<PAGE>
 
                                West Essex Bank

                         Employee Stock Ownership Plan

                           Effective January 1, 1998
<PAGE>
 
                                West Essex Bank
                         Employee Stock Ownership Plan
                                 Certification

     I, Leopold W. Montanaro, President and Chief Executive Officer of, West
Essex Bank, a federally-chartered stock savings bank, hereby certify that the
attached West Essex Bank Employee Stock Ownership Plan, effective January 1,
1998, was adopted at a duly held meeting of the Board of Directors of the Bank.


 
ATTEST:                                     West Essex Bank


/s/ Craig L. Montanaro                      By:/s/ Leopold W. Montanaro
------------------------                       -------------------------------- 
Craig L. Montanaro                               Leopold W. Montanaro
Secretary                                        President and Chief Executive 
                                           
<PAGE>
 
                                West Essex Bank
                         Employee Stock Ownership Plan

                               Table of Contents

<TABLE>
<CAPTION>
 
 
<S>                                                              <C>
Section 1 - Introduction.......................................   1
                                                        
Section 2 - Definitions........................................   2
                                                        
Section 3 - Eligibility and Participation......................   9
                                                        
Section 4 - Contributions......................................  11
                                                        
Section 5 - Allocation and Valuation...........................  14
                                                        
Section 6 - Vesting and Forfeitures............................  21
                                                        
Section 7 - Distributions......................................  24
                                                        
Section 8 - Voting of Company Stock and Tender Offers..........  29
                                                        
Section 9 - The Committee and Plan Administration..............  30
                                                        
Section 10 - Rules Governing Benefit Claims....................  34
                                                        
Section 11 - The Trust.........................................  36
                                                        
Section 12 - Adoption, Amendment and Termination...............  38
                                                        
Section 13 - General Provisions................................  40
                                                        
Section 14 - Top-Heavy Provisions..............................  42
 
</TABLE>
<PAGE>
 
                                West Essex Bank
                         Employee Stock Ownership Plan

                                   Section 1
                                  Introduction
                                        

Section 1.01   Nature of the Plan.
               ------------------ 

Effective as of January 1, 1998, (the "Effective Date"),West Essex Bank, a
federally-chartered savings bank (the "Bank"), hereby establishes the West Essex
Bank Employee Stock Ownership Plan (the "Plan") to enable Eligible Employees (as
defined in Section 2.01(p) of the Plan) to acquire stock ownership interests in
West Essex Bancorp, Inc., the holding company of the Bank (the "Company"). The
Bank intends this Plan to be a tax-qualified stock bonus plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and an
employee stock ownership plan within the meaning of Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Sections 409 and 4975(e)(7) of the Code. The Plan is designed to invest
primarily in the common stock of the Company, which stock constitutes
"qualifying employer securities" within the meaning of Section 407(d)(5) of
ERISA and Sections 409(l) and 4975(e)(8) of the Code. Accordingly, the Plan and
Trust Agreement (as defined in Section 2.01(oo) of the Plan) shall be
interpreted and applied in a manner consistent with the Bank's intent for it to
be a tax-qualified plan designed to invest primarily in qualifying employer
securities.

Section 1.02   Employers and Affiliates.
               ------------------------ 

The Bank and each of its Affiliates (as defined in Section 2.01(c) of the Plan)
which, with the consent of the Bank, adopt the Plan pursuant to the provisions
of Section 12.01 of the Plan are collectively referred to as the "Employers" and
individually as an "Employer."  The Plan shall be treated as a single plan with
respect to all participating Employers.
<PAGE>
 
                                   Section 2
                                  Definitions

Section 2.01  Definitions.
               ----------- 

In this Plan, whenever the context so indicates, the singular or the plural
number and the masculine or feminine gender shall be deemed to include the
other, the terms "he," "his," and "him," shall refer to a Participant or
Beneficiary, as the case may be, and, except as otherwise provided, or unless
the context otherwise requires, the capitalized terms shall have the following
meanings:

(a) "Account" or "Accounts" mean a Participant's or Beneficiary's Company Stock
Account and/or his Other Investments Account, as the context so requires.

(b) "Acquisition Loan" means a loan (or other extension of credit, including an
installment obligation to a "party in interest" (as defined in Section 3(14) of
ERISA) incurred by the Trustee in connection with the purchase of Company Stock.

(c) "Affiliate" means any corporation, trade or business, which, at the time of
reference, is together with the Bank, a member of a controlled group of
corporations, a group of trades or businesses (whether or not incorporated)
under common control, or an affiliated service group, as described in Sections
414(b), 414(c), and 414(m) of the Code, respectively, or any other organization
treated as a single employer with the Bank under Section 414(o) of the Code;
provided, however, that, where the context so requires, the term "Affiliate"
shall be construed to give full effect to the provisions of Sections 409(l)(4)
and 415(h) of the Code.

(d) "Bank" means West Essex Bank, and any entity which succeeds to the business
of West Essex Bank and which adopts this Plan in accordance with the provisions
of Section 12.02 of the Plan or by written agreement assuming the obligations
under the Plan.

(e) "Beneficiary" means the person(s) entitled to receive benefits under the
Plan following a Participant's death, pursuant to Section 7.03 of the Plan.

(f) "Code" means the Internal Revenue Code of 1986, as amended.

(g) "Committee" means the individual(s) responsible for the administration of
the Plan in accordance with Section 9 of the Plan.

(h) "Company" means West Essex Bancorp, Inc. and any entity which succeeds to
the business of West Essex Bancorp, Inc.


                                       2
<PAGE>
 
(i) "Company Stock" means shares of the voting common stock or preferred stock,
meeting the requirements of Section 409 of the Code and Section 407(d)(5) of
ERISA, issued by the Bank or its Affiliates.

(j) "Company Stock Account" means the account established and maintained in the
name of each Participant or Beneficiary to reflect his share of the Trust Fund
invested in Company Stock.

(k) "Compensation" means an Employee's wages, salary, fees and other amounts
defined as compensation in Section 415(c)(3) of the Code and Income Tax
Regulations Sections 1.415-2(d)(2) and (3), received for personal services
actually rendered in the course of employment with the employer for the calendar
year, prior to any reduction pursuant to a Compensation Reduction Agreement.
Compensation shall include commissions, overtime, bonuses, wage continuation
payments to an Employee absent due to illness or disability of a short-term
nature, amounts paid or reimbursed by the Employer for Employee moving expenses
(to the extent not deductible by the Employee), and the value of any
nonqualified stock option granted to an Employee by the Employer (to the extent
includable in gross income for the year granted).

Compensation does not include contributions made by the Employer to any other
pension, deferred compensation, welfare or other employee benefit plan, amounts
realized from the exercise of a nonqualified stock option or the sale of a
qualified stock option, and other amounts which receive special tax benefits.

A Participant's Compensation shall not exceed $150,000 (as periodically adjusted
pursuant to Section 401(a)(17) of the Code (the "Compensation Limit")).  If a
Participant's Compensation is determined on a basis of a period of less than
twelve (12) calendar months, then the Compensation Limit for such Participant
shall be the Compensation Limit in effect for the Plan Year in which the period
begins multiplied by a ratio obtained by dividing the number of full months in
the period by twelve (12).

(l)  "Conversion Date" means the date the Company first issues common stock
pursuant to its initial public offering.

(m) "Disability" means a physical or mental condition, which renders the
Participant eligible for benefits under the Employer's long-term disability
plan.

(n) "Effective Date" means January 1, 1998.

(o) "Eligible Employee" means any Employee who is not precluded from
participating in the Plan by reason of the provisions of Section 3.02 of the
Plan.

(p) "Employee" means any person who is actually performing services for the Bank
or an Affiliate in a common-law, employer-employee relationship as determined
under Sections 31.3121(d)-1, 31.3306(i)-1, or 31.3401(c)-1 of the Treasury
Regulations and any "leased employee" (within the meaning of Section 414(n) of
the Code).


                                       3
<PAGE>
 
(q) "Employer" or "Employers" means the Bank and its Affiliates, which adopt the
Plan in accordance with the provisions of Section 12.01 of the Plan, and any
entity which succeeds to the business of the Bank or its Affiliates and which
adopts the Plan in accordance with the provisions of Section 12.02 of the Plan
or by written agreement assumes the obligations under the Plan.

(r) "Entry Date" means the first day of each January and July coinciding with or
next following the date the Employee satisfies the eligibility requirements
under Section 3 of the Plan.

(s) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

(t) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(u) "Financed Shares" means shares of Company Stock acquired by the Trustee with
the proceeds of an Acquisition Loan, which shall constitute "qualifying employer
securities" under Section 409(l) of the Code and any shares of Company Stock
received upon conversion or exchange of such shares.

(v) "Highly Compensated Employee" means an Employee who, for a particular Plan
Year, satisfies one of the following conditions:

     (i) was a "5-percent owner" (as defined in Section 414(q)(2) of the Code)
     during the year or the preceding year, or

     (ii) for the preceding year,

          (A) had "compensation" (as defined in Section 414(q)(4) of the Code)
          from the Bank and its Affiliates exceeding $80,000 (as periodically
          adjusted pursuant to Section 414(q)(1) of the Code), and

          (B) if the Employer elects, was in the "top-paid group" (as defined in
          Section 414(q)(3) of the Code) of Employees for such preceding year.

(w) "Hours of Service" means each hour for which an Employee is paid or entitled
to be paid for performing duties for the Employer.

For purposes of determining whether an Employee has incurred a One Year Break in
Service and for vesting and participation purposes, if an Employee begins a
maternity/paternity leave of absence described in Section 411(a)(6)(E)(i) of the
Code, his Hours of Service shall include the Hours of Service that would have
been credited to him if he had not been so absent (or eight (8) Hours of Service
for each day of such absence if the actual Hours of Service cannot be
determined).  An


                                       4
<PAGE>
 
Employee shall be credited for such Hours of Service (up to a maximum of 501
Hours of Service) in the Plan Year in which his absence begins (if such
crediting will prevent him from incurring a One Year Break in Service in such
Plan Year) or, in all other cases, in the following Plan Year. An absence from
employment for maternity or paternity reasons means an absence:

     (i) by reason of pregnancy of the Employee,

     (ii) by reason of a birth of a child of the Employee,

     (iii) by reason of the placement of a child with the Employee in connection
     with the adoption of such child by such Employee, or

     (iv) for purposes of caring for such child for a period beginning
     immediately following such birth or placement.


(x) "Loan Suspense Account" means that portion Trust Fund consisting of Company
Stock acquired with an Acquisition Loan which has not yet been allocated to the
Participants' Accounts.

(y) "Matching Contribution" means any contribution made to the Plan pursuant to
the provisions of Section 4.01(c) of the Plan.

(aa) "Normal Retirement Age" means the date the Employee attains age sixty-five
(65).

(bb) "Normal Retirement Date" means the first day of the month coincident with
or next following the Participant's attainment of Normal Retirement Age.

(cc) "One Year Period of Severance" means a twelve (12) consecutive month period
following an Employee's Termination of Service with the Employer during which
the Employee did not perform an Hour of Service.  Notwithstanding the foregoing,
if an Employee is absent from employment for maternity or paternity reasons,
such absence during the twenty-four (24) month period commencing on the first
date of such absence shall not constitute a One Year Period of Severance.  An
absence from employment for maternity or paternity reasons means an absence:

     (i) by reason of pregnancy of the Employee,

     (ii) by reason of a birth of a child of the Employee,

     (iii) by reason of the placement of a child with the Employee in connection
     with the adoption of such child by such Employee, or

     (iv) for purposes of caring for such child for a period beginning
     immediately following such birth or placement.

        
                                       5
<PAGE>
 
(dd) "Other Investments Account" means the account established and maintained in
the name of each Participant or Beneficiary to reflect his share of the Trust
Fund, other than Company Stock.

(ee) "Participant" means any Employee who has become a participant in accordance
with Section 3.01 of the Plan or any other person with an Account balance under
the Plan.

(ff) "Period of Service" means a period commencing on the date an Employee first
performs an Hour of Service for the Employer upon initial employment or, if
applicable, upon reemployment, and ending on the date such Employee first incurs
a Termination of Service.  Notwithstanding the foregoing, the period between the
first and second anniversary of the first date of a maternity or paternity
absence described under Section 2.01(cc) of the Plan shall not be included in
determining a Period of Service. A period during which an individual was not
employed by the Employer shall nevertheless be deemed to be a Period of Service
if such individual incurred a Termination of Service and:

     (i) such Termination of Service was the result of resignation, discharge or
     retirement and such individual is reemployed by the Employer within one (1)
     year after such Termination of Service; or

     (ii) such Termination of Service occurred when the individual was otherwise
     absent for less than one (1) year and he was reemployed by the Employer
     within one (1) year after the date such absence began.

All Periods of Service not disregarded under Sections 3.04 and 6.03 of the Plan
shall be aggregated. Wherever used in the Plan, a Period of Service means the
quotient obtained by dividing the days in all Periods of Service not disregarded
hereunder by 365 and disregarding any fractional remainder.

(gg) "Plan" means this West Essex Bank Employee Stock Ownership Plan, as amended
from time to time.

(hh) "Plan Year" means the calendar year.

(ii) "Postponed Retirement Date" means the first day of the month coincident
with or next following a Participant's date of actual retirement which occurs
after his Normal Retirement Date.

(jj) "Recognized Absence" means a period for which:

     (i) an Employer grants an Employee a leave of absence for a limited period
     of time, but only if an Employer grants such leaves of absence on a
     nondiscriminatory basis to all Eligible Employees; or


                                       6
<PAGE>
 
     (ii) an Employee is temporarily laid off by an Employer because of a change
     in the business conditions of the Employer; or

     (iii) an Employee is on active military duty, but only to the extent that
     his employment rights are protected by the Military Selective Service Act
     of 1967 (38 U.S.C. sec. 2021).

(kk) "Retirement Date" means a Participant's Normal Retirement Date or Postponed
Retirement Date, whichever is applicable.

(ll) "Savings Plan" means the West Essex Bank 401(k) Savings Plan in RSI
Retirement Trust, as amended from time to time.

(mm) "Service" means employment with the Bank or an Affiliate.

(nn) "Termination of Service" means the earlier of (a) the date on which an
Employee's service is terminated by reason of his resignation, retirement,
discharge, death or Disability or (b) the first anniversary of the date on which
such Employee's service is terminated for disability of a short-term nature or
any other reason.  Service in the Armed Forces of the United States shall not
constitute a Termination of Service but shall be considered to be a period of
employment by the Employer provided (i) such military service is caused by war
or other emergency or the Employee is required to serve under the laws of
conscription in time of peace, (ii) the Employee returns to employment with the
Employer within six (6) months following discharge from such military service
and (iii) such Employee is reemployed by the Employer at a time when the
Employee had a right to reemployment at his former position or substantially
similar position upon separation from such military duty in accordance with
seniority rights as protected under the laws of the United States.  A leave of
absence granted to an Employee by the Employer shall not constitute a
Termination of Service provided that the Participant returns to the active
service of the Employer at the expiration of any such period for which leave has
been granted.  Notwithstanding the foregoing, an Employee who is absent from
service with the Employer beyond the first anniversary of the first date of his
absence for maternity or paternity reasons set forth in Section 2.01(cc) of the
Plan shall incur a Termination of Service for purposes of the Plan on the second
anniversary of the date of such absence.

(oo) "Treasury Regulations" means the regulations promulgated by the Department
of Treasury under the Code.

(pp) "Trust" means the West Essex Bank Employee Stock Ownership Plan Trust
created in connection with the establishment of the Plan.

(qq) "Trust Agreement" means the trust agreement establishing the Trust.


                                       7
<PAGE>
 
(rr) "Trust Fund" means the assets held in the Trust for the benefit of
Participants and their Beneficiaries.

(ss) "Trustee" means the trustee or trustees from time to time in office under
the Trust Agreement.

(tt) "Valuation Date" means the last day of the Plan Year and each other date as
of which the Committee shall determine the investment experience of the Trust
Fund and adjust the Participants' Accounts accordingly.
 
(uu) "Valuation Period" means the period following a Valuation Date and ending
with the next Valuation Date.

                                   Section 3
                         Eligibility and Participation

 Section 3.01    Initial Participation.
                 --------------------- 

(a) Employees Employed as of the Conversion Date.  Any Eligible Employee who is
    --------------------------------------------                               
employed by an Employer at any time from the Effective Date to the Conversion
Date shall enter the Plan and become a Participant immediately as of the later
of the Effective Date or the date he first performs an Hour of Service for the
Employer.

(b) Employees Employed After the Conversion Date.  An Eligible Employee who
    --------------------------------------------                           
becomes employed by an Employer subsequent to the Conversion Date shall enter
the Plan and become a Participant as of the Entry Date coincident with or next
following the date he satisfies the following requirements:

     (i)  He has completed a Period of Service of one hundred eighty-two (182)
     days; and

     (ii)  He has attained 21 years of age.

Section 3.02   Certain Employees Ineligible.
               ---------------------------- 

The following Employees are ineligible to participate in the Plan:

(a) Employees covered by a collective bargaining agreement between the Employer
and the Employee's collective bargaining representative if:

     (i) retirement benefits have been the subject of good faith bargaining
     between the Employer and the representative, and



                                       8
<PAGE>
 
     (ii) the collective bargaining agreement does not expressly provide that
     Employees of such unit be covered under the Plan;

(b) Employees paid solely on a daily fee, or retainer basis;

(c) Employees who are nonresident aliens and who receive no earned income from
an Employer which constitutes income from sources within the United States;

(d) Employees of an Affiliate that has not adopted the Plan pursuant to Sections
12.01 or 12.02 of the Plan; and

(e) Any "leased employees" (within the meaning of Section 414(n) of the Code).

Section 3.03   Transfer to Eligible Employment.
               ------------------------------- 

If an Employee ineligible to participate in the Plan by reason of Section 3.02
of the Plan transfers to employment as an Eligible Employee, he shall enter the
Plan as of the later of:

(a) the first Entry Date after the date of transfer, or

(b) the first Entry Date on which he could have become a Participant pursuant to
Section 3.01 of the Plan if his prior employment with the Bank or Affiliate had
been as an Eligible Employee.

Section 3.04   Participation After Reemployment and Recognized Absences.
               -------------------------------------------------------- 

(a)  If an Employee incurs a One Year Period of Severance prior to satisfying
the eligibility requirements of Section 3.01 of the Plan, such Employee's
service prior to the One Year Period of Severance shall be disregarded and such
Employee must again satisfy the eligibility requirements of Section 3.01(b) of
the Plan as a new Employee.

(b) If an Employee incurs a One Year Period of Severance after satisfying the
eligibility requirements of Section 3.01 of the Plan and such Employee is not
vested in any portion of his Accounts under the Plan and the Employee again
performs an Hour of Service with an Employer, he shall receive credit for
Periods of Service prior to a One Year Period of Severance only if the number of
consecutive One Year Periods of Severance is less than the greater of:

     (i) five, or

     (ii) the aggregate number of his Periods of Service credited before his One
     Year Period of Severance.

                                       9
<PAGE>
 
If such former Employee's Periods of Service are again credited to the Employee
pursuant to this Section 3.04(b), such former Employee shall be eligible to
participate in the Plan immediately upon his reemployment, provided such
Employee is not excluded from participating in the Plan pursuant to Section 3.02
of the Plan.  If such former Employee's Periods of Service prior to his One Year
Period of Severance are not recredited under this Section 3.04(b), such Employee
must satisfy the eligibility requirements of Section 3.01(b) of the Plan as a
new Employee.

(c) If an Employee incurs a One Year Period of Severance after satisfying the
eligibility requirements of Section 3.01 of the Plan and such Employee is vested
in any portion of his Accounts under the Plan and the Employee again performs an
Hour of Service with an Employer, he shall receive credit for Periods of Service
prior to a One Year Period of Severance and shall be eligible to participate in
the Plan immediately upon reemployment, provided such Employee is not excluded
from participating in the Plan pursuant to Section 3.02 of the Plan.

Section 3.05   Participation Not Guarantee of Employment.
               ----------------------------------------- 

Participation in the Plan does not constitute a guarantee or contract of
employment and will not give any Employee the right to be retained in the employ
of the Bank or any of its Affiliates nor any right or claim to any benefit under
the terms of the Plan unless such right or claim has specifically accrued under
the Plan.


                                      10
<PAGE>
 
                                   Section 4
                                 Contributions

Section 4.01   Employer Contributions.
               ---------------------- 

(a)  Discretionary Contributions.  Each Plan Year, each Employer, in its
discretion, may make a contribution to the Trust.  Each Employer making a
contribution for any Plan Year under this Section 4.01(a) will contribute to the
Trustee cash equal to, or Company Stock or other property having an aggregate
fair market value equal to, such amount as the Board of Directors of the
Employer shall determine by resolution.  Notwithstanding the Employer's
discretion with respect to the medium of contribution, an Employer shall not
make a contribution in any medium which would make such contribution a
prohibited transaction (for which no exemption is provided) under Section 406 of
ERISA or Section 4975 of the Code.

(b)  Employer Contributions for Acquisition Loans.  Each Plan Year, the
Employers shall, subject to the provisions of the Bank's "Plan of Conversion"
(as filed with the appropriate governmental agencies in connection with the
Bank's conversion from a mutual to stock form of organization) and any related
regulatory prohibitions, contribute an amount of cash sufficient to enable to
the Trustee to discharge any indebtedness incurred with respect to an
Acquisition Loan pursuant to the terms of the Acquisition Loan.  The Employers'
obligation to make contributions under this Section 4.01(b) shall be reduced to
the extent of any investment earnings attributable to such contributions and any
cash dividends paid with respect to Company Stock held by the Trustee in the
Loan Suspense Account. The Employers' obligation to make contributions under
this Section 4.01(b) shall further be reduced to the extent of any cash
contribution made pursuant to the provisions of paragraph (c) of this Section
4.01.  If there is more than one Acquisition Loan, the Employers shall designate
the one to which any contribution pursuant to this Section 4.01(b), and, if
applicable paragraph (c) of this Section 4.01, is to be applied.

(c) Employer Matching Contributions under the Savings Plan.  For each Plan Year,
each Employer, in its discretion, may make a contribution to the Trust equal to
a percentage of the Employee's voluntary contributions made for the Plan Year
under the Savings Plan.  Each Employer making a contribution for any Plan Year
under this Section 4.01(c) shall contribute to the Trustee cash equal to, or
Company Stock or other property having an aggregate fair market value equal to,
such amount as the Board of Directors of the Employer shall determine by
resolution or as shall be set forth in the Savings Plan, as applicable.
Notwithstanding the Employer's discretion with respect to the medium of
contribution, an Employer shall not make a contribution in any medium which
would make such contribution a prohibited transaction (for which no exemption is
provided) under Section 406 of ERISA or Section 4975 of the Code.


                                      11
<PAGE>
 
Section 4.02   Limitations on Contributions.
               ---------------------------- 

In no event shall an Employer's contribution(s) made under Section 4.01 of the
Plan for any Plan Year exceed the lesser of:

(a) The maximum amount deductible under Section 404 of the Code by that Employer
as an expense for Federal income tax purposes; and

(b) The maximum amount which can be credited for that Plan Year in accordance
with the allocation limitation provisions of Section 5.05 of the Plan.

Section 4.03   Acquisition Loans.
               ----------------- 

The Trustee may incur Acquisition Loans from time to time to finance the
acquisition of Company Stock for the Trust or to repay a prior Acquisition Loan.
An Acquisition Loan shall be for a specific term, shall bear a reasonable rate
of interest, and shall not be payable on demand except in the event of default,
and shall be primarily for the benefit of Participants and Beneficiaries of the
Plan.  An Acquisition Loan may be secured by a collateral pledge of the Financed
Shares so acquired and any other Plan assets which are permissible security
within the provisions of Section 54.4975-7(b) of the Treasury Regulations.  No
other assets of the Plan or Trust may be pledged as collateral for an
Acquisition Loan, and no lender shall have recourse against any other Trust
assets.  Any pledge of Financed Shares must provide for the release of shares so
pledged on a basis equal to the principal and interest (or if the requirements
of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the
Employer so elects, principal payments only), paid by the Trustee on the
Acquisition Loan. The released Financed Shares shall be allocated by
Participants' Accounts in accordance with the provisions of Sections 5.04 or
5.09 of the Plan, whichever is applicable.  Payment of principal and interest on
any Acquisition Loan shall be made by the Trustee only from the Employer
contributions paid in cash to enable the Trustee to repay such loan in
accordance with Sections 4.01(b) or 4.01(c) of the Plan, from earnings
attributable to such contributions, and any cash dividends received by the
Trustee on Financed Shares acquired with the proceeds of the Acquisition Loan
(including contributions, earnings and dividends received during or prior to the
year of repayment less such payments in prior years), whether or not allocated.
Financed Shares shall initially be credited to the Loan Suspense Account and
shall be transferred for allocation to the Company Stock Account of Participants
only as payments of principal and interest (or, if the requirements of Section
54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so
elects, principal payments only), on the Acquisition Loan are made by the
Trustee.  The number of Financed Shares to be released from the Loan Suspense
Account for allocation to Participants' Company Stock Account for each Plan Year
shall be based on the ratio that the payments of principal and interest (or, if


                                      12
<PAGE>
 
the requirements of Section 54.4975-7(b)(8)(ii) of the Treasury Regulations are
met and the Employer so elects, principal payments only), on the Acquisition
Loan for that Plan Year bears to the sum of the payments of principal and
interest on the Acquisition Loan for that Plan Year plus the total remaining
payment of principal and interest projected (or, if the requirements of Section
54.4975-7(b)(8)(ii) of the Treasury Regulations are met and the Employer so
elects, principal payments only), on the Acquisition Loan over the duration of
the Acquisition Loan repayment period, subject to the provisions of Section 5.05
of the Plan.

Section 4.04.  Conditions as to Contributions.
               ------------------------------ 

In addition to the provisions of Section 12.03 of the Plan for the return of an
Employer's contributions in connection with a failure of the Plan to qualify
initially under the Code, any amount contributed by an Employer due to a good
faith mistake of fact, or based upon a good faith but erroneous determination of
its deductibility under Section 404 of the Code, shall be returned to the
Employer within one year after the date on which the Employer originally made
such contribution, or within one year after its nondeductibility has been
finally determined.  However, the amount to be returned shall be reduced to take
account for any adverse investment experience within the Trust in order that the
balance credited to each Participant's Accounts is not less that it would have
been if the contribution had never been made by the Employer.

Section 4.05   Employee Contributions.
               ---------------------- 

Employee contributions are neither required nor permitted under the Plan.

Section 4.06   Rollover Contributions.
               ---------------------- 

Rollover contributions of assets from other tax-qualified retirement plans are
not permitted under the Plan.

Section 4.07   Trustee-to-Trustee Transfers.
               ---------------------------- 

Trustee-to-trustee transfer of assets from other tax-qualified retirement plans
are not permitted under the Plan.


                                      13
<PAGE>
 
                                   Section 5
                                Plan Accounting

Section 5.01   Accounting for Allocations.
               -------------------------- 

The Committee shall establish the Accounts (and sub-accounts, if deemed
necessary) for each Participant, and the accounting procedures for the purpose
of making the allocations to the Participants' Accounts provided for in this
Section 5.  The Committee shall maintain adequate records of the cost basis of
shares of Company Stock allocated to each Participant's Company Stock Account.
The Committee also shall keep separate records of Financed Shares attributable
to each Acquisition Loan and of contributions made by the Employers (and any
earnings thereon) made for the purpose of enabling the Trustee to repay any
Acquisition Loan.  From time to time, the Committee may modify its accounting
procedures for the purpose of achieving equitable and nondiscriminatory
allocations among the Accounts of Participants, in accordance with the
provisions of this Section 5 and the applicable requirements of the Code and
ERISA.  In accordance with Section 9 of the Plan, the Committee may delegate the
responsibility for maintaining Accounts and records.

Section 5.02   Maintenance of Participants' Company Stock Accounts.
               --------------------------------------------------- 

As of each Valuation Date, the Committee shall adjust the Company Stock Account
of each Participant to reflect activity during the Valuation Period as follows:

(a) First, charge to each Participant's Company Stock Account all distributions
and payments made to him that have not been previously charged;

(b) Next, credit to each Participant's Company Stock Account the shares of
Company Stock, if any, that have been purchased with amounts from his Other
Investments Account, and adjust such Other Investments Account in accordance
with the provisions of Section 5.03 of the Plan; and

(c) Finally, credit to each Participant's Company Stock Account the shares of
Company Stock representing contributions made by the Employers in the form of
Company Stock and the number of Financed Shares released from the Loan Suspense
Account under Section 4.03 of the Plan that are to be allocated and credited as
of that date in accordance with the provisions of Section 5.04 of the Plan.

Section 5.03   Maintenance of Participants' Other Investments Accounts.
               ------------------------------------------------------- 

As of each Valuation Date, the Committee shall adjust the Other Investments
Account of each Participant to reflect activity during the Valuation Period as
follows:


                                      14
<PAGE>
 
(a) First, charge to each Participant's Other Investments Account all
distributions and payments made to him that have not previously been charged;

(b) Next, if Company Stock is purchased with assets from a Participant's Other
Investments Account, the Participant's Other Investments Account shall be
charged accordingly;

(c) Next, subject to the dividend provisions of Section 5.09 of the Plan, credit
to the Other Investments Account of each Participant any cash dividends paid to
the Trustee on shares of Company Stock held in that Participant's Company Stock
Account (as of the record date for such cash dividends) and dividends paid on
shares of Company Stock held in the Loan Suspense Account that have not been
used to repay any Acquisition Loan.  Cash dividends that have not been used to
repay an Acquisition Loan and have been credited to a Participant's Other
Investments Account shall be applied by the Trustee to purchase shares of
Company Stock, which shares shall then be credited to the Company Stock Account
of such Participant.  The Participant's Other Investments Account shall then be
charged by the amount of cash used to purchase such Company Stock or used to
repay any Acquisition Loan.  In addition, any earnings on:

     (i) Other Investments Accounts will be allocated to Participants' Other
     Investments Account, pro rata, based on such Other Investment Accounts
     balances as of the first day of the Valuation Period, and

     (ii) the Loan Suspense Account, other than dividends used to repay the
     Acquisition Loan, will be allocated to Participants' Other Investments
     Accounts, pro rata, based on their Other Investment Account Balances as of
     the first day of the Valuation Period.

(d) Next, allocate and credit the Employer contributions made pursuant to
Section 4.01(b) of the Plan for the purpose of repaying any Acquisition Loan in
accordance with Section 5.04 of the Plan.  Such amount shall then be used to
repay any Acquisition Loan and such Participant's Other Investments Account
shall be charged accordingly; and

(e) Finally, allocate and credit the Employer contributions (other than amounts
contributed to repay an Acquisition Loan) that are made in cash (or property
other than Company Stock) for the Plan Year to the Other Investments Account of
each Participant in accordance with Section 5.04 of the Plan.

Section 5.04   Allocation and Crediting of Employer Contributions.
               -------------------------------------------------- 

(a) Except as otherwise provided for in Section 5.09 of the Plan, as of the
Valuation Date for each Plan Year:


                                      15
<PAGE>
 
     (i) Company Stock released from the Loan Suspense Account for that year and
     shares of Company Stock contributed directly to the Plan shall be allocated
     and credited to each Active Participant's (as defined in paragraph (c) of
     this Section 5.04) Account as follows:

          (A) first the number of shares of Company Stock with a fair market
          value (valued as of the time the Matching Contributions are accrued
          under the Savings Plan) equal to the Matching Contributions made under
          Section 4.01(c) of the Plan on behalf of an Active Participant shall
          be credited to the Active Participant's Company Stock Account (and a
          matching contribution sub-account); and then

          (B) the number of shares of Company Stock that bears the same ratio as
          the Active Participant's Compensation bears to the aggregate
          Compensation of all Active Participants for the Plan Year shall be
          credited to such Active Participant's Company Stock Account, and then

     (ii) The cash contributions not used to repay an Acquisition Loan and any
     other property (other than shares of Company Stock) contributed for that
     year and forfeitures (as determined pursuant to Section 6 of the Plan)
     shall be allocated and credited to each Active Participant's Account based
     on the ratio determined by comparing each Active Participant's Compensation
     to the aggregate Compensation of all Active Participants for the Plan Year.

(b) For purposes of this Section 5.04, the term "Active Participant" means:

     (i) with respect to contributions made pursuant to Section 4.01(c) of the
     Plan, those Participants who would have otherwise have been entitled to an
     allocation of Matching Contributions under the terms of the Savings Plan
     for such period; and

     (ii) with respect to contributions made pursuant to Sections 4.01(a) and
     4.01(b) of the Plan, those Employees who:

          (A) were employed by that Employer, including Employees on a
          Recognized Absence, on the last day of the Plan Year; or

          (B) who terminated employment during the Plan Year by reason of death,
               Disability, or attainment of their Retirement Date.

Section 5.05   Limitations on Allocations.
               -------------------------- 

(a) In General.  Subject to the provisions of this Section 5.05, Section 415 of
the Code shall be incorporated by reference into the terms of the Plan.  No
allocation shall be made under Section 5.04 of the Plan that would result in a
violation of Section 415 of the Code.


                                      16
<PAGE>
 
(b) Code Section 415 Compensation.  For purposes of this Section 5.05,
Compensation shall be adjusted to reflect the general rule of Section 1.415-2(d)
of the Treasury Regulations.

(c)  Limitation Year.  The "limitation year" (within the meaning of Section 415
of the Code) shall be the calendar year.

(d)  Multiple Defined Contribution Plans.  In any case where a Participant also
participates in another defined contribution plan of the Bank or its Affiliates,
the appropriate committee of such other plan shall first reduce the after-tax
contributions under any such plan, shall then reduce any elective deferrals
under any such plan subject to Section 401(k) of the Code, shall then reduce all
other contributions under any other such plan and, if necessary, shall then
reduce contributions under this Plan, subject to the provisions of paragraph (f)
of this Section 5.05.

(e) Combined Plan Limitations.  To the extent necessary to comply with the
requirements of Section 415(e) of the Code, the plan administration or
appropriate committee shall first reduce the annual benefit payable under any
defined benefit plan in which the Participant participates and, if necessary,
the Committee shall thereafter reduce the contributions under the defined
contribution plans in which such Participant participates in accordance with
paragraph (d) of this Section 5.05.

(f) Excess Allocations.  If, after applying the allocation provisions under
Section 5.04 of the Plan, allocations under Section 5.04 of the Plan would
otherwise result in a violation of Section 415 of the Code, the Committee shall
allocate and reallocate employer contributions to other Participants in the Plan
for the limitation year or, if such allocation and reallocation causes the
limitations of Section 415 of the Code to be exceeded,  shall hold excess
amounts in an unallocated suspense account for allocation in a subsequent Plan
Year in accordance with Section 1.415-6(b)(6)(i) of the Treasury Regulations.
Such suspense account, if permitted, will be credited before any allocation of
contributions for subsequent limitation years.

Section 5.06   Other Limitations.
               ----------------- 

Aside from the limitations set forth in Sections 5.05 of the Plan, in no event
shall more than one-third of the Employer contributions to the Plan (including
Matching Contributions) be allocated to the Accounts of Highly Compensated
Employees. In order to ensure such allocations are not made, the Committee
shall, beginning with the Participants whose Compensation exceeds the limit then
in effect under Section 401(a)(17) of the Code, reduce the amount of
Compensation of such Highly Compensated Employees on a pro-rata basis per
individual that would otherwise be taken into account for purposes of allocating
benefits under Section 5.04 of the Plan. If, in order to satisfy this Section
5.06, any such Participant's Compensation must be reduced to an amount that is
lower than the Compensation amount of the next highest paid (based on such
Participant's Compensation) Highly Compensated Employee (the "breakpoint
amount"), then, for purposes of allocating benefits under Section 5.04 of the
Plan, the Compensation of all concerned Participants shall be reduced to an
amount not to exceed such breakpoint amount.


                                      17
<PAGE>
 
Section 5.07     Limitations as to Certain Section 1042 Transactions.
                 --------------------------------------------------- 

To the extent that a shareholder of Company Stock sell qualifying Company Stock
to the Plan and elects (with the consent of the Bank) nonrecognition of gain
under Section 1042 of the Code, no portion of the Company Stock purchased in
such nonrecognition transaction (or dividends or other income attributable
thereto) may accrue or be allocated during the nonallocation period (the ten
(10) year period beginning on the later of the date of the sale of the qualified
Company Stock or the date of the Plan allocation attributable to the final
payment of an Acquisition Loan incurred in connection with such sale) for the
benefit of:

(a) The selling shareholder;

(b) the spouse, brothers or sisters (whether by the whole or half blood),
ancestors or lineal descendants of the selling shareholder or descendant
referred to in (a) above; or

(c) any other person who owns, after application of Section 318(a) of the Code,
more than twenty-five percent (25%) of:

     (i) any class of outstanding stock of the Bank or any Affiliate, or

     (ii) the total value of any class of outstanding stock of the Bank or any
     Affiliate.

For purposes of this Section 5.07, Section 318(a) of the Code shall be applied
without regard to the employee trust exception of Section 318(a)(2)(B)(i) of the
Code.

Section 5.08   Nondiscrimination Test for Matching Contributions.
               ------------------------------------------------- 

(a)  Notwithstanding anything herein to the contrary, the Plan shall meet the
nondiscrimination test of Section 401(m) of the Code for each Plan Year.  In
order to meet the nondiscrimination test, any or all of the following steps may
be taken:

     (i)  At any time during the Plan Year, the Committee may limit the amount
          of Matching Contributions that may be made on behalf of Highly
          Compensated Employees;

     (ii) The Committee may distribute to Highly Compensated Employees the
          excess aggregate contributions made for the Plan Year, to the extent
          necessary to meet the requirements of Section 401(m) of Code, on the
          basis of the amount of contributions on behalf of, or by, each Highly
          Compensated Employee;

     (iii) The Committee may recommend to the Board of Directors of the Bank
           that the Employer make an additional Matching Contribution to the
           Plan for the benefit


                                      18
<PAGE>
 
           of Participants who are not Highly Compensated Employees to the
           extent necessary to meet the requirements of Section 401(m) of the
           Code; and

     (iv) The Committee may take any other steps that the Committee deems
          appropriate.

(b) The nondiscrimination requirements of Section 401(m) of the Code require
that, in each Plan Year, the "Contribution Percentage" (defined below) of the
eligible Highly Compensated Employees for such Plan Year does not exceed the
greater of:

     (i) The Contribution Percentage of all other eligible Employees for the
         preceding Plan Year multiplied by 1.25; or

     (ii) The lesser of the Contribution Percentage of all other eligible
          Employees for the preceding Plan Year multiplied by 2, or the
          Contribution Percentage of all other eligible Employees for the
          preceding Plan Year plus 2 percentage points. (Use of this alternative
          limitation shall be subject to the provisions of Section 1.401(m)-2 of
          the Treasury Regulations regarding the multiple use of the alternative
          deferral tests set for forth in Section 401(k) and 401(m) of the
          Code.)

The Committee may elect to calculate the Contribution Percentages using the Plan
Year rather than the preceding Plan Year; provided, however, that if the
Committee so elects, the election may only be changed as provided by the
Secretary of the Treasury.

(c)  The "Contribution Percentage" for a group of Employees is the average of
the ratios, calculated separately for each Employee in the group, of the amount
of Matching Contributions that are credited under the Plan on behalf of each
Employee for the Plan Year, to the Employee's Compensation for the Plan Year.

Section 5.09   Dividends.
               --------- 

(a) Stock Dividends.  Dividends on Company Stock which are received by the
Trustee in the form of additional Company Stock shall be retained in the portion
of the Trust Fund consisting of Company Stock, and shall be allocated among the
Participant's Accounts and the Loan Suspense Account in accordance with their
holdings of the Company Stock on which the dividends have been paid.

(b) Cash Dividends on Allocated Shares.  Dividends on Company Stock credited to
Participants' Accounts which are received by the Trustee in the form of cash
shall, at the direction of the Bank, either:

       (i) be credited to Participants' Accounts in accordance with Section 5.03
       of the Plan and invested as part of the Trust Fund;


                        
                                      19
<PAGE>
 
     (ii) be distributed immediately to the Participants;

     (iii) be distributed to the Participants within ninety (90) days of the
     close of the Plan Year in which paid; or

     (iv) be used to repay principal and interest on the Acquisition Loan used
     to acquire Company Stock on which the dividends were paid.

(c) Cash Dividends on Unallocated Shares.  Dividends on Company Stock held in
the Loan Suspense Account which are received by the Trustee in the form of cash
shall be applied as soon as practicable to payments of principal and interest
under the Acquisition Loan incurred with the purchase of the Company Stock.

(d) Financed Shares.   Financed Shares released from the Loan Suspense Account
by reason of dividends paid with respect to such Company Stock shall be
allocated under Sections 5.03 and 5.04 of the Plan as follows:

     (i) First, Financed Shares with a fair market value at least equal to the
     dividends paid with respect the Company Stock allocated to Participants'
     Accounts shall be allocated among and credited to the Accounts of such
     Participants, pro rata, according to the number of shares of Company Stock
     held in such accounts on the date such dividend is declared by the Company;

     (ii) Then, any remaining Financed Shares released from the Loan Suspense
     Account by reason of dividends paid with respect to Company Stock held in
     the Loan Suspense Account shall be allocated among and credited to the
     Accounts of all Participants, pro rata, according to each Participant's
     Compensation.



                                      20
<PAGE>
 
                                   Section 6
                            Vesting and Forfeitures

Section 6.01  Deferred Vesting in Accounts.
              ---------------------------- 

(a) A Participant shall become vested in his Accounts in accordance with the
following schedule:

             Period of Service              Vested Percentage
             -----------------              -----------------

             Less than 2 years                    0%
             2 years                              20%
             3 years                              40%
             4 years                              60%
             5 years                              80%
             6 years or more                      100%

(b) For purposes of determining a Participant's Period of Service under this
Section 6.01, employment with the Bank or an Affiliate shall be deemed
employment with the Employer.  For purposes of determining a Participant's
vested percentage in his Accounts, all Periods of Service shall be included.

Section 6.02 Immediate Vesting in Certain Situations.
             --------------------------------------- 

(a) Notwithstanding Section 6.01(a) of the Plan, a Participant shall become
fully vested in his Accounts upon the earlier of:

    (i) Termination of the Plan or upon the permanent and complete
    discontinuance of contributions by his Employer to the Plan; provided,
    however, that in the event of a partial termination, the interest of each
    Participant shall fully vest only with respect to that part of the Plan
    which is terminated;

    (ii) The Participant's Normal Retirement Age;

    (iii) A "Change in Control" (as defined below); or

    (iv) Termination of employment by reason of death or Disability.

For purposes of this Section 6.02, a "Change in Control" of the Bank or the
Company means an event of a nature that: (i) would be required to be reported in
response to Item 1 of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); or (ii) results in a Change in Control of the
Bank or the Company within the meaning of the Home Owners' Loan Act of 1933, as
amended,
<PAGE>
 
the Federal Deposit Insurance Act and the Rules and Regulations promulgated by
the Office of Thrift Supervision ("OTS") (or its predecessor agency), as in
effect on the date hereof (provided, that in applying the definition of change
in control as set forth under the rules and regulations of the OTS, the Board
shall substitute its judgment for that of the OTS); or (iii) without limitation
such a Change in Control shall be deemed to have occurred at such time as (A)
any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of voting securities of the Bank or the
Company representing 25% or more of the Bank's or the Company's outstanding
voting securities or right to acquire such securities except for any voting
securities of the Bank purchased by the Company and any voting securities
purchased by any employee benefit plan of the Bank or the Company, or (B)
individuals who constitute the Board on the date hereof (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof, provided that
any person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising the
Incumbent Board, or whose nomination for election by the Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (B), considered as though he were a member
of the Incumbent Board, or (C) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Bank or the Company or
similar transaction occurs in which the Bank or Company is not the resulting
entity.

Section 6.03  Treatment of Forfeitures.
              ------------------------ 

(a) If a Participant who is not fully vested in his Accounts terminates
employment, that portion of his Accounts in which he is not vested shall be
forfeited upon the earlier of:

    (i) the date the Participant receives a distribution of his entire vested
    benefits under the Plan, or

    (ii) the date at which the Participant incurs five (5) consecutive One Year
    Periods of Severance.

(b) If a Participant who has terminated employment and has received a
distribution of his entire vested benefits under the Plan is subsequently
reemployed by an Employer prior to incurring five (5) consecutive One Year
Periods of Severance, he shall have the portion of his Accounts which was
previously forfeited restored to his Accounts, provided he repays to the Trustee
within five (5) years of his subsequent employment date an amount equal to the
distribution.  The amount restored to the Participant's Account shall be
credited to his Account as of the last day of the Plan Year in which the
Participant repays the distributed amount to the Trustee and the restored amount
shall come from other Employees' forfeitures and, if such forfeitures are
insufficient, from a special contribution by his Employer for that year.  If a
Participant's employment  terminates prior to his Account having become vested,
such Participant shall be deemed to have received a distribution of his entire
vested interest as of the Valuation Date next following his termination of
employment.

                        
                                      22
<PAGE>
 
(c) If a Participant who has terminated employment but has not received a
distribution of his entire vested benefits under the Plan is subsequently
reemployed by an Employer subsequent to incurring five (5) consecutive One Year
Periods of Severance, any undistributed balance of his Accounts from his prior
participation which was not forfeited shall be maintained as a fully vested
subaccount with his Account.

(d) If a portion of a Participant's Account is forfeited, assets other than
Company Stock must be forfeited before any Company Stock may be forfeited.

(e) Forfeitures shall be reallocated among the other Participants in the Plan
pursuant to Section 5.04(a)(ii) above.

Section 6.04   Accounting for Forfeitures.
               -------------------------- 

A forfeiture shall be charged to the Participant's Account as of the first day
of the first Valuation Period in which the forfeiture becomes certain pursuant
to Section 6.03 of the Plan. Except as otherwise provided in Section 6.03 of the
Plan, a forfeiture shall be added to the contributions of the terminated
Participant's Employer which are to be credited to other Participants pursuant
to Section 4 as of the last day of the Plan Year in which the forfeiture becomes
certain.

Section 6.05   Vesting Upon Reemployment.
               ------------------------- 

(a) If an Employee is not vested in his Accounts, incurs a One Year Period of
Severance and again performs an Hour of Service, such Employee shall receive
credit for his Periods of Service prior to his One Year Period of Severance only
if the number of consecutive One Year Periods of Severance is less than the
greater of: (i) five (5) years of (ii) the aggregate number of his Periods of
Service credited before his One Year Period of Severance.

(b) If a Participant is partially vested in his Accounts, incurs a One Year
Period of Severance and again performs an Hour of Service, such Participant
shall receive credit for his Periods of Service prior to his One Year Period of
Severance; provided, however, that after five (5) consecutive One Year Periods
of Severance, a former Participant's vested interest in his Accounts
attributable to Periods of Service prior to his One Year Period of Severance
shall not be increased as a result of his Periods of Service following his
reemployment date.

(c) If a Participant is fully vested in his Accounts, incurs a One Year Period
of Severance and again performs an Hour of Service, such Participant shall
receive credit for all his Periods of Service prior to his One Year Period of
Severance.

                                      23
<PAGE>
 
                                   Section 7
                                 Distributions

 Section 7.01   Distribution of Benefit Upon a Termination of Employment.
                -------------------------------------------------------- 

(a) A Participant whose employment terminates for any reason shall receive the
entire vested portion of his Accounts in a single payment on a date selected by
the Committee; provided, however, that such date shall be on or before the 60th
day after the end of the Plan Year in which the Participant's employment
terminated.  The benefits from that portion of the Participant's Other
Investments Account shall be calculated on the basis of the most recent
Valuation Date before the date of payment.  Subject to the provisions of Section
7.05 of the Plan, if the Committee so provides, a Participant may elect that his
benefits be distributed to him in the form of either Company Stock, cash, or
some combination thereof.

(b) Notwithstanding paragraph (a) of this Section 7.01, if the balance credited
to a Participant's Accounts exceeds, or has ever exceeded at the time such
benefit was distributable, $5,000, his benefits shall not be paid before the
latest of his 65th birthday or the tenth anniversary of the year in which he
commenced participation in the Plan, unless he elects an early payment date in a
written election filed with the Committee.  Such an election is not valid unless
it is made after the Participant has received the required notice under Section
1.411(a)-11(c) of the Treasury Regulations that provides a general description
of the material features of a lump sum distribution and the Participant's right
to defer receipt of his benefits under the Plan.  The notice shall be provided
no less than 30 days and no more than 90 days before the first day on which all
events have occurred which entitle the Participant to such benefit.  Written
consent of the Participant to the distribution generally may not be made within
30 days of the date the Participant receives the notice and shall not be made
more than 90 days from the date the Participant receives the notice.  However, a
distribution may be made less than 30 days after the notice provided under
Section 1.411(a)-11(c) of the Treasury Regulations is given, if:

    (i) the Committee clearly informs the Participant that he has a right to
    period of at least 30 days after receiving the notice to consider the
    decision of whether or not to elect a distribution  (and if applicable, a
    particular distribution option), and

    (ii) the Participant, after receiving the notice, affirmatively elects a
    distribution.

A Participant may modify such an election at any time, provided any new benefit
payment date is at least 30 days after a modified election is delivered to the
Committee.

Section 7.02 Minimum Distribution Requirements.
             --------------------------------- 

With respect to all Participants, other than those who are "5% owners" (as
defined in Section 416 of the Code), benefits shall be paid no later than the
April 1st of the later of:



                                      24
<PAGE>
 
    (i) the calendar year following the calendar year in which the Participant
    attains age 70-1/2, or

    (ii) the calendar year in which the Participant retires.

With respect to all Participants who are 5% owners within the meaning of Section
416 of the Code, such Participants benefits shall be paid no later than the
April 1st of the calendar year following the calendar year in which the
Participant attains age 70-1/2.

Section 7.03   Benefits on a Participant's Death.
               --------------------------------- 

(a) If a Participant dies before his benefits are paid pursuant to Section 7.01
of the Plan, the balance credited to his Accounts shall be paid to his
Beneficiary in a single distribution on or before the 60th day after the end of
the Plan Year in which the Participant died. If the Participant has not named a
Beneficiary or if his named Beneficiary should not survive him, then the balance
in his Account shall be paid to his estate. The benefits from that portion of
the Participant's Other Investments Account shall be calculated on the basis of
the most recent Valuation Date before the date of payment.

(b) If a married Participant dies before his benefit payments begin, then,
unless he has specifically elected otherwise, the Committee shall cause the
balance in his Accounts to be paid to his spouse, as Beneficiary.  A married
Participant may name an individual other than his spouse as his Beneficiary,
provided that such election is accompanied by the spouse's written consent,
which must:

    (i) acknowledge the effect of the election;

    (ii) explicitly provide either that the designated Beneficiary may not
    subsequently be changed by the Participant without the spouse's further
    consent or that it may be changed without such consent; and

    (iii) must be witnessed by the Committee, its representative, or a notary
    public.

This requirement shall not apply if the Participant establishes to the
Committee's satisfaction that the spouse may not be located.

(c) The Committee shall from time to time take whatever steps it deems
appropriate to keep informed of each Participant's marital status.  Each
Employer shall provide the Committee with the most reliable information in the
Employer's possession regarding its Participants' marital status, and the
Committee may, in its discretion, require a notarized affidavit from any
Participant as to his marital status.  The Committee, the Plan, the Trustee, and
the Employers shall be fully protected and discharged from any liability to the
extent of any benefit payments made as a result of the Committee's good faith
and reasonable reliance upon information obtained from a Participant as to the
Participant's marital status.

                                      25
<PAGE>
 
Section 7.04   Delay in Benefit Determination.
               ------------------------------ 

If the Committee is unable to determine the benefits payable to a Participant or
Beneficiary on or before the latest date prescribed for payment pursuant to this
Section 7, the benefits shall in any event be paid within 60 days after they can
first be determined, with whatever makeup payments may be appropriate in view of
the delay.

Section 7.05   Options to Receive and Sell Stock.
               --------------------------------- 

(a) Unless ownership of virtually all Company Stock is restricted to active
Employees and qualified retirement plans for the benefit of Employees pursuant
to the certificates of incorporation or by-laws of the Employers issuing Company
Stock, a terminated Participant or the Beneficiary of a deceased Participant may
instruct the Committee to distribute the Participant's entire vested interest in
his Accounts in the form of Company Stock.  In that event, the Committee shall
apply the Participant's vested interest in his Other Investments Account to
purchase sufficient Company Stock to make the required distribution.

(b) Any Participant who receives Company Stock pursuant to this Section, and any
person who has received Company Stock from the Plan or from such a Participant
by reason of the Participant's death or incompetency, by reason of divorce or
separation from the Participant, or by reason of a rollover distribution
described in Section 402(c) of the Code, shall have the right to require the
Employer which issued the Company Stock to purchase the Company Stock for its
current fair market value (hereinafter referred to as the "put right").  The put
right shall be exercisable by written notice to the Committee during the first
60 days after the Company Stock is distributed by the Plan, and, if not
exercised in that period, during the first 60 days in the following Plan Year
after the Committee has communicated to the Participant its determination as to
the Company Stock's current fair market value.  If the put right is exercised,
the Trustee may, if so directed by the Committee in its sole discretion, assume
the Employer's rights and obligations with respect to purchasing the Stock.
However, the put right shall not apply to the extent that the Company Stock, at
the time the put right would otherwise be exercisable, may be sold on an
established market in accordance with federal and state securities laws and
regulations.

(c) With respect to a put right, the Employer or the Trustee, as the case may
be, may elect to pay for the Company Stock in equal periodic installments, not
less frequently than annually, over a period not longer than five (5) years from
the 30th day after the put right is exercised pursuant to paragraph (b) of this
Section 7.05, with adequate security and interest at a reasonable rate on the
unpaid balance, all such terms to be set forth in a promissory note delivered to
the seller with normal terms as to acceleration upon any uncured default.

(d) Nothing contained in this Section 7.05 shall be deemed to obligate any
Employer to register any Company Stock under any federal or state securities law
or to create or maintain a public market to facilitate the transfer or
disposition of any Company Stock.  The put right described in this Section


                                      26
<PAGE>
 
7.05 may only be exercised by a person described in the paragraph (b) of this
Section 7.05, and may not be transferred with any Company Stock to any other
person. As to all Company Stock purchased by the Plan in exchange for any
Acquisition Loan, the put right be nonterminable. The put right for Company
Stock acquired through a Acquisition Loan shall continue with respect to such
Company Stock after the Acquisition Loan is repaid or the Plan ceases to be an
employee stock ownership plan. Except as provided above, in accordance with the
provisions of Sections 54.4975-7(b)(4) of the Treasury Regulations, no Company
Stock acquired with the proceeds of an Acquisition Loan may be subject to any
put, call or other option or buy-sell or similar arrangement while held by, and
when distributed from, the Plan, whether the Plan is then an employee stock
ownership plan.

Section 7.06  Restrictions on Disposition of Stock.
              ------------------------------------ 

Except in the case of Company Stock which is traded on an established market, a
Participant who receives Company Stock pursuant to this Section 7, and any
person who has received Company Stock from the Plan or from such a Participant
by reason of the Participant's death or incompetency, by reason of divorce or
separation from the Participant, or by reason of a rollover distribution
described in Section 402(c) of the Code, shall, prior to any sale or other
transfer of the Company Stock to any other person, first offer the Company Stock
to the issuing Employer and to the Plan at its current fair market value.  This
restriction shall apply to any transfer, whether voluntary, involuntary, or by
operation of law, and whether for consideration or gratuitous.  Either the
Employer or the Trustee may accept the offer within 14 days after it is
delivered.  Any Company Stock distributed by the Plan shall bear a conspicuous
legend describing the right of first refusal under this Section 7.06, as
applicable, as well as any other restrictions upon the transfer of the Company
Stock imposed by federal and state securities laws and regulations.

Section 7.07  Direct Transfer of Eligible Plan Distributions.
              ---------------------------------------------- 

(a) A Participant or Beneficiary may direct that an "eligible rollover
distribution" (as defined  below) included in a payment made pursuant to this
Section 7 be paid directly to an "eligible retirement plan" (as defined below).

(b) To effect such a direct transfer, the Participant or Beneficiary must notify
the Committee that a direct transfer is desired and provide to the Committee the
eligible retirement plan to which the payment is to be made.  Such notice shall
be made in such form and at such time as the Committee may prescribe.  Upon
receipt of such notice, the Committee shall direct the Trustee to make a
trustee-to-trustee transfer of the eligible rollover distribution to the
eligible retirement plan so specified.

(c) For purposes of this Section 7.07, an "eligible rollover distribution" shall
have the meaning set forth in Section 402(c)(4) of the Code and any Treasury
Regulations promulgated thereunder.  To the extent such meaning is not
inconsistent with the above references, an eligible rollover distribution shall
mean any distribution of all or any portion of the Participant's Account, except
that 


                                      27
<PAGE>
 
such term shall not include any distribution which is one of a series of
substantially equal periodic payments (not less frequently than annually) made
(i) for the life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and a designated Beneficiary, or
(ii) for a period of ten years or more.  Further, the term "eligible rollover
distribution" shall not include any distribution required to be made under
Section 401(a)(9) of the Code.

(d) For purposes of this Section 7.07, an "eligible retirement plan" shall have
the meaning set forth in Section 402(c)(8) of the Code and any Treasury
Regulations promulgated thereunder.  To the extent such meaning is not
inconsistent with the above references, an eligible retirement plan shall mean:
(i) an individual retirement account described in Section 408(a) of the Code;
(ii) an individual retirement annuity described in Section 408(b) of the Code
(other than an endowment contract), (iii) a qualified trust described in Section
401(a) of the Code and exempt under Section 501(a) of the Code, and (iv) an
annuity plan described in Section 403(a) of the Code.



                                      28
<PAGE>
 
                                   Section 8
                   Voting of Company Stock and Tender Offers

Section 8.01 Voting of Company Stock.
             ----------------------- 

(a) In General. The Trustee shall generally vote all shares of Company Stock
held in the Trust in accordance with the provisions of this Section 8.01.

(b) Allocated Shares. Shares of Company Stock which have been allocated to
Participants' Accounts shall be voted by the Trustee in accordance with the
Participants' written instructions.

(c) Uninstructed and Unallocated Shares.  Shares of Company Stock which have
been allocated to Participants' Accounts but for which no written instructions
have been received by the Trustee regarding voting shall be voted by the Trustee
in a manner calculated to most accurately reflect the instructions the Trustee
has received from Participants regarding voting shares of allocated Company
Stock.  Shares of unallocated Company Stock shall also be voted by the Trustee
in a manner calculated to most accurately reflect the instructions the Trustee
has received from Participants regarding voting shares of allocated Company
Stock.  Notwithstanding the preceding two sentences, all shares of Company Stock
which have been allocated to Participants' Accounts and for which the Trustee
has not timely received written instructions regarding voting and all
unallocated shares of Company Stock must be voted by the Trustee in a manner
determined by the Trustee to be solely in the best interests of the Participants
and Beneficiaries.

(d) Voting Prior to Allocation. In the event no shares of Company Stock have
been allocated to Participants' Accounts at the time Company Stock is to be
voted, each Participant shall be deemed to have one share of Company Stock
allocated to his Accounts for the sole purpose of providing the Trustee with
voting instructions.

(e) Procedure and Confidentiality. Whenever such voting rights are to be
exercised, the Employers, the Committee, and the Trustee shall see that all
Participants and Beneficiaries are provided with the same notices and other
materials as are provided to other holders of the Company Stock, and are
provided with adequate opportunity to deliver their instructions to the Trustee
regarding the voting of Company Stock allocated to their Accounts or deemed
allocated to their Accounts for purposes of voting.  The instructions of the
Participants with respect to the voting of shares of Company Stock shall be
confidential.

Section 8.02 Tender Offers.
             ------------- 

In the event of a tender offer, Company Stock shall be tendered by the Trustee
in the same manner set forth in Section 8.01 of the Plan regarding the voting of
Company Stock.
<PAGE>
 
                                   Section 9
                     The Committee and Plan Administration

Section 9.01   Identity of the Committee.
               ------------------------- 

The Committee shall consist of three or more individuals selected by the Bank.
Any individual, including a director, trustee, shareholder, officer, or Employee
of an Employer, shall be eligible to serve as a member of the Committee. The
Bank shall have the power to remove any individual serving on the Committee at
any time without cause upon ten (10) days written notice to such individual and
any individual may resign from the Committee at any time without reason upon ten
(10) days written notice to the Bank. The Bank shall notify the Trustee of any
change in membership of the Committee.


Section  9.02   Authority of Committee.
                ---------------------- 

(a) The Committee shall be the "plan administrator" within the meaning of ERISA
and shall have exclusive responsibility and authority to control and manage the
operation and administration of the Plan, including the interpretation and
application of its provisions, except to the extent such responsibility and
authority are otherwise specifically:

    (i) allocated to the Bank, the Employers, or the Trustee under the Plan and
    Trust Agreement;

    (ii) delegated in writing to other persons by the Bank, the Employers, the
    Committee, or the Trustee; or

    (iii) allocated to other parties by operation of law.

(b) The Committee shall have exclusive responsibility regarding decisions
concerning the payment of benefits under the Plan.

(c) The Committee shall have full investment responsibility with respect to the
Investment Fund except to the extent, if any, specifically provided in the Trust
Agreement.

(d) In the discharge of its duties, the Committee may employ accountants,
actuaries, legal counsel, and other agents (who also may be employed by an
Employer or the Trustee in the same or some other capacity) and may pay such
individuals reasonable compensation and expenses for their services rendered
with respect to the operation or administration of the Plan to the extent such
payments are not otherwise prohibited by law.
<PAGE>
 
Section 9.03  Duties of Committee.
              ------------------- 

(a) The Committee shall keep whatever records may be necessary in connection
with the maintenance of the Plan and shall furnish to the Employers whatever
reports may be required from time to time by the Employers.  The Committee shall
furnish to the Trustee whatever information may be necessary to properly
administer the Trust.  The Committee shall see to the filing with the
appropriate government agencies of all reports and returns required with respect
to the Plan under ERISA and the Code and other applicable laws.

(b) The Committee shall have exclusive responsibility and authority with respect
to the Plan's holdings of Company Stock and shall direct the Trustee in all
respects regarding the purchase, retention, sale, exchange, and pledge of
Company Stock and the creation and satisfaction of any Acquisition Loan to the
extent such responsibilities are not set forth in the Trust Agreement.

(c) The Committee shall at all times act consistently with the Bank's long-term
intention that the Plan, as an employee stock ownership plan, be invested
primarily in Company Stock.  Subject to the direction of the Committee with
respect to any Acquisition Loan pursuant to the provisions of Section 4.03 of
the Plan, and subject to the provisions of Sections 7.05 and 11.04 of the Plan
as to Participants' rights under certain circumstances to have their Accounts
invested in Company Stock or in assets other than Company Stock, the Committee
shall determine, in its sole discretion, the extent to which assets of the Trust
shall be used to repay any Acquisition Loan, to purchase Company Stock, or to
invest in other assets selected by the Committee or an investment manager.  No
provision of the Plan relating to the allocation or vesting of any interests in
the Company Stock or investments other than Company Stock shall restrict the
Committee from changing any holdings of the Trust Fund, whether the changes
involve an increase or a decrease in the Company Stock or other assets credited
to Participants' Accounts.  In determining the proper extent of the Trust Fund's
investment in Company Stock, the Committee shall be authorized to employ
investment counsel, legal counsel, appraisers, and other agents and to pay their
reasonable compensation and expenses to the extent such payments are not
prohibited by law.

(d) If the valuation of any Company Stock is not established by reported
trading on a generally recognized public market, then the  Committee shall have
the exclusive authority and responsibility to determine value of the Company
Stock for all purposes under the Plan.  Such value shall be determined as of
each Valuation Date and on any other date as of which the Trustee purchases or
sells Company Stock in a manner consistent with Section 4975 of the Code and the
Treasury Regulations thereunder.  The Committee shall use generally accepted
methods of valuing stock of similar corporations for purposes of arm's length
business and investment transactions, and in this connection the Committee shall
obtain, and shall be protected in relying upon, the valuation of Company Stock
as determined by an independent appraiser experienced in preparing valuations of
similar businesses.
<PAGE>
 
Section 9.04   Compliance with ERISA and the Code.
               ---------------------------------- 

The Committee shall perform all acts necessary to ensure the Plan's compliance
with ERISA and the Code.  Each individual member of the Committee shall
discharge his duties in good faith and in accordance with the applicable
requirements of ERISA and the Code.

Section 9.05   Action by Committee.
               ------------------- 

All actions of the Committee shall be governed by the affirmative vote of a
number of the members of the Committee which is a majority of the total number
of the members of the Committee. The members of the Committee may meet
informally and may take any action without meeting as a group.

Section 9.06   Execution of Documents.
               ---------------------- 

Any instrument executed by the Committee may be signed by any member of the
Committee.

Section 9.07   Adoption of Rules.
               ----------------- 

The Committee shall adopt such rules and regulations of uniform applicability as
it deems necessary or appropriate for the proper operation, administration and
interpretation of the Plan.

Section 9.08   Responsibilities to Participants.
               -------------------------------- 

The Committee shall determine which Employees qualify to participate in the
Plan.  The Committee shall furnish to each Eligible Employee whatever summary
plan descriptions, summary annual reports, and other notices and information may
be required under ERISA.  The Committee also shall determine when a Participant
or his Beneficiary qualifies for the payment of benefits under the Plan. The
Committee shall furnish to each such Participant or Beneficiary whatever
information is required under ERISA or the Code (or is otherwise appropriate) to
enable the Participant or Beneficiary to make whatever elections may be
available pursuant to Section 7, and the Committee shall provide for the payment
of benefits in the proper form and amount from the Trust.  The Committee may
decide in its sole discretion to permit modifications of elections and to defer
or accelerate benefits to the extent consistent with the terms of the Plan,
applicable law, and the best interests of the individuals concerned.

Section 9.09   Alternative Payees in Event of Incapacity.
               ----------------------------------------- 

If the Committee finds at any time that an individual qualifying for benefits
under this Plan is a minor or is incompetent, the Committee may direct the
benefits to be paid, in the case of a minor, to his parents, his legal guardian,
a custodian for him under the Uniform Transfers to Minors Act, or the person
having actual custody of him, or, in the case of an incompetent, to his spouse,
his legal


                                      32
<PAGE>
 
guardian, or the person having actual custody of him. The Committee and the
Trustee shall not be obligated to inquire as to the actual use of the funds by
the person receiving them under this Section 9.09, and any such payment shall
completely discharge the obligations of the Plan, the Trustee, the Committee,
and the Employers to the extent of the payment.

Section 9.10  Indemnification by Employers.
              ---------------------------- 

Except as separately agreed in writing, the Committee, and any member or
employee of the Committee, shall be indemnified and held harmless by the
Employers, jointly and severally, to the fullest extent permitted by law
against any and all costs, damages, expenses, and liabilities reasonably
incurred by or imposed upon the Committee or such individual in connection
with any claim made against the Committee or such individual or in which the
Committee or such individual may be involved by reason of being, or having
been, the Committee, or a member or employee of the Committee, to the extent
such amounts are not paid by insurance.

Section 9.11  Abstention by Interested Member.
              ------------------------------- 

Any member of the Committee who also is a Participant in the Plan shall take no
part in any determination specifically relating to his own participation or
benefits under the Plan, unless his abstention would render the Committee
incapable of acting on the matter.


                                      33
<PAGE>
 
                                   Section 10
                         Rules Governing Benefit Claims

Section 10.01  Claim for Benefits.
               ------------------ 

Any Participant or Beneficiary who qualifies for the payment of benefits shall
file a claim for his benefits with the Committee on a form provided by the
Committee.  The claim, including any election of an alternative benefit
form, shall be filed at least 30 days before the date on which the benefits
are to begin.  If a Participant or Beneficiary fails to file a claim by the
30th day before the date on which benefits become payable, he shall be
presumed to have filed a claim for payment for the Participant's benefits in
the standard form prescribed by Section 7 of the Plan.
 
Section 10.02  Notification by Committee.
               ------------------------- 

Within 90 days after receiving a claim for benefits (or within 180 days, if
special circumstances require an extension of time and written notice of the
extension is given to the Participant or Beneficiary within 90 days after
receiving the claim for benefits), the Committee shall notify the Participant or
Beneficiary whether the claim has been approved or denied. If the Committee
denies a claim in any respect, the Committee shall set forth in a written notice
to the Participant or Beneficiary:

(a) each specific reason for the denial;

(b) specific references to the pertinent Plan provisions on which the denial is
    based;

(c) a description of any additional material or information which could be
    submitted by the Participant or Beneficiary to support his claim, with an
    explanation of the relevance of such information; and

(d) an explanation of the claims review procedures set forth in Section 10.03 of
    the Plan.

Section 10.03  Claims Review Procedure.
               ----------------------- 

Within 60 days after a Participant or Beneficiary receives notice from the
Committee that his claim for benefits has been denied in any respect, he may
file with the Committee a written notice of appeal setting forth his reasons for
disputing the Committee's determination. In connection with his appeal the
Participant or Beneficiary or his representative may inspect or purchase copies
of pertinent documents and records to the extent not inconsistent with other
Participants' and Beneficiaries' rights of privacy. Within 60 days after
receiving a notice of appeal from a prior determination (or within 120 days, if
special circumstances require an extension of time and written notice of the
extension is given to the Participant or Beneficiary and his representative
within 60 days after receiving the notice of appeal), the Committee shall
furnish to the Participant or


                                      34
<PAGE>
 
Beneficiary and his representative, if any, a written statement of the
Committee's final decision with respect to his claim, including the reasons for
such decision and the particular Plan provisions upon which it is based.



                                      35
<PAGE>
 
                                   Section 11
                                   The Trust

Section 11.01  Creation of Trust Fund.
               ---------------------- 

All amounts received under the Plan from an Employer and investments shall be
held in a Trust Fund pursuant to the terms of this Plan and the Trust Agreement.
The benefits described in this Plan shall be payable only from the assets of the
Trust Fund.  Neither the Bank, any other Employer, its board of directors or
trustees, its stockholders, its officers, its employees, the Committee, nor the
Trustee shall be liable for payment of any benefit under this Plan except from
the Trust Fund.

Section 11.02 Company Stock and Other Investments.
              ----------------------------------- 

Trust Fund held by the Trustee shall be divided into Company Stock and
investments other than Company Stock.  The Trustee shall have no investment
responsibility for the portion of the Trust Fund consisting of Company Stock,
but shall accept any Employer contributions made in the form of Company Stock,
and shall acquire, sell, exchange, distribute, and otherwise deal with and
dispose of Company Stock in accordance with the instructions of the Committee.

Section 11.03  Acquisition of Company Stock.
               ---------------------------- 

From time to time the Committee may, in its sole discretion, direct the Trustee
to acquire Company Stock from the issuing Employer or from shareholders,
including shareholders who are or have been Employees, Participants, or
fiduciaries with respect to the Plan.  The Trustee shall pay for such Company
Stock no more than its fair market value, which shall be determined conclusively
by the Committee pursuant to Section 9.03(d) of the Plan.  The Committee may
direct the Trustee to finance the acquisition of Company Stock through an
Acquisition Loan subject to the provisions of Section 4.03 of the Plan.

Section 11.04  Participants' Option to Diversify.
               --------------------------------- 

The Committee shall provide for a procedure under which each Participant may,
during the first five years of a certain six-year period, elect to have up to 25
percent of the value of his Accounts committed to alternative investment options
within an "Investment Fund."  For the sixth year in this period, the Participant
may elect to have up to 50 percent of the value of his Accounts committed to
other investments.  The six-year period shall begin with the Plan Year following
the first Plan Year in which the Participant has both reached aged 55 and
completed 10 years of participation in the Plan; a Participant's election to
diversify his Accounts must be made within the 90-day period immediately
following the last day of each of the six Plan Years.  The Committee shall see
that the Investment Fund includes a sufficient number of investment options to
comply with Section 401(a)(28)(B) of the Code.  The Committee may, in its
discretion, permit a transfer of a portion of the Participant's Accounts to the
Savings Plan in order to satisfy this Section 11.04, provided such 


                                      36
<PAGE>
 
investments comply with Section 401(a)(28)(B) and such transfer is not otherwise
prohibited under the Code or ERISA. The Trustee shall comply with any investment
directions received from Participants in accordance with the procedures adopted
from time to time by the Committee under this Section 11.04.


                                      37
<PAGE>
 
                                   Section 12
                      Adoption, Amendment and Termination

 Section 12.01        Adoption of Plan by Other Employers.
                      ----------------------------------- 

With the consent of the Bank, any entity may become a participating Employer
under the Plan by:

(a) taking such action as shall be necessary to adopt the Plan;

(b) becoming a party to the Trust Agreement establishing the Trust Fund; and

(c) executing and delivering such instruments and taking such other action as
may be necessary or desirable to put the Plan into effect with respect to the
entity's Employees.

Section 12.02       Adoption of Plan by Successor.
                    ----------------------------- 

In the event that any Employer shall be reorganized by way of merger,
consolidation, transfer of assets or otherwise, so that an entity other than an
Employer shall succeed to all or substantially all of the Employer's business,
the successor entity may be substituted for the Employer under the Plan by
adopting the Plan and becoming a party to the Trust Agreement.  Contributions by
the Employer shall be automatically suspended from the effective date of any
such reorganization until the date upon which the substitution of the successor
entity for the Employer under the Plan becomes effective.  If, within 90 days
following the effective date of any such reorganization, the successor entity
shall not have elected to become a party to the Plan, or if the Employer shall
adopt a plan of complete liquidation other than in connection with a
reorganization, the Plan shall be automatically terminated with respect to
Employees of the Employer as of the close of business on the 90th day following
the effective date of the reorganization, or as of the close of business on the
date of adoption of a plan of complete liquidation, as the case may be.

Section  12.03      Plan Adoption Subject to Qualification.
                    -------------------------------------- 

Notwithstanding any other provision of the Plan, the adoption of the Plan and
the execution of the Trust Agreement are conditioned upon their being determined
initially by the Internal Revenue Service to meet the qualification requirements
of Section 401(a) of the Code, so that the Employers may deduct currently for
federal income tax purposes their contributions to the Trust and so that the
Participants may exclude the contributions from their gross income and recognize
income only when they receive benefits.  In the event that this Plan is held by
the Internal Revenue Service not to qualify initially under Section 401(a) of
the Code, the Plan may be amended retroactively to the earliest date permitted
by the Code and the applicable Treasury Regulations in order to secure
qualification under Section 401(a) of the Code.  If this Plan is held by the
Internal Revenue Service not to qualify initially under Section 401(a) of the
Code either as originally adopted or as amended, each Employer's contributions
to the Trust under this Plan (including any earnings thereon) shall be 


                                      38
<PAGE>
 
returned to it and this Plan shall be terminated. In the event that this Plan is
amended after its initial qualification and the Plan as amended is held by the
Internal Revenue Service not to qualify under Section 401(a) of the Code, the
amendment may be modified retroactively to the earliest date permitted by the
Code and the applicable Treasury Regulations in order to secure approval of the
amendment under Section 401(a) of the Code.

Section  12.04  Right to Amend or Terminate.
                --------------------------- 

The Bank intends to continue this Plan as a permanent program.  However, each
participating Employer separately reserves the right to suspend, supersede, or
terminate the Plan at any time and for any reason, as it applies to that
Employer's Employees, and the Bank reserves the right to amend, suspend,
supersede, merge, consolidate, or terminate the Plan at any time and for any
reason, as it applies to the Employees of all Employers.  No amendment,
suspension, supersession, merger, consolidation, or termination of the Plan
shall reduce any Participant's or Beneficiary's proportionate interest in the
Trust Fund, or shall divert any portion of the Trust Fund to purposes other than
the exclusive benefit of the Participants and their Beneficiaries prior to the
satisfaction of all liabilities under the Plan.  Except as is required for
purposes of compliance with the Code or ERISA, the provisions of Section 4.04
relating to the crediting of contributions, forfeitures and shares of Company
Stock released from the Loan Suspense Account, nor any other provision of the
Plan relating to the allocation of benefits to Participants, may be amended more
frequently than once every six months.  Moreover, there shall not be any
transfer of assets to a successor plan or merger or consolidation with another
plan unless, in the event of the termination of the successor plan or the
surviving plan immediately following such transfer, merger, or consolidation,
each participant or beneficiary would be entitled to a benefit equal to or
greater than the benefit he would have been entitled to if the plan in which he
was previously a participant or beneficiary had terminated immediately prior to
such transfer, merger, or consolidation.  Following a termination of this Plan
by the Bank, the Trustee shall continue to administer the Trust and pay benefits
in accordance with the Plan and the Committee's instructions.


                                      39
<PAGE>
 
                                   Section 13
                               General Provisions

Section  13.01  Nonassignability of Benefits.
                ---------------------------- 

The interests of Participants and other persons entitled to benefits under the
Plan shall not be subject to the claims of their creditors and may not be
voluntarily or involuntarily assigned, alienated, pledged, encumbered, sold, or
transferred.  The prohibitions set forth in this Section 13.01 shall also apply
any judgement, decree, or order (including approval of a property or settlement
agreement) which relates to the provision of child support, alimony, or property
rights to a present or former spouse, child, or other dependent of a Participant
pursuant to a domestic relations order, unless such judgement, decree or order
is determined to be a "qualified domestic relations order" as defined in Section
414(p) of the Code.

Section  13.02  Limit of Employer Liability.
                --------------------------- 

The liability of the Employers with respect to Participants and other persons
entitled to benefits under the Plan shall be limited to making contributions to
the Trust from time to time, in accordance with Section 4 of the Plan.

Section  13.03  Plan Expenses.
                ------------- 

All expenses incurred by the Committee or the Trustee in connection with
administering the Plan and Trust shall be paid by the Trustee from the Trust
Fund to the extent the expenses have not been paid or assumed by the Employers
or by the Trustee.

Section  13.04  Nondiversion of Assets.
                ---------------------- 

Except as provided in Sections 5.05 and 12.03 of the Plan, under no
circumstances shall any portion of the Trust Fund be diverted to or used for any
purpose other than the exclusive benefit of the Participants and their
Beneficiaries prior to the satisfaction of all liabilities under the Plan.

Section  13.05  Separability of Provisions.
                -------------------------- 

If any provision of the Plan is held to be invalid or unenforceable, the other
provisions of the Plan shall not be affected but shall be applied as if the
invalid or unenforceable provision had not been included in the Plan.

Section  13.06  Service of Process.
                ------------------ 

The agent for the service of process upon the Plan shall be the president of the
Bank and the Trustee, or such other person as may be designated from time to
time by the Bank.


                                      40
<PAGE>
 
Section  13.07  Governing Law.
                ------------- 

The Plan is established under, and its validity, construction and effect shall
be governed by the laws of the State of New Jersey to the extent those laws are
not preempted by federal law, including the provisions of ERISA.

Section  13.08  Special Rules for Persons Subject to Section 16(b)
                --------------------------------------------------
Requirements.
------------ 

Notwithstanding anything herein to the contrary, any former Participant who is
subject to the provisions of Section 16(b) of the Securities Exchange Act of
1934, who becomes eligible to again participate in the Plan, may not become a
Participant prior to the date that is six months from the date such former
Participant terminated participation in the Plan.  In addition, any person
subject to the provisions of Section 16(b) of the 1934 Act receiving a
distribution of Company Stock from the Plan must hold such Company Stock for a
period of six months commencing with the date of distribution. However, this
restriction will not apply to Company Stock distributions made in connection
with death, retirement, disability or termination of employment, or made
pursuant to the terms of a qualified domestic relations order.


                                      41
<PAGE>
 
                                   Section 14
                              Top-Heavy Provisions

Section 14.01  Top-Heavy Provisions.
               -------------------- 

If, as of the last day of the first Plan Year, or thereafter, if as of the day
next preceding the beginning of any Plan Year (the "Determination Date"), the
Plan is a "top-heavy plan" (determined in accordance with the provisions of
Section 416(g) of the Code); that is, the aggregate present value of the accrued
benefits and account balances of all "Key Employees" (within the meaning of
Section 416(i) of the Code and for this purpose using the definition of
Compensation, as modified under Section 5.5(b) of the Plan) and their
Beneficiaries, the provision specified in this Section 14 will automatically
become effective as of the first day of the Plan Year.  For purposes of the
above sentence, the aggregate present value of the accrued benefits and account
balances of a Participant who has not performed any services for the Bank or any
of its Affiliates during the five-year period ending on the Determination Date
shall not be taken into account.  This calculation shall be made in accordance
with Section 416(g) of the Code, taking into consideration plans which are
considered part of the Aggregation Group.  The term "Aggregation Group" shall
include each plan of the Bank or any of its Affiliates that includes a Key
Employee and each plan of the Bank or any of its Affiliates that allows the Plan
to meet the requirements of Section 401(a)(4) of the Code or Section 410 of the
Code and may include any other plan of the Bank or any of its Affiliates, if the
Aggregation Group would continue to meet the requirements of Sections 401(a)(4)
and 410 of the Code.

Section 14.02  Plan Modifications Upon Becoming Top-Heavy.
               ------------------------------------------ 

(a) Minimum Accruals.  Section 5.04 of the Plan will be modified to provide that
the aggregate amount of Employer contributions allocated in each Plan Year to
the Accounts of each Participant who is a Non-Key Employee (within the meaning
of Section 416(i)(1) of the Code), and who is employed by an Employer as of the
last day of the Plan Year, may not be less than the lesser of:

    (i) three percent of his Compensation for the Plan Year; and

    (ii) a percentage of his Compensation equal to the largest percentage
    obtained by dividing the sum of the amount credited to the Accounts of any
    key Employee by that key Employee's Compensation; and

(b) Section 415(e) of the Code.  Section 5.05 of the Plan will be modified to
provide that the dollar limitations in the denominators of the "defined benefit
plan fraction" and "defined contribution plan fraction" (as such terms are
defined in Section 415(e) of the Code) will be multiplied by 1.0 instead of
1.25.  However, the above sentence shall not apply if "four percent" is
substituted for "three percent" in paragraph (a) of this Section 14.02.


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<PAGE>
 
The preceding provisions will remain in effect for the period in which the Plan
is top-heavy.  If, for any particular year thereafter, the Plan is no longer
top-heavy, the provisions contained in this Section 14 shall cease to apply,
except that any previously vested portion of any Account balance shall remain
nonforfeitable.

Section 14.03  Super Top-Heavy Provisions.
               -------------------------- 

If, as of a Determination Date, the aggregate present value of the accrued
benefits and Account balances of all "Key Employees" (within the meaning of
Section 416(i) of the Code) and their Beneficiaries exceed 90% of the aggregate
present value of the accrued benefits and Account balances of all Participants
and Beneficiaries, paragraph (a) of Section 14.02 will automatically become
effective as of the first day of such Plan Year, except that Section 14.02(b) of
the Plan will be modified to provide that the dollar limitations in the
denominators of the defined benefit plan fraction and defined contribution plan
fraction in Section 5.05 of the Plan shall be multiplied by 1.0 instead of 1.25,
whether or not the minimum benefit is increased under Section 14.02(a) of the
Plan.


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