Plan as to eligibility for  participation
in the Plan, the number of Shares subject to the Options, if any, to be granted,
and the terms and conditions thereof;

      (b) to  adopt  rules  and  regulations  and to  prescribe  forms  for  the
operation and administration of the Plan; and

      (c) to take any other action not  inconsistent  with the provisions of the
Plan that it may deem necessary or appropriate.

                                    ARTICLE V
                      STOCK OPTIONS FOR ELIGIBLE DIRECTORS

SECTION 5.1 IN GENERAL.

      (a) On the Effective Date, each person who is an Eligible  Director on the
Effective  Date shall be granted an Option to purchase  such number of Shares as
is equal to 160,698  Shares  divided by the number of Eligible  Directors on the
Effective Date, provided,  however,  that if any director declines to accept all
or any portion of the Option to which such Eligible  Director is entitled,  then
the number of Shares for which an Option is so declined shall be divided equally
among the Options granted to other Eligible Directors, and provided further that
no Eligible Director shall receive an Option covering more than 26,783 Shares.

      (b) Any Option  granted  under this  section  5.1 or section  5.4 shall be
evidenced  by a written  agreement  which  shall  specify  the  number of Shares
covered by the Option,  the Exercise  Price for the Shares subject to the Option
and the Option Period, all as determined  pursuant to this Article V. The Option
agreement  shall also set forth  specifically  or  incorporate  by reference the
applicable provisions of the Plan.

SECTION 5.2 EXERCISE PRICE.

      The price per Share at which an Option  granted  to an  Eligible  Director
under section 5.1 or section 5.4 may be exercised shall be the Fair Market Value
of a Share on the date on which the Option is granted.

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SECTION 5.3 OPTION PERIOD.

      (a) Subject to section  5.3(b),  the Option  Period during which an Option
granted  to an  Eligible  Director  under  section  5.1 or  section  5.4  may be
exercised  shall  commence on the date the Option is granted and shall expire on
the earlier of:

           (i) Termination for Cause; or

           (ii) the last day of the ten-year  period  commencing  on the date on
which the Option was granted.

      (b) Unless otherwise  permitted by the Banking Regulations and approved by
the Committee,  the maximum  number of Shares as to which an outstanding  Option
may be exercised shall be as follows:

           (i) prior to the first  anniversary of the Effective Date, the Option
shall not be exercisable;

           (ii) on and  after  the first  anniversary,  but prior to the  second
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of twenty percent (20%) of the Shares subject to the Option;

           (iii) on and after  the  second  anniversary,  but prior to the third
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of forty  percent  (40%) of the Shares  subject  to the  Option,  when  granted,
including  in such number any  optioned  Shares  purchased  prior to such second
anniversary;

           (iv) on and  after  the third  anniversary,  but prior to the  fourth
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of sixty  percent  (60%) of the Shares  subject  to the  Option,  when  granted,
including  in such  number any  optioned  Shares  purchased  prior to such third
anniversary;

           (v) on and  after  the  fourth  anniversary,  but  prior to the fifth
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of eighty  percent  (80%) of the Shares  subject to the  Option,  when  granted,
including  in such number any  optioned  Shares  purchased  prior to such fourth
anniversary; and

           (vi) on and after the fifth  anniversary  of the Effective  Date, and
for the  remainder of the Option  Period,  the Option may be exercised as to the
entire number of optioned Shares not theretofore purchased;

provided,  however, that such an Option shall become fully exercisable,  and all
optioned Shares not previously purchased shall become available for purchase, on
the date of the Option holder's death or Disability; and provided, further, that
to the extent not  prohibited by the Banking  Regulations,  all Options  granted
under  section 5.1 or section 5.4 after one year after the  consummation  of the
conversion  of the Bank to the stock form of  ownership  shall not be subject to
the foregoing  provisions of section  5.3(b),  but shall instead be  exercisable
immediately  upon  grant  or as  otherwise  determined  by  the  Committee,  and
provided, further, that the Committee shall have the authority, prior to or upon
the grant of any Option,  to further  delay the vesting of such Option or impose
additional conditions, requirements or limitations on such vesting.

SECTION 5.4 FUTURE ELIGIBLE DIRECTORS.

      Each person who  becomes an Eligible  Director  after the  Effective  Date
shall be  granted  an Option to  purchase  the same  number of Shares  for which
Eligible Directors were granted Options under section 5.1(a), provided, however,
that such  grant  shall be  effective  only to the  extent  permitted  under the
Banking  Regulations,  and provided,  further that the provisions of section 5.3
shall apply to such grant except that the term  "Effective  Date" in section 5.3
shall, for this purpose, mean the date such person becomes an Eligible Director.

                                   ARTICLE VI
                      STOCK OPTIONS FOR ELIGIBLE EMPLOYEES

SECTION 6.1 NUMBER OF SHARES.

      Subject to sections 6.2 and 6.5 and such limitations as the Board may from
time to time impose,  the number of Shares as to which an Eligible  Employee may
be granted Options shall be determined by the Committee, in its discretion.

SECTION 6.2 GRANT OF OPTIONS.

      (a) Subject to the  limitations  of the Plan,  the  Committee  may, in its
discretion,  grant to an Eligible  Employee an Option to  purchase  Shares.  The
Option for such  Eligible  Employee  must be  designated  as either an Incentive
Stock Option or a Non-Qualified

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<PAGE>

Stock Option and, if not designated as either,  shall be a  Non-Qualified  Stock
Option.

      (b) Any Option  granted  under this  section 6.2 shall be  evidenced  by a
written agreement which shall:

           (i) specify the number of Shares covered by the Option;

           (ii)  specify the  Exercise  Price,  determined  in  accordance  with
section 6.3, for the Shares subject to the Option;

           (iii) specify the Option Period determined in accordance with section
6.4;

           (iv)  set  forth   specifically   or  incorporate  by  reference  the
applicable provisions of the Plan; and

           (v) contain such other terms and conditions not inconsistent with the
Plan as the  Committee  may, in its  discretion,  prescribe  with  respect to an
Option granted to an Eligible Employee.

SECTION 6.3 EXERCISE PRICE.

      The price per Share at which an Option  granted  to an  Eligible  Employee
shall be determined by the Committee, in its discretion; provided, however, that
the  Exercise  Price shall not be less than the Fair Market  Value of a Share on
the date on which the Option is granted.

SECTION 6.4 OPTION PERIOD.

      Subject to section 6.5, the Option Period  during which an Option  granted
to an Eligible Employee may be exercised shall commence on the date specified by
the Committee in the Option  agreement and shall expire on the date specified in
the Option agreement or, if no date is specified, on the earliest of:

      (a) the date and time when the Eligible  Employee ceases to be an employee
of the Employer due to a Termination for Cause; and

      (b) the last day of the ten-year  period  commencing  on the date on which
the Option was granted.

SECTION 6.5 VESTING PROVISIONS.

      Unless otherwise  permitted by the Banking Regulations and approved by the
Committee,  each Option granted to an Eligible Employee shall become exercisable
as follows:

           (i) prior to the first  anniversary of the Effective Date, the Option
shall not be exercisable;

           (ii) on and  after  the first  anniversary,  but prior to the  second
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of twenty percent (20%) of the Shares subject to the Option when granted;

           (iii) on and after  the  second  anniversary,  but prior to the third
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of forty  percent  (40%) of the  Shares  subject  to the  Option  when  granted,
including in such forty percent  (40%) any optioned  Shares  purchased  prior to
such second anniversary;

           (iv) on and  after  the third  anniversary,  but prior to the  fourth
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of sixty  percent  (60%) of the  Shares  subject  to the  Option  when  granted,
including in such sixty percent  (60%) any optioned  Shares  purchased  prior to
such third anniversary;

           (v) on and  after  the  fourth  anniversary,  but  prior to the fifth
anniversary,  of the Effective Date, the Option may be exercised as to a maximum
of eighty  percent  (80%) of the  Shares  subject to the  Option  when  granted,
including in such eighty percent (80%) any optioned  Shares  purchased  prior to
such fourth anniversary; and

           (vi) on and after the fifth  anniversary  of the Effective  Date, and
for the  remainder of the Option  Period,  the Option may be exercised as to the
entire number of optioned Shares not theretofore purchased;

provided,  however, that such an Option shall become fully exercisable,  and all
optioned Shares not previously purchased shall become available for purchase, on
the date of the Option holder's death or Disability; and provided, further, that
to the extent not  inconsistent  with Banking  Regulations,  all Options granted
under section 6.2(a) after one year after the  consummation of the conversion of
the Bank to the stock form of  ownership  shall not be subject to the  foregoing
provisions of this section 6.5, but shall

                                        6
<PAGE>

instead be exercisable  immediately upon grant or as otherwise determined by the
Committee,  and provided,  further, that the Committee shall have the authority,
prior to or upon the grant of any Option,  to further  delay the vesting of such
Option or impose  additional  conditions,  requirements  or  limitations on such
vesting.

      (d) The  Option  Period of any  Option  granted  to an  Eligible  Employee
hereunder,  whether or not previously vested,  shall be suspended as of the time
and date at which the Option holder has received  notice from the Board that his
or  her  employment  is  subject  to a  possible  Termination  for  Cause.  Such
suspension  shall remain in effect  until the Option  holder  receives  official
notice  from  the  Board  that  he or she  has  been  cleared  of  any  possible
Termination  for Cause,  at which time,  the original  Exercise  Period shall be
reinstated  without any adjustment for the intervening  suspended period. In the
event that the Option  Period under section 6.4 expires  during such  suspension
for any of the reasons specified in section 6.4(d), the Company shall pay to the
Eligible  Employee  damages  equal to the value of the expired  Options less the
Exercise  Price of such Options if it is  determined  that there had not existed
justification for Termination for Cause on the date of such expiration.

SECTION 6.6 ADDITIONAL RESTRICTIONS ON INCENTIVE STOCK OPTIONS.

      In addition to the limitations of section 7.2(a),  an Option granted to an
Eligible  Employee  designated by the Committee to be an Incentive  Stock Option
shall be subject to the following limitations:

      (a) If, for any calendar year, the sum of (i) plus (ii) exceeds  $100,000,
where (i) equals the Fair Market Value  (determined as of the date of the grant)
of Shares  subject to an Option  intended to be an Incentive  Stock Option which
first become  available for purchase  during such calendar year, and (ii) equals
the Fair Market Value  (determined as of the date of grant) of Shares subject to
any other options intended to be Incentive Stock Options and previously  granted
to the same Eligible  Employee  which first become  exercisable in such calendar
year,  then that number of Shares  optioned which causes the sum of (i) and (ii)
to  exceed  $100,000  shall  be  deemed  to be  Shares  optioned  pursuant  to a
Non-Qualified Stock Option or Non-Qualified  Stock Options,  with the same terms
as the Option or Options intended to be an Incentive Stock Option;

      (b) The Exercise Price of an Incentive Stock Option granted to an Eligible
Employee  who, at the time the Option is granted,  owns Shares  comprising  more
than 10% of the  total  combined  voting  power of all  classes  of stock of the
Company shall not be less than 110% of the Fair Market Value of a Share,  and if
an Option  designated  as an  Incentive  Stock  Option  shall be  granted  at an
Exercise Price that does not satisfy this requirement,  the designated  Exercise
Price shall be observed and the Option shall be treated as a Non-Qualified Stock
Option;

      (c) The Option Period of an Incentive  Stock Option granted to an Eligible
Employee  who, at the time the Option is granted,  owns Shares  comprising  more
than 10% of the  total  combined  voting  power of all  classes  of stock of the
Company,  shall expire no later than the fifth  anniversary of the date on which
the Option was granted, and if an Option designated as an Incentive Stock Option
shall be granted for an Option  Period that does not satisfy  this  requirement,
the  designated  Option Period shall be observed and the Option shall be treated
as a Non-Qualified Stock Option;

      (d) An  Incentive  Stock Option that is  exercised  during its  designated
Option Period but more than:

           (i) three (3) months after the  termination  of  employment  with the
Company,  a parent or a subsidiary  (other than on account of disability  within
the meaning of section  22(e)(3) of the Code or death) of the Eligible  Employee
to whom it was granted; or

           (ii) one (1) year after such  individual's  termination of employment
with the Company, a parent or a subsidiary due to disability (within the meaning
of section 22(e)(3) of the Code);

may be exercised in accordance  with the terms but shall at the time of exercise
be treated as a Non-Qualified Stock Option.

      (e) For the purpose of determining whether an Option is an Incentive Stock
Option when it is exercised, a person shall not be considered to have terminated
employment  during  any period in which  such  person  serves as a member of the
Board of Directors of an Employer to the extent that such service  satisfies the
requirements of section 422 of the Code for continuous employment.

                                   ARTICLE VII
                              OPTIONS - IN GENERAL

SECTION 7.1 METHOD OF EXERCISE.

      (a) Subject to the  limitations of the Plan and the Option  agreement,  an
Option  holder may, at any time during the Option  Period,  exercise  his or her
right to  purchase  all or any part of the Shares to which the  Option  relates;
provided,  however,  that the minimum number of Shares which may be purchased at
any time shall be 100, or, if less,  the total number of Shares  relating to the
Option which

                                        7
<PAGE>

remain unpurchased. An Option holder shall exercise an Option to purchase Shares
by:

           (i) giving  written  notice to the Secretary of the Company,  in such
form and manner as the  Committee may  prescribe,  of his intent to exercise the
Option;

           (ii)  delivering  to the  Secretary  of the  Company,  full  payment,
consistent with section  7.1(b),  for the Shares as to which the Option is to be
exercised; and

           (iii)  satisfying  such other  conditions as may be prescribed in the
Option agreement.

If, at any time that any  Option is  exercisable  there is not a duly  appointed
Secretary of the Company,  then notice of intent to exercise shall be given,  in
writing,  accompanied  by  payment  in full,  to the Board of  Directors  of the
Company.

      (b) The  Exercise  Price of Shares to be  purchased  upon  exercise of any
Option  shall be paid in full in cash (by  certified or bank check or such other
instrument as the Company may accept) or, if and to the extent  permitted by the
Committee,  by one or more of the  following:  (i) in the form of Shares already
owned by the Option holder having an aggregate Fair Market Value on the date the
Option is exercised  equal to the aggregate  Exercise Price to be paid;  (ii) by
requesting the Company to cancel  without  payment  Options  outstanding to such
Person for that number of Shares whose  aggregate  Fair Market Value on the date
of  exercise,  when  reduced  by their  aggregate  Exercise  Price,  equals  the
aggregate  Exercise  Price  of  the  Options  being  exercised;  or  (iii)  by a
combination thereof.  Payment for any Shares to be purchased upon exercise of an
Option may also be made by delivering a properly executed exercise notice to the
Company, together with a copy of irrevocable instructions to a broker to deliver
promptly to the Company the amount of sale or loan  proceeds to pay the purchase
price.  To facilitate the foregoing,  the Company may enter into  agreements for
coordinated procedures with one or more brokerage firms.

      (c) When the  requirements  of section 7.1(a) and (b) have been satisfied,
the Committee  shall take such action as is necessary to cause the issuance of a
stock certificate  evidencing the Option holder's  ownership of such Shares. The
Person  exercising  the  Option  shall  have no  right  to  vote  or to  receive
dividends,  nor have any other rights with  respect to the Shares,  prior to the
date as of which  such  Shares  are  transferred  to such  Person  on the  stock
transfer  records  of the  Company,  and no  adjustments  shall  be made for any
dividends  or other  rights for which the record date is prior to the date as of
which such transfer is effected, except as may be required under section 8.3.

SECTION 7.2 LIMITATIONS ON OPTIONS.

      (a) An Option by its terms shall not be  transferable by the Option holder
other than to Family  Members or Non-profit  Organizations  or by will or by the
laws of descent and distribution  and shall be exercisable,  during the lifetime
of the Option holder, only by the Option holder, a Family Member or a Non-profit
Organization.  Any such  transfer  shall be  effected  by written  notice to the
Company  given in such form and manner as the  Committee may prescribe and shall
be recognized  only if such notice is received by the Company prior to the death
of the person giving it. Thereafter,  the transferee shall have, with respect to
such Option,  all of the rights,  privileges and obligations  which would attach
thereunder to the transferor if the Option were issued to such transferor.  If a
privilege of the Option  depends on the life,  employment or other status of the
transferor,  such privilege of the Option for the  transferee  shall continue to
depend on the life, employment or other status of the transferor.  The Committee
shall have full and exclusive authority to interpret and apply the provisions of
this Plan to  transferees  to the  extent  not  specifically  described  herein.
Notwithstanding the foregoing,  an Incentive Stock Option is not transferable by
an Eligible Employee other than by will or the laws of descent and distribution,
and is exercisable, during his lifetime, solely by him.

      (b) The Company's  obligation to deliver  Shares with respect to an Option
shall,  if the  Committee  so  requests,  be  conditioned  upon the receipt of a
representation as to the investment  intention of the Option holder to whom such
Shares are to be delivered,  in such form as the Committee shall determine to be
necessary or  advisable to comply with the  provisions  of  applicable  federal,
state or local law. It may be provided that any such representation shall become
inoperative  upon a  registration  of the Shares or upon the  occurrence  of any
other event eliminating the necessity of such representation.  The Company shall
not be required to deliver any Shares under the Plan prior to (i) the  admission
of such  Shares to listing  on any stock  exchange  on which  Shares may then be
listed, or (ii) the completion of such registration or other qualification under
any state or federal law, rule or regulation as the Committee shall determine to
be necessary or advisable.

SECTION 7.3 LIMITED STOCK APPRECIATION RIGHTS.

      (a) Each Option  granted under this Plan shall be accompanied by a Limited
Stock Appreciation Right that is exercisable at the times and upon the terms and
conditions  set forth  herein.  Each Limited  Stock  Appreciation  Right granted
hereunder  shall be exercisable  for a period  commencing on the date on which a
Change in Control  occurs and ending six (6) months after such date or, if later
in the case of any  Person,  thirty (30) days after the  earliest  date on which
such Person may exercise the Limited Stock Appreciation Right without subjecting
himself to liability under section 16 of the Securities Exchange Act of 1934, as
amended, provided, however, that a Limited Stock

                                        8
<PAGE>

Appreciation  Right  shall  not be  exercisable  if and to the  extent  that the
exercise thereof is prohibited by any  then-applicable  Banking  Regulations.  A
Person in possession of a Limited Stock Appreciation Right granted hereunder may
exercise such Limited Stock Appreciation Right by:

      (i) giving written notice to the Committee, in such form and manner as the
Committee  may   prescribe,   of  his  intent  to  exercise  the  Limited  Stock
Appreciation Right; and

      (ii) agreeing in such written notice to the  cancellation  of Options then
outstanding  to him for a number of  Shares  equal to the  number of Shares  for
which the Limited Stock Appreciation Right is being exercised.

Except as provided in this Plan, within ten (10) days after the giving of such a
notice,  the  Committee  shall  cause the  Company to  deliver to such  Person a
monetary  payment in an amount  per Share  equal to the amount by which the Fair
Market Value of the Share on the date of exercise exceeds the Exercise Price per
Share of each of the Options being canceled.

      (b) Notwithstanding anything herein contained to the contrary, the Limited
Stock  Appreciation  Rights granted hereunder shall be canceled at the effective
time of a Change in Control resulting from a transaction between the Company and
another party pursuant to a written  agreement  whereby the  consummation of the
transaction  is conditioned  upon the delivery to each Option  holder,  upon the
closing of such  transaction and in exchange for the cancellation of all of such
Option  holder's   outstanding  Options,  of  a  monetary  payment  or  property
(including  but not  limited  to options to  purchase  securities  of the entity
resulting  from such  transaction)  with a value  equivalent to the value of the
Options being canceled.

SECTION 7.4 EXPIRATION UPON VOLUNTARY RESIGNATION.

      (a) All Options granted to an Eligible Employee who voluntarily terminates
employment with the Employer,  other than a voluntary  termination  constituting
Retirement,  shall expire 90 days after the voluntary  termination is effective,
provided,  however,  that any options granted to such Eligible Employee,  or any
part of such  Options,  which are not  exercisable  on the date  such  voluntary
termination not constituting  Retirement is effective shall expire on that date.
The  provisions of this section  7.4(a) shall not apply so long as such Eligible
Employee continues to be a director of an Employer.

      (b) All Options granted to an Eligible Director who voluntarily resigns as
a director  of the  Employer,  other  than a  voluntary  resignation  that would
constitute Retirement if the directorship is treated as employment, shall expire
90 days after the voluntary  resignation is effective,  provided,  however, that
any options  granted to such  Eligible  Director,  or any part of such  Options,
which  are  not   exercisable  on  the  date  such  voluntary   resignation  not
constituting Retirement is effective shall expire on that date.

SECTION 7.5 ACCELERATED VESTING

         Notwithstanding  any  other  provision  of  the  Plan  or  any  vesting
restrictions imposed by the Committee,  all Options granted under the Plan which
remain  outstanding but which are not  exercisable  shall  immediately  vest and
shall be immediately exercisable if (a) a Change in Control occurs, or (b) as to
Options held by any Person,  if that person  retires from service as an employee
and director, as applicable,  of all Employers after not less than five years of
service with any Employer.  For the purpose of this  Section,  a Person shall be
deemed to have retired upon voluntary resignation,  termination without cause or
upon  failure  to be  re-elected  as a  director.  Options  held by an  Eligible
Employee shall immediately vest upon such retirement  notwithstanding  that such
Person may continue to be a director of an Employer.

                                  ARTICLE VIII
                            AMENDMENT AND TERMINATION

SECTION 8.1 TERMINATION.

      The Board may  suspend  or  terminate  the Plan in whole or in part at any
time prior to the tenth  anniversary  of the  Effective  Date by giving  written
notice  of such  suspension  or  termination  to the  Committee.  Unless  sooner
terminated,  the Plan shall  terminate  automatically  on the day  preceding the
tenth  anniversary  of the  Effective  Date.  In the event of any  suspension or
termination of the Plan, all Options theretofore granted under the Plan that are
outstanding  on the date of such  suspension  or  termination  of the Plan shall
remain  outstanding  and  exercisable  for  the  period  and  on the  terms  and
conditions set forth in the Option agreements evidencing such Options.

SECTION 8.2 AMENDMENT.

      The Board  may  amend or  revise  the Plan in whole or in part at any time
whether before or after approval of the Plan by the stockholders of the Company;
provided,  however,  that, to the extent  required to comply with section 162(m)
and section 422 of the Code, no such amendment or revision shall be effective if
it amends a  material  term of the Plan  unless  approved  by the  holders  of a
majority of the voting Shares of CNY Financial Corporation.

SECTION 8.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION.

      (a)  In  the  event  of  any  merger,  consolidation,  or  other  business
reorganization in which the Company is the surviving entity, and in the event of
any stock split, stock dividend or other event generally affecting the number of
Shares held by each Person who is then a holder of record of Shares,  the number
of Shares covered by each outstanding  Option and the number of Shares available
pursuant  to section  3.1 shall be  adjusted  to account  for such  event.  Such
adjustment shall be effected by multiplying such number of Shares by

                                        9

<PAGE>

an amount  equal to the number of Shares that would be owned after such event by
a Person who,  immediately  prior to such event, was the holder of record of one
Share,  and the  Exercise  Price of  outstanding  Options  shall be  adjusted by
dividing the aggregate  Exercise  Price for all Shares covered by each Option by
the adjusted number of Shares covered by such Option;  provided,  however,  that
the Committee may, in its discretion,  establish another  appropriate  method of
adjustment.

      (b)  In  the  event  of  any  merger,  consolidation,  or  other  business
reorganization  in which the Company is not the  surviving  entity,  any Options
granted  under the Plan  which  remain  outstanding  may be  canceled  as of the
effective  date  of  such  merger,   consolidation,   business   reorganization,
liquidation  or sale by the Board  upon 30 days'  written  notice to the  Option
holder; provided,  however, that on or as soon as practicable following the date
of  cancellation,  each Option holder shall  receive a monetary  payment in such
amount,  or other  property of such kind and value,  as the Board  determines in
good faith to be equivalent in value to the Options that have been canceled.

      (c) In the event that the Company  shall declare and pay any dividend with
respect to Shares  (other than a dividend  payable in Shares) which results in a
nontaxable  return of capital to the  holders of Shares for  federal  income tax
purposes or otherwise  than by dividend  makes  distribution  of property to the
holders of its Shares,  the  Company  shall make an  equivalent  payment to each
Person  holding an  outstanding  Option as of the record date for such dividend.
Such payment shall be made at substantially  the same time, in substantially the
same  form  and in  substantially  the same  amount  per  optioned  Share as the
dividend  or  other  distribution  paid  with  respect  to  outstanding  Shares;
provided, however, that if any dividend or distribution on outstanding Shares is
paid in  property  other than  cash,  the  Company,  in its  discretion  applied
uniformly to all outstanding Options, may make such payment in a cash amount per
optioned  Share  equal in fair  market  value to the  fair  market  value of the
non-cash dividend or distribution.

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.

      This Plan is not intended to satisfy the  requirements  for  qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee  Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation  program  that is exempt from the  regulatory  requirements  of the
Employee  Retirement Income Security Act of 1974, as amended.  The Plan shall be
construed and administered so as to effectuate this intent.

SECTION 9.2 NO RIGHT TO CONTINUED EMPLOYMENT.

      Neither the  establishment  of the Plan nor any provisions of the Plan nor
any action of the Board or the Committee  with respect to the Plan nor the grant
of any Option or Limited Stock Appreciation Rights shall be held or construed to
confer  upon  any  Eligible  Director  or  Eligible  Employee  any  right  to  a
continuation  of his or her position as a director or employee of the  Employer.
The Employer  reserves the right to remove any Eligible  Director or dismiss any
Eligible  Employee  or  otherwise  deal with any  Eligible  Director or Eligible
Employee to the same extent as though the Plan had not been adopted.

SECTION 9.3 CONSTRUCTION OF LANGUAGE.

      Whenever  appropriate in the Plan,  words used in the singular may be read
in the plural,  words used in the plural may be read in the singular,  and words
importing the masculine gender may be read as referring  equally to the feminine
or the neuter.  Any reference to an Article or section  number shall refer to an
Article or section of this Plan unless otherwise indicated.

SECTION 9.4 GOVERNING LAW.

      The Plan shall be construed,  administered  and enforced  according to the
laws of the State of New York  without  giving  effect to the  conflict  of laws
principles thereof, except to the extent that such laws are preempted by federal
law. The Plan shall be construed to comply with applicable Banking Regulations.

SECTION 9.5 HEADINGS.

      The headings of Articles and sections are included  solely for convenience
of reference. If there is any conflict between such headings and the text of the
Plan, the text shall control.

SECTION 9.6 NON-ALIENATION OF BENEFITS.

      The right to receive a benefit  under the Plan shall not be subject in any
manner to anticipation, alienation or assignment, nor

                                       10

<PAGE>

shall such right be liable  for or  subject  to debts,  contracts,  liabilities,
engagements  or torts,  except to the extent  provided in a  qualified  domestic
relations order as defined in section 414(p) of the Code.

SECTION 9.7 TAXES.

      The Company  shall have the right to deduct  from all amounts  paid by the
Company in cash with respect to an Option  under the Plan any taxes  required by
law to be withheld with respect to such Option.  Where any Person is entitled to
receive Shares pursuant to the exercise of an Option, the Company shall have the
right to require  such Person to pay the Company the amount of any tax which the
Company  is  required  to  withhold  with  respect to such  Shares,  or, in lieu
thereof,  to retain, or to sell without notice, a sufficient number of Shares to
cover the amount required to be withheld.

SECTION 9.8 APPROVAL OF STOCKHOLDERS.

      This Plan  shall not be  effective  or  implemented  prior to the one year
anniversary of the  conversion of the Bank to the stock form unless  approved by
the  holders of a majority  of the total  votes  eligible to be cast at any duly
called annual or special meeting of the Company, in which case the Plan shall be
effective  as of the  date  of such  approval.  If this  Plan is  approved  by a
majority  of the votes cast at such  meeting  but not by a majority of the votes
eligible to be cast at such  meeting,  then this Plan shall be  effective on the
later of the date of such stockholder  approval or October 7, 1999. No Option or
Limited  Stock  Appreciation  Rights  shall  be  granted  before  this  Plan  is
effective.

SECTION 9.9 NOTICES.

      Any  communication  required  or  permitted  to be given  under  the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver,  shall be in writing and shall be deemed to have been given at such time
as it is delivered personally or five (5) days after mailing if mailed,  postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address  listed  below,  or at such other  address as one such
party may by written notice specify to the other party:

      (a) If to the Committee:

      The  Human  Resources  Committee  (or  such  other  committee  as  may  be
      designated by the Board)
      CNY Financial Corporation
      One North Main Street
      Cortland, New York 13045

      (b) If to an Option holder, to the Option holder's address as shown in the
Employer's records.

                                       11

<PAGE>


                            CNY FINANCIAL CORPORATION

                            PERSONNEL RECOGNITION AND

                                 RETENTION PLAN

                      FOR DIRECTORS, OFFICERS AND EMPLOYEES


<PAGE>

                              TABLE OF CONTENTS

                                  ARTICLE I
                                   PURPOSE

Section 1.1 General Purpose of the Plan..................................  1

                                  ARTICLE II
                                 DEFINITIONS

Section 2.1 Award .......................................................  1
Section 2.2 Award Date ..................................................  1
Section 2.3 Bank.........................................................  1
Section 2.4 Banking Regulations..........................................  1
Section 2.5 Beneficiary .................................................  1
Section 2.6 Board .......................................................  1
Section 2.7 Change of Control ...........................................  1
Section 2.8 Code ........................................................  2
Section 2.9 Committee ...................................................  2
Section 2.10 Company ....................................................  2
Section 2.11 Disability .................................................  2
Section 2.12 Disinterested Board Member .................................  2
Section 2.13 Effective Date .............................................  2
Section 2.14 Eligible Director ..........................................  2
Section 2.15 Eligible Employee ..........................................  2
Section 2.16 Employer ...................................................  2
Section 2.17 Exchange Act ...............................................  2
Section 2.18 Person .....................................................  2
Section 2.19 Plan........................................................  2
Section 2.20 Retirement..................................................  2
Section 2.21 Share ......................................................  2
Section 2.22 Termination for Cause.......................................  2
Section 2.23 Trust ......................................................  3
Section 2.24 Trust Agreement ............................................  3
Section 2.25 Trust Fund .................................................  3
Section 2.26 Trustee.....................................................  3

                                 ARTICLE III
                       SHARES AVAILABLE UNDER THE PLAN

Section 3.1 Shares Available Under the Plan..............................  3

                                  ARTICLE IV
                                ADMINISTRATION

Section 4.1 Committee ...................................................  3
Section 4.2 Committee Action.............................................  3
Section 4.3 Committee Responsibilities...................................  4

                                  ARTICLE IV
                                THE TRUST FUND

Section 5.1 Contributions ...............................................  4
Section 5.2 The Trust Fund ..............................................  4
Section 5.3 Investments..................................................  4

                                  ARTICLE VI
                                    AWARDS

Section 6.1  Awards To Eligible Directors ................................ 4
Section 6.2  Awards To Eligible Employees ................................ 4
Section 6.3  Awards in General ........................................... 5
Section 6.4  Shares Allocations .......................................... 5
Section 6.5  Dividend Rights ............................................. 5
Section 6.6  Voting Rights ............................................... 5
Section 6.7  Tender Offers ............................................... 5
Section 6.8  Limitations on Awards........................................ 6
Section 6.9  Expiration of Unvested Awards Upon
             Resignation or Termination for Cause......................... 6
Section 6.10 Accelerated Vesting ........................................  6

                                 ARTICLE VII
                            DISTRIBUTION OF SHARES

Section 7.1 Designation of Beneficiary ..................................  6
Section 7.2 Manner of Distribution ......................................  7
Section 7.3 Taxes........................................................  7

                                 ARTICLE VIII
                          AMENDMENT AND TERMINATION

Section 8.1 Termination .................................................  7
Section 8.2 Amendment ...................................................  7
Section 8.3 Adjustments in the Event of
            a Business Reorganization....................................  7

                                  ARTICLE IX
                                MISCELLANEOUS

Section 9.1 Status as an Employee Benefit Plan ..........................  8
Section 9.2 No Right to Continued Employment ............................  8
Section 9.3 Construction of Language ....................................  8
Section 9.4 Governing Law................................................  8
Section 9.5 Headings.....................................................  8
Section 9.6 Non-Alienation of Benefits ..................................  8
Section 9.7 Notices .....................................................  8
Section 9.8 Approval of Stockholders.....................................  9

                                         i

<PAGE>

                            CNY FINANCIAL CORPORATION
                    PERSONNEL RECOGNITION AND RETENTION PLAN
                      FOR DIRECTORS, OFFICERS AND EMPLOYEES

                                    ARTICLE I
                                     PURPOSE

SECTION 1.1 GENERAL PURPOSE OF THE PLAN.

      The purpose of the Plan is to promote the growth and  profitability of CNY
Financial  Corporation and to provide eligible  directors,  certain key officers
and  employees  of CNY  Financial  Corporation  with  an  incentive  to  achieve
corporate  objectives,  to  attract  and  retain  directors,  key  officers  and
employees of outstanding competence and to provide such directors,  officers and
employees with an equity interest in CNY Financial Corporation.

                                   ARTICLE II
                                   DEFINITIONS

      The  following  definitions  shall  apply for the  purposes  of this Plan,
unless a different meaning is plainly indicated by the context:

SECTION 2.1 AWARD  means a grant of Shares to an  Eligible  Director or Eligible
Employee pursuant to section 6.1 or 6.2.

SECTION 2.2 AWARD DATE  means,  with  respect to a  particular  Award,  the date
specified  by the  Committee  in the notice of the Award  issued to the Eligible
Director or Eligible Employee by the Committee, pursuant to section 6.3.

SECTION 2.3 BANK means Cortland  Savings Bank, a New York State  chartered stock
savings bank, and any successor thereto.

SECTION 2.4 BANKING  REGULATIONS  means the  regulations  issued by the New York
State Banking Board, the New York State  Superintendent  of Banks or the Federal
Deposit  Insurance  Corporation  and  applicable  to the  Plan,  the Bank or the
Company.

SECTION 2.5 BENEFICIARY  means the Person  designated by an Eligible Director or
Eligible Employee pursuant to section 7.1, to receive distribution of any Shares
available for distribution to such Eligible  Director or Eligible  Employee,  in
the event such  Eligible  Director or Eligible  Employee dies prior to receiving
distribution of such Shares.

SECTION 2.6 BOARD means the Board of Directors of the Company.

SECTION 2.7 CHANGE OF CONTROL means any of the following events:

      (a) the  occurrence  of any event upon which any "person" (as such term is
used in sections  13(d) and 14(d) of the  Securities  Exchange  Act of 1934,  as
amended ("Exchange  Act")),  other than (A) a trustee or other fiduciary holding
securities  under  an  employee  benefit  plan  maintained  for the  benefit  of
employees of an Employer;  (B) a corporation owned,  directly or indirectly,  by
the stockholders of the Company in  substantially  the same proportions as their
ownership of stock of the  Company;  or (C) any group  constituting  a person in
which employees of the Company are substantial members,  becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated  under the Exchange Act),  directly
or indirectly,  of securities issued by the Company  representing 25% or more of
the combined voting power of all of the Company's then  outstanding  securities;
or

      (b) the occurrence of any event upon which the individuals who on the date
the Plan is  adopted  by the Board  are  members  of the  Board,  together  with
individuals  whose  election  by the Board or  nomination  for  election  by the
Company's  stockholders  was  approved  by  the  affirmative  vote  of at  least
two-thirds of the members of the Board then in office who were either members of
the Board on the date this Plan is adopted or whose  nomination  or election was
previously  so  approved,  cease for any reason to  constitute a majority of the
members of the Board, but excluding, for this purpose, any such individual whose
initial  assumption  of office  is in  connection  with an actual or  threatened
election  contest  relating to the election of directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A  promulgated  under the Exchange
Act); or

      (c) the stockholders of the Company approve either:

           (i)  a  merger  or  consolidation  of  the  Company  with  any  other
corporation,  other than a merger or  consolidation  following which both of the
following conditions are satisfied:

                (A)  either  (1)  the  members  of  the  Board  of  the  Company
immediately prior to such merger or consolidation constitute at least a majority
of the members of the  governing  body of the  institution  resulting  from such
merger or consolidation; or (2) the

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stockholders  of the Company own  securities of the  institution  resulting from
such merger or  consolidation  representing  80% or more of the combined  voting
power of all such securities of the resulting  institution  then  outstanding in
substantially  the same  proportions as their ownership of voting  securities of
the Company immediately before such merger or consolidation; and

                (B) the entity which  results from such merger or  consolidation
expressly  agrees in writing to assume and  perform  the  Company's  obligations
under the Plan; or

           (ii) a plan of complete  liquidation  of the Company or an  agreement
for the sale or  disposition by the Company of all or  substantially  all of its
assets; and

      (d) any event that would be  described  in section  2.7(a),  (b) or (c) if
"the Bank" were substituted for "the Company" therein.

SECTION  2.8  CODE  means  the  Internal  Revenue  Code of 1986  (including  the
corresponding provisions of any succeeding law).

SECTION 2.9 COMMITTEE  means the Human  Resources  Committee of the Company,  or
such other committee of the Company as the Board shall designate.

SECTION 2.10 COMPANY means CNY Financial  Corporation,  a corporation  organized
and existing under the laws of the State of Delaware, and any successor thereto.

SECTION  2.11  DISABILITY  means a  condition  of total  incapacity,  mental  or
physical,  for further performance of duty with the Employer which the Committee
shall have determined,  on the basis of competent medical evidence, is likely to
be permanent.

SECTION 2.12  DISINTERESTED  BOARD MEMBER means a member of the Board who (a) is
not a current  employee of the Company or a  subsidiary,  and (b)  satisfies all
other  requirements  which may be necessary so that the Plan  qualifies  for the
maximum  available  benefits under section 162(m) of the Code and any applicable
rules of the Securities and Exchange Commission under Section 16 of the Exchange
Act.

SECTION  2.13  EFFECTIVE  DATE means the date on which the plan is  approved  by
stockholders  pursuant to section 9.8, provided,  however,  that if this Plan is
approved  by a majority  of the votes cast at the  meeting at which this Plan is
presented  to  stockholders  for  approval  but not by a  majority  of the votes
eligible to be cast at such meeting, then Effective Date shall mean the later of
October 7, 1999, or the date of such approval.

SECTION 2.14 ELIGIBLE  DIRECTOR  means a member of the board of directors of the
Employer who is not also an employee of the Employer.

SECTION  2.15  ELIGIBLE  EMPLOYEE  means any  employee  whom the  Committee  may
determine  to be a key officer or employee of the Employer and select to receive
an Award pursuant to the Plan.

SECTION 2.16 EMPLOYER means the Company, the Bank and any successor thereto and,
with the prior  approval of the Board,  and subject to such terms and conditions
as may be  imposed  by the  Board,  any other  savings  bank,  savings  and loan
association,   bank,  corporation,   financial  institution  or  other  business
organization or institution.  With respect to any Eligible  Employee or Eligible
Director,  the Employer  shall mean the entity which employs such person or upon
whose board of directors such person serves.

SECTION 2.17 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.

SECTION 2.18 PERSON means an individual, a corporation,  a bank, a savings bank,
a savings and loan  association,  a financial  institution,  a  partnership,  an
association,  a  joint-stock  company,  a trust,  an estate,  an  unincorporated
organization and any other business organization or institution.

SECTION 2.19 PLAN means the CNY Financial  Corporation Personnel Recognition and
Retention  Plan for  Directors,  Officers and  Employees as amended from time to
time.

SECTION  2.20  RETIREMENT  means  retirement  at or after  the  normal  or early
retirement date set forth in any tax-qualified  retirement plan of the Employer,
but if not defined in any such plan,  or if defined in manner less  advantageous
to an Eligible Employee, the term shall mean retirement at or after reaching age
58.

SECTION 2.21 SHARE means a share of common stock of the Company,  par value $.01
per share.

SECTION 2.22 TERMINATION FOR CAUSE means one of the following:

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         (a) For an Eligible Employee, "Termination for Cause" means termination
of employment with the Employer upon the occurrence of any of the following: (i)
the employee  intentionally  engages in dishonest conduct in connection with his
performance  of services  for the  Employer  resulting  in his  conviction  of a
felony;  (ii) the employee is convicted of, or pleads guilty or nolo  contendere
to,  a felony  or any  crime  involving  moral  turpitude;  (iii)  the  employee
willfully  fails or refuses  to  perform  his  duties  under any  employment  or
retention  agreement  and  fails to cure  such  breach  within  sixty  (60) days
following  written notice thereof from the Employer;  (iv) the employee breaches
his fiduciary  duties to the Employer for personal  profit;  (v) the  employee's
material willful breach or violation of any law, rule or regulation  (other than
traffic  violations  or similar  offenses),  or final cease and desist  order in
connection  with his  performance  of  services  for the  Employer;  or (vi) the
removal of the  employee  from  service  with the  Employer as the result of any
proceeding  for  removal by the New York  Superintendent  of Banks,  the Federal
Deposit  Insurance  Corporation  or any  other  bank  regulatory  agency  having
jurisdiction over the Employer. Such individual shall not be deemed to have been
discharged for cause unless and until he shall have received a written notice of
termination  from the Board,  which notice shall be given to such individual not
later than five (5)  business  days after the board of directors of the Employer
adopts,  and shall be accompanied  by, a resolution duly approved by affirmative
vote of a majority of the entire board of directors of the Employer finding that
in the good faith  opinion of the board of  directors  of the  Employer  grounds
exist for discharging the individual for cause.  Such resolution must be adopted
at a meeting  called and held for such  purpose not less than  fifteen (15) days
nor more than thirty (30) days after notice to the individual.  At such meeting,
there shall be a  reasonable  opportunity  for the  individual  to make oral and
written  presentations to the members of the board of directors of the Employer,
on his own behalf, or through a representative, who may be his legal counsel, to
refute the grounds for the proposed determination.

         (b) For an Eligible Director,  removal as a director in accordance with
the  provisions of applicable  law and the bylaws and charter or  certificate of
incorporation  of the entity of which the  person is a director  after a finding
that the  Eligible  Director  has  engaged in any of the  conduct  specified  in
section 2.28(a)(i) through (vi).

SECTION 2.23 TRUST means the legal  relationship  created by the Trust Agreement
pursuant  to which the Trustee  holds the Trust Fund in trust.  The Trust may be
referred  to as the  "Personnel  Recognition  and  Retention  Plan  Trust of CNY
Financial Corporation."

SECTION  2.24  TRUST  AGREEMENT  means  the  agreement   between  CNY  Financial
Corporation and the Trustee therein named or its successor pursuant to which the
Trust Fund shall be held in trust.

SECTION 2.25 TRUST FUND means the corpus  (consisting of contributions paid over
to the Trustee,  and investments  thereof),  and all earnings,  appreciations or
additions thereof and thereto,  held by the Trustee under the Trust Agreement in
accordance  with the Plan, less any  depreciation  thereof and any payments made
therefrom pursuant to the Plan.

SECTION  2.26  TRUSTEE  means the Trustee of the Trust Fund from time to time in
office.  The Trustee  shall serve as Trustee until it is removed or resigns from
office and is  replaced  by a successor  Trustee or  Trustees  appointed  by the
Company.

                                   ARTICLE III
                         SHARES AVAILABLE UNDER THE PLAN

SECTION 3.1 SHARES AVAILABLE UNDER THE PLAN.

      The  maximum  number of Shares for which  Awards can be granted  under the
Plan shall be 214,226 shares.

                                   ARTICLE IV
                                 ADMINISTRATION

SECTION 4.1 COMMITTEE.

      The Plan shall be  administered  by the members of the  Committee,  all of
whose members shall be Disinterested Board Members. If the Committee consists of
fewer than two Disinterested Board Members,  then the Board shall appoint to the
Committee such additional  Disinterested  Board Members as shall be necessary to
provide for a Committee consisting of at least two Disinterested Board Members.

SECTION 4.2 COMMITTEE ACTION.

      The Committee shall hold such meetings,  and may make such  administrative
rules and  regulations,  as it may deem proper. A majority of the members of the
Committee shall constitute a quorum, and the action of a majority of the members
of the Committee  present at a meeting at which a quorum is present,  as well as
actions taken pursuant to the unanimous written consent of all of the members of
the Committee  without  holding a meeting,  shall be deemed to be actions of the
Committee.  All actions of the Committee shall be final and conclusive and shall
be binding upon the Company and all other interested parties. Any Person dealing
with the

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Committee  shall  be  fully  protected  in  relying  upon  any  written  notice,
instruction,  direction or other  communication  signed by the  Secretary of the
Committee and one member of the Committee, by two members of the Committee or by
a representative of the Committee authorized to sign the same in its behalf.

SECTION 4.3 COMMITTEE RESPONSIBILITIES.

      Subject to the terms and  conditions of the Plan and such  limitations  as
may be imposed by the Board,  the Committee shall be responsible for the overall
management and administration of the Plan and shall have such authority as shall
be  necessary  or  appropriate  in  order  to  carry  out its  responsibilities,
including, without limitation, the authority:

      (a) to interpret  and construe the Plan,  and to determine  the answers to
all questions that may arise under the Plan as to  eligibility  for Awards under
the Plan, the amount of Shares,  if any, to be granted pursuant to an Award, and
the terms and conditions of such Award;

      (b) to  adopt  rules  and  regulations  and to  prescribe  forms  for  the
operation and administration of the Plan; and

      (c) to take any other action not  inconsistent  with the provisions of the
Plan that it may deem necessary or appropriate.

                                    ARTICLE V
                                 THE TRUST FUND

SECTION 5.1 CONTRIBUTIONS.

      The Company shall  contribute,  or cause to be contributed,  to the Trust,
from time to time,  such amounts of money or property as shall be  determined by
the Board, in its discretion. No contributions by Eligible Directors or Eligible
Employees shall be permitted.

SECTION 5.2 THE TRUST FUND.

      The Trust Fund shall be held and invested  under the Trust  Agreement with
the Trustee.  The  provisions of the Trust  Agreement  shall include  provisions
conferring  powers on the Trustee as to investment,  control and disbursement of
the Trust Fund, and such other provisions not inconsistent  with the Plan as may
be prescribed by or under the authority of the Board.  No bond or security shall
be required of any Trustee at any time in office.

SECTION 5.3 INVESTMENTS.

      The  Trustee  shall  invest  the Trust  Fund in Shares  and in such  other
investments as may be permitted  under the Trust  Agreement,  including  savings
accounts,  time or other interest bearing deposits in, or other interest bearing
obligations of, the Employer,  in such proportions as shall be determined by the
Committee;  provided,  however, that in no event, other than as the result of an
adjustment pursuant to section 8.3(a),  shall the Trust Fund be used to purchase
more than 214,226 Shares.  Notwithstanding  the immediately  preceding sentence,
the Trustee may temporarily invest the Trust Fund in short-term  obligations of,
or guaranteed by, the U.S.  Government or an agency thereof,  or the Trustee may
retain the Trust Fund uninvested or may sell assets of the Trust Fund to provide
amounts required for purposes of the Plan.

                                   ARTICLE VI
                                     AWARDS

SECTION 6.1 AWARDS TO ELIGIBLE DIRECTORS.

      On the Effective Date, each Person who is then an Eligible  Director shall
be  granted an Award of such  number of Shares as is equal to 64,267  divided by
the number of Eligible Directors on the Effective Date, provided,  however, that
if any  director  declines  to accept all or any  portion of the Shares to which
such Eligible Director is entitled,  then the number of Shares declined shall be
divided equally among the other Eligible Directors, and provided further that no
Eligible Director shall receive an award of more than 10,711 Shares.  Fractional
Shares  will not be  awarded.  The Board may  reduce  the number of Shares to be
granted to any or all Eligible Directors, but only before the grant occurs.

SECTION 6.2 AWARDS TO ELIGIBLE EMPLOYEES.

      Subject to section 6.8 and such  limitations as the Board may from time to
time  impose,  the  number  of Shares as to which an  Eligible  Employee  may be
granted  an Award  shall  be  determined  by the  Committee  in its  discretion;
provided  however,  that in no event shall the number of Shares  allocated to an
Eligible Employee in an Award exceed the number of Shares then held in the Trust

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and not allocated in connection with other Awards.

SECTION 6.3 AWARDS IN GENERAL.

      Any Award shall be evidenced by a written  notice  issued by the Committee
to the Eligible Director or Eligible Employee, which notice shall:

      (a) specify the number of Shares covered by the Award;

      (b) specify the Award Date;

      (c) specify  the dates on which such Shares  shall  become  available  for
distribution to the Eligible Director or Eligible  Employee,  in accordance with
section 7.2; and

      (d) contain such other terms and conditions not inconsistent with the Plan
as the Board may, in its discretion, prescribe.

SECTION 6.4 SHARE ALLOCATIONS.

      Upon the grant of an Award to an Eligible  Director or Eligible  Employee,
the Committee  shall notify the Trustee of the Award and of the number of Shares
subject to the Award. Thereafter,  until such time as the Shares subject to such
Award become vested or are forfeited, the books and records of the Trustee shall
reflect  that such  number of Shares are being held for the benefit of the Award
recipient.

SECTION 6.5 DIVIDEND RIGHTS.

      (a) Any cash dividends or distributions  declared and paid with respect to
Shares in the Trust  Fund that are,  as of the  record  date for such  dividend,
allocated to an Eligible  Director or Eligible  Employee in  connection  with an
Award shall be promptly paid to such Eligible Director or Eligible Employee. Any
cash dividends  declared and paid with respect to Shares that are not, as of the
record date for such  dividend,  allocated to any Eligible  Director or Eligible
Employee in connection  with any Award shall, at the direction of the Committee,
be held in the  Trust or used to pay the  administrative  expenses  of the Plan,
including any compensation due to the Trustee.

      (b) Any  dividends  or  distributions  declared  and paid with  respect to
Shares in property  other than cash shall be held in the Trust  Fund.  If, as of
the record date for such  dividend or  distribution,  the Shares with respect to
which it is paid are allocated to an Eligible  Director or Eligible  Employee in
connection  with an  Award,  the  property  so  distributed  shall be  similarly
allocated to such Eligible Director or Eligible Employee in connection with such
Award and shall be held for  distribution  or forfeiture in accordance  with the
terms and conditions of the Award.

SECTION 6.6 VOTING RIGHTS.

      (a) Each Eligible  Director or Eligible Employee to whom an Award has been
made that is not fully  vested,  or which is fully  vested but which has not yet
been transferred on the stock records of the Company as of the applicable record
date,  shall  have the right to direct  the  manner in which all  voting  rights
appurtenant  to the Shares  related to such Award will be  exercised  while such
Shares are held in the Trust Fund. Such a direction shall be given by completing
and filing,  with the inspector of  elections,  the Trustee or such other person
who shall be  independent  of the Company as the Committee  shall  designate,  a
written direction in the form and manner prescribed by the Committee. If no such
direction is given by an Eligible Director or Eligible Employee, then the voting
rights appurtenant to the Shares allocated to him shall not be exercised.

      (b) To the  extent  that  the  Trust  Fund  contains  Shares  that are not
allocated in connection  with an Award,  all voting rights  appurtenant  to such
Shares shall be exercised by the Trustee in such manner as the  Committee  shall
direct  based  upon the  same  proportions  as the  voting  directions  given by
Eligible  Directors and Eligible  Employees with respect to Shares  allocated in
connection with their Awards.

      (c) The  Committee  shall  furnish,  or  cause  to be  furnished,  to each
Eligible Director and Eligible Employee, all annual reports, proxy materials and
other information  furnished by the Company,  or by any proxy solicitor,  to the
holders of Shares.

SECTION 6.7 TENDER OFFERS.

      (a) Each Eligible  Director or Eligible Employee to whom an Award has been
made that is not fully  vested,  or which is fully  vested but which has not yet
been  transferred  to such Eligible  Director or Eligible  Employee on the stock
records of the Company as

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<PAGE>

of the applicable  record date, shall have the right to direct,  with respect to
the Shares  related to such Award,  the manner of response to any tender  offer,
exchange  offer or other offer made to the  holders of Shares.  Such a direction
shall be given by completing  and filing,  with the inspector of elections,  the
Trustee or such  other  person who shall be  independent  of the  Company as the
Committee shall designate, a written direction in the form and manner prescribed
by the  Committee.  If no such  direction  is given by an  Eligible  Director or
Eligible Employee, then the Shares shall not be tendered or exchanged.

      (b) To the  extent  that  the  Trust  Fund  contains  Shares  that are not
allocated in connection with an Award, all responses to tender offers,  exchange
offers and other offers appurtenant to such Shares shall be given by the Trustee
in such manner as the Committee  shall direct to reflect the responses  given by
Eligible  Directors and Eligible  Employees with respect to Shares  allocated in
connection with their Awards.

      (c) The  Committee  shall  furnish,  or  cause  to be  furnished,  to each
Eligible  Director  and  Eligible  Employee,  all  information  furnished by the
offeror to the holders of Shares.

SECTION 6.8 LIMITATIONS ON AWARDS.

      (a) Unless otherwise  permitted by the Banking Regulations and approved by
the Committee,  each Award shall become vested and distributable ratably so that
20% of the award shall become vested on each of the first five  anniversaries of
the Effective Date, provided, however, that such Award shall become fully vested
and  distributable  on the date of the Award holder's  death or Disability;  and
provided, further, that to the extent not inconsistent with Banking Regulations,
all Awards granted under this Plan after one year after the  consummation of the
conversion  of the Bank to the stock form of  ownership  shall not be subject to
the foregoing  provisions of section 6.8(a) related to 20% annual  vesting,  but
shall instead vest and be  distributable  immediately upon grant or as otherwise
determined by the Committee,  and provided,  further,  that the Committee  shall
have the  authority,  prior to or upon the grant of any Award,  to further delay
the  vesting  or  distribution  of such Award or impose  additional  conditions,
requirements or limitations on such vesting or distribution.

      (b) An  Award by its  terms  shall  not be  transferable  by the  Eligible
Director or Eligible  Employee  other than by will or by the laws of descent and
distribution,   and  the  Shares  granted   pursuant  to  such  Award  shall  be
distributable, during the lifetime of the Recipient, only to the Recipient.

SECTION 6.9 EXPIRATION OF UNVESTED  AWARDS UPON  RESIGNATION OR TERMINATION  FOR
CAUSE.

      (a) All Awards  granted to an Eligible  Employee which have not yet vested
and  become  distributable  who  voluntarily   terminates  employment  with  the
Employer,  other than a voluntary  termination  constituting  Retirement,  shall
expire immediately when the voluntary termination is effective, and the unvested
Shares  remaining from such Award shall not vest. The provisions of this section
6.9(a)  shall  not apply so long as such  Eligible  Employee  continues  to be a
director of an Employer.

      (b) All Awards  granted to an Eligible  Director which have not yet vested
and become  distributable who voluntarily resigns as a director of the Employer,
other than a  voluntary  resignation  that would  constitute  Retirement  if the
directorship  is  treated  as  employment,  shall  expire  immediately  when the
voluntary  resignation is effective and the unvested Shares  remaining from such
Award shall not vest.

      (c) All Awards granted to an Eligible  Director of Eligible Employee which
have not yet vested and  become  distributable  shall  expire  immediately  upon
Termination  for Cause and the unvested  Shares  remaining from such Award shall
not vest.

      (d) The vesting of Awards granted to an Eligible Employee  hereunder shall
be  suspended  as of the  time  and date at which  such  Eligible  Employee  has
received  notice  from the Board  that his or her  employment  is  subject  to a
possible Termination for Cause. Such suspension shall remain in effect until the
Eligible  Employee  receives  official  notice from the Board that he or she has
been  cleared of any  possible  Termination  for Cause,  at which time the Award
shall be  reinstated  and any  portion of the Award  which would have vested and
become  distributable  during such  suspension  shall be immediately  vested and
distributable.

SECTION 6.10 ACCELERATED VESTING

      Notwithstanding   any  other   provision   of  the  Plan  or  any  vesting
restrictions imposed by the Committee,  all Awards under the Plan which have not
yet terminated but which have not yet vested shall be immediately distributed in
accordance  with Section 7.2 of the Plan if (a) a Change in Control  occurs,  or
(b) as to Awards held by any Person,  if that Person retires from all service as
an employee and director,  as applicable,  of all Employers  after not less than
five years of service  with any  Employer.  For the purpose of this  Section,  a
Person shall be deemed to have retired upon voluntary  resignation,  termination
without cause or upon failure to be re-elected as a director.  Vesting shall not
accelerate  for an  Eligible  Employee  because  such  person has  retired as an
employee so long as such Person continues to be a director of an Employer.

                                   ARTICLE VII
                             DISTRIBUTION OF SHARES

SECTION 7.1 DESIGNATION OF BENEFICIARY.

      An Eligible  Director or Eligible  Employee  who has received an Award may
designate a Beneficiary to receive any  undistributed  Shares that are or become
available for  distribution on or after the date of his death.  Such designation
(and any change or revocation of such  designation)  shall be made in writing in
the form and manner prescribed by the Committee.  If the Beneficiary  designated
by an Eligible Director or Eligible Employee dies prior to the Eligible Director
or Eligible Employee, or if no Beneficiary has been

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<PAGE>

designated,   any  undistributed   Shares  that  are  or  become  available  for
distribution on or after the Eligible  Director's or Eligible  Employee's  death
shall be paid to the executor or  administrator  of the Eligible  Director's  or
Eligible Employee's estate, or if no such executor or administrator is appointed
within  such  time  as  the  Committee,  in  its  sole  discretion,  shall  deem
reasonable,  to  such  one or more  of the  spouse  and  descendants  and  blood
relatives of such deceased person as the Committee may select.

SECTION 7.2 MANNER OF DISTRIBUTION.

      (a) As soon as practicable  following the date any Shares granted pursuant
to an Award become vested as set forth in section 6.8, the Committee  shall take
such actions as are  necessary to cause the transfer of record  ownership of the
Shares  that have become  vested from the Trustee to the Award  holder and shall
cause the Trustee to  distribute  to the Award  holder all  property  other than
Shares then being held in connection with the Shares being distributed.

      (b) The Company's  obligation  to deliver  Shares with respect to an Award
shall,  if the  Committee  so  requests,  be  conditioned  upon the receipt of a
representation  as to the  investment  intention  of the  Eligible  Director  or
Eligible  Employee or  Beneficiary  to whom such Shares are to be delivered,  in
such form as the  Committee  shall  determine  to be  necessary  or advisable to
comply with the provisions of applicable federal,  state or local law. It may be
provided  that  any  such   representation   shall  become  inoperative  upon  a
registration of the Shares or upon the occurrence of any other event eliminating
the  necessity  of such  representation.  The  Company  shall not be required to
deliver any Shares  under the Plan prior to (i) the  admission of such Shares to
listing on any stock  exchange on which  Shares may then be listed,  or (ii) the
completion  of such  registration  or other  qualification  under  any  state or
federal law, rule or regulation as the Committee shall determine to be necessary
or advisable.

SECTION 7.3 TAXES.

      The Company,  the Committee or the Trustee shall have the right to require
any person  entitled to receive Shares pursuant to an Award to pay the amount of
any tax which is required to be withheld  with  respect to such  Shares,  or, in
lieu  thereof,  to retain,  or to sell without  notice,  a sufficient  number of
Shares to cover the amount required to be withheld.

                                  ARTICLE VIII
                            TERMINATION AND AMENDMENT

SECTION 8.1 TERMINATION.

      The Board may  suspend  or  terminate  the Plan in whole or in part at any
time  by  giving  written  notice  of  such  suspension  or  termination  to the
Committee;  provided,  however,  that the Plan may not be terminated while there
are outstanding  Awards that may thereafter become vested.  Upon the termination
of the Plan,  the Trustee shall make  distributions  from the Trust Fund in such
amounts and to such  persons as the  Committee  may direct and shall  return the
remaining assets of the Trust Fund, if any, to the Company.

SECTION 8.2 AMENDMENT.

      The Board may amend or revise the Plan in whole or in part at any time but
no amendment may adversely  affect  outstanding  awards and all  amendments  are
subject to applicable laws and regulations.

SECTION 8.3 ADJUSTMENTS IN THE EVENT OF A BUSINESS REORGANIZATION.

      (a)  In  the  event  of  any  merger,  consolidation,  or  other  business
reorganization  (including  but not limited to a Change of Control) in which the
Company is the  surviving  entity,  and in the event of any stock  split,  stock
dividend or other event  generally  affecting  the number of Shares held by each
person  who is then a holder of record of Shares,  the number of Shares  held in
the Trust Fund, including Shares covered by Awards, shall be adjusted to account
for such event.  Such adjustment shall be effected by multiplying such number of
Shares by an amount equal to the number of Shares that would be owned after such
event by a person who, immediately prior to such event, was the holder of record
of one Share;  provided,  however,  that the Committee  may, in its  discretion,
establish another appropriate method of adjustment.

      (b)  In  the  event  of  any  merger,  consolidation,  or  other  business
reorganization  (including  but not limited to a Change of Control) in which the
Company is not the  surviving  entity,  the Trustee shall hold in the Trust Fund
any money, stock, securities or, other property received by holders of record of
Shares  in  connection  with  such  merger,  consolidation,  or  other  business
reorganization.  Any Award with respect to which Shares had been allocated to an
Eligible  Director or Eligible  Employee  shall be adjusted by allocating to the
Eligible Director or Eligible Employee receiving such Award the amount of money,
stock,  securities  or other  property  received  by the  Trustee for the Shares
allocated to such Eligible Director or Eligible Employee.

                                        7
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                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1 STATUS AS AN EMPLOYEE BENEFIT PLAN.

      This Plan is not intended to satisfy the  requirements  for  qualification
under section 401(a) of the Code or to satisfy the definitional requirements for
an "employee benefit plan" under section 3(3) of the Employee  Retirement Income
Security Act of 1974, as amended. It is intended to be a non-qualified incentive
compensation  program  that is exempt from the  regulatory  requirements  of the
Employee  Retirement Income Security Act of 1974, as amended.  The Plan shall be
construed and administered so as to effectuate this intent.

SECTION 9.2 NO RIGHT TO CONTINUED EMPLOYMENT.

      Neither the  establishment  of the Plan nor any provisions of the Plan nor
any action of the Board or the Committee  with respect to the Plan shall be held
or construed to confer upon any Eligible Director or Eligible Employee any right
to a continuation of employment by the Employer. The Employer reserves the right
to dismiss any Eligible Director or Eligible Employee or otherwise deal with any
Eligible Director or Eligible Employee to the same extent as though the Plan had
not been adopted.

SECTION 9.3 CONSTRUCTION OF LANGUAGE.

      Whenever  appropriate in the Plan,  words used in the singular may be read
in the plural,  words used in the plural may be read in the singular,  and words
importing the masculine gender may be read as referring  equally to the feminine
or the neuter.  Any reference to an Article or section  number shall refer to an
Article or section of this Plan unless otherwise indicated.

SECTION 9.4 GOVERNING LAW.

      The Plan shall be construed  and enforced in  accordance  with the laws of
the State of New York without  giving effect to the conflict of laws  principles
thereof,  except to the extent that such laws are  preempted by the federal laws
of the United  States of  America.  The Plan shall be  construed  to comply with
applicable Banking Regulations.

SECTION 9.5 HEADINGS.

      The headings of Articles and sections are included  solely for convenience
of reference. If there is any conflict between such headings and the text of the
Plan, the text shall control.

SECTION 9.6 NON-ALIENATION OF BENEFITS.

      The right to receive a benefit  under the Plan shall not be subject in any
manner to anticipation, alienation or assignment, nor shall such right be liable
for or subject to debts, contracts, liabilities, engagements or torts, except to
the  extent  provided  in a  qualified  domestic  relations  order as defined in
section 414(p) of the Code.

SECTION 9.7 NOTICES.

      Any  communication  required  or  permitted  to be given  under  the Plan,
including any notice, direction, designation, comment, instruction, objection or
waiver,  shall be in writing and shall be deemed to have been given at such time
as it is  personally  delivered  or 5 days  after  mailing  if  mailed,  postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address  listed  below,  or at such other  address as one such
party may by written notice specify to the other:

      (a) If to the Committee:

      The  Human  Resources  Committee  (or  such  other  committee  as  may  be
      designated by the Board)
      CNY Financial Corporation
      One North Main Street
      Cortland, New York 13045

      (b) If to an  Eligible  Director  or Eligible  Employee,  to the  Eligible
Director's or Eligible Employee's address as shown in the Employer's records.

                                        8
<PAGE>

SECTION 9.8 APPROVAL OF STOCKHOLDERS.

      This Plan  shall not be  effective  or  implemented  prior to the one year
anniversary of the  conversion of the Bank to stock form unless  approved by the
holders of a majority of the total votes  eligible to be cast at any duly called
annual or  special  meeting  of the  Company,  in which  case the Plan  shall be
effective  as of the  date  of such  approval.  If this  Plan is  approved  by a
majority  of the votes cast at such  meeting  but not by a majority of the votes
eligible to be cast at such  meeting,  then this Plan shall be  effective on the
later of the date of such stockholder  approval or October 7, 1999. No awards of
Shares may occur or be effective before this Plan is effective.

                                         9