EXHIBIT 10.4
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                              AFSALA BANCORP, INC.

                             1997 STOCK OPTION PLAN


         1. Purpose of the Plan.  The Plan shall be known as the AFSALA  Bancorp
Inc.  ("Corporation")  1997 Stock Option Plan (the  "Plan").  The purpose of the
Plan is to attract and retain  qualified  personnel for positions of substantial
responsibility and to provide additional incentive to officers,  directors,  key
employees  and other  persons  providing  services  to the  Corporation,  or any
present or future parent or subsidiary of the Corporation to promote the success
of the  business.  The Plan is intended  to provide for the grant of  "Incentive
Stock Options,"  within the meaning of Section 422 of the Internal  Revenue Code
of 1986, as amended (the "Code") and Non-Incentive  Stock Options,  options that
do not so  qualify.  The  provisions  of the Plan  relating to  Incentive  Stock
Options shall be  interpreted to conform to the  requirements  of Section 422 of
the Code.

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

                  (a) "Award"  means the grant by the  Committee of an Incentive
Stock Option or a Non-Incentive  Stock Option,  or any combination  thereof,  as
provided in the Plan.

                  (b)  "Board"   shall  mean  the  Board  of  Directors  of  the
Corporation, or any successor or parent corporation thereto.

                  (c) "Change in Control"  shall mean: (i) the sale of all, or a
material  portion,  of the  assets  of  the  Corporation;  (ii)  the  merger  or
recapitalization of the Corporation whereby the Corporation is not the surviving
entity;  (iii) a change in control of the Corporation,  as otherwise  defined or
determined by the Office of Thrift Supervision or regulations promulgated by it;
or (iv) the  acquisition,  directly or indirectly,  of the beneficial  ownership
(within  the  meaning  of  that  term  as it is used  in  Section  13(d)  of the
Securities  Exchange  Act of 1934  and the  rules  and  regulations  promulgated
thereunder)  of  twenty-five  percent  (25%) or more of the  outstanding  voting
securities  of the  Corporation  by any  person,  trust,  entity or group.  This
limitation  shall  not  apply to the  purchase  of  shares  by  underwriters  in
connection  with a public  offering of  Corporation  stock,  or the  purchase of
shares  of up to  25%  of any  class  of  securities  of  the  Corporation  by a
tax-qualified  employee  stock  benefit  plan which is exempt from the  approval
requirements,  set forth under 12 C.F.R.  ss.574.3(c)(1)(vi) as now in effect or
as may  hereafter be amended.  The term  "person"  refers to an  individual or a
corporation,  partnership,  trust, association,  joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to whether a Change
in Control has occurred shall be conclusive and binding.

                  (d) "Code"  shall mean the Internal  Revenue Code of 1986,  as
amended, and regulations promulgated thereunder.


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                  (e)  "Committee"  shall  mean the  Board or the  Stock  Option
Committee appointed by the Board in accordance with Section 5(a) of the Plan.

                  (f) "Common Stock" shall mean common stock, par value $.10 per
share, of the Corporation, or any successor or parent corporation thereto.

                  (g)  "Continuous  Employment"  or  "Continuous  Status  as  an
Employee"  shall  mean  the  absence  of  any  interruption  or  termination  of
employment with the Corporation or any present or future Parent or Subsidiary of
the Corporation.  Employment shall not be considered  interrupted in the case of
sick  leave,  military  leave or any  other  leave of  absence  approved  by the
Corporation  or in the  case of  transfers  between  payroll  locations,  of the
Corporation  or between the  Corporation,  its  Parent,  its  Subsidiaries  or a
successor.

                  (h)  "Corporation"  shall mean the AFSALA  Bancorp  Inc.,  the
parent corporation of the Savings Bank, or any successor or Parent thereof.

                  (i)  "Director"  shall  mean  a  member  of the  Board  of the
Corporation, or any successor or parent corporation thereto.

                  (j)  "Director  Emeritus"  shall  mean a person  serving  as a
director  emeritus,  advisory  director,  consulting  director or other  similar
position as may be  appointed  by the Board of  Directors of the Savings Bank or
the Corporation from time to time.

                  (k)  "Disability"  means (a) with respect to  Incentive  Stock
Options,  the "permanent  and total  disability" of the Employee as such term is
defined at Section  22(e)(3) of the Code; and (b) with respect to  Non-Incentive
Stock Options,  any physical or mental  impairment which renders the Participant
incapable of continuing in the  employment or service of the Savings Bank or the
Parent in his then current capacity as determined by the Committee.

                  (l) "Effective  Date" shall mean the date specified in Section
15 hereof.

                  (m)  "Employee"   shall  mean  any  person   employed  by  the
Corporation or any present or future Parent or Subsidiary of the Corporation.

                  (n) "Fair Market Value" shall mean: (i) if the Common Stock is
traded otherwise than on a national  securities  exchange,  then the Fair Market
Value per Share shall be equal to the mean between the last bid and ask price of
such  Common  Stock on such  date or,  if there is no bid and ask  price on said
date,  then on the  immediately  prior business day on which there was a bid and
ask price. If no such bid and ask price is available, then the Fair Market Value
shall be determined by the Committee in good faith;  or (ii) if the Common Stock
is listed on a national  securities  exchange,  then the Fair  Market  Value per
Share shall be not less than the average of the highest and lowest selling price
of such Common Stock on such exchange on such date, or if there were no sales on
said date,  then the Fair Market  Value shall be not less than the mean  between
the last bid and ask price on such date.

                  (o) "Incentive  Stock Option" or "ISO" shall mean an option to
purchase  Shares granted by the Committee  pursuant to Section 8 hereof which is
subject to the limitations and  restrictions of Section 8 hereof and is intended
to qualify as an incentive stock option under Section 422 of the Code.


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                  (p)  "Non-Incentive  Stock Option" or "Non-ISO"  shall mean an
option to purchase Shares granted pursuant to Section 9 hereof,  which option is
not intended to qualify under Section 422 of the Code.

                  (q)  "Option"   shall  mean  an  Incentive   Stock  Option  or
Non-Incentive Stock Option granted pursuant to this Plan providing the holder of
such Option with the right to purchase Common Stock.

                  (r)  "Optioned  Stock"  shall mean stock  subject to an Option
granted pursuant to the Plan.

                  (s) "Optionee" shall mean any person who receives an Option or
Award pursuant to the Plan.

                  (t)  "Parent"  shall mean any  present  or future  corporation
which would be a "parent  corporation"  as defined in Sections 424(e) and (g) of
the Code.

                  (u)  "Participant"  means  any  director,  Director  Emeritus,
officer or key employee of the  Corporation  or any Parent or  Subsidiary of the
Corporation or any other person  providing a service to the  Corporation  who is
selected by the  Committee to receive an Award,  or who by the express  terms of
the Plan is granted an Award.

                  (v)  "Plan"  shall mean the AFSALA  Bancorp,  Inc.  1997 Stock
Option Plan.

                  (w)  "Savings  Bank"  shall  mean   Amsterdam   Federal  Bank,
Amsterdam, New York, or any successor corporation thereto.

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

                  (y) "Subsidiary"  shall mean any present or future corporation
which  constitutes a "subsidiary  corporation" as defined in Sections 424(f) and
(g) of the Code.

          3. Shares  Subject to the Plan.  Except as  otherwise  required by the
provisions of Section 13 hereof,  the aggregate number of Shares with respect to
which Awards may be made pursuant to the Plan shall not exceed  145,475  Shares.
Such Shares may either be from authorized but unissued  shares,  treasury shares
or shares purchased in the market for Plan purposes.

         If an Award shall expire, become unexercisable, or be forfeited for any
reason  prior to its  exercise,  new Awards  may be granted  under the Plan with
respect to the number of Shares as to which such expiration has occurred.

         4.       Six Month Holding Period.

                  Subject to vesting requirements,  if applicable, except in the
event of death or  disability  of the  Optionee,  a minimum of six  months  must
elapse  between  the date of the grant of an Option  and the date of the sale of
the Common Stock received through the exercise of such Option.


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          5.      Administration of the Plan.

                  (a)   Composition  of  the   Committee.   The  Plan  shall  be
administered  by the Board of Directors of the  Corporation or a Committee which
shall consist of not less than two Directors of the Corporation appointed by the
Board and  serving at the  pleasure  of the Board.  All  persons  designated  as
members  of  the  Committee  shall  meet  the  requirements  of a  "Non-Employee
Director" within the meaning of Rule 16b-3 under the Securities  Exchange Act of
1934, as amended, as found at 17 CFR ss.240.16b-3.

                  (b) Powers of the Committee.  The Committee is authorized (but
only to the extent not  contrary  to the  express  provisions  of the Plan or to
resolutions adopted by the Board) to interpret the Plan, to prescribe, amend and
rescind  rules and  regulations  relating to the Plan, to determine the form and
content of Awards to be issued  under the Plan and to make other  determinations
necessary or advisable for the  administration  of the Plan,  and shall have and
may  exercise  such other power and  authority  as may be delegated to it by the
Board from time to time. A majority of the entire  Committee shall  constitute a
quorum and the action of a majority  of the  members  present at any  meeting at
which a quorum is present  shall be deemed the  action of the  Committee.  In no
event may the Committee  revoke  outstanding  Awards  without the consent of the
Participant.

                  The President of the  Corporation  and such other  officers as
shall be designated by the  Committee are hereby  authorized to execute  written
agreements  evidencing  Awards on behalf of the Corporation and to cause them to
be delivered to the  Participants.  Such  agreements  shall set forth the Option
exercise price, the number of shares of Common Stock subject to such Option, the
expiration  date  of  such  Options,  and  such  other  terms  and  restrictions
applicable to such Award as are  determined  in accordance  with the Plan or the
actions of the Committee.

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

          6.      Eligibility for Awards and Limitations.

                           (a) The Committee shall from time to  time  determine
the officers, Directors, Directors Emeritus, key employees and other persons who
shall be granted  Awards  under the Plan,  the number of Awards to be granted to
each such persons, and whether Awards granted to each such Participant under the
Plan  shall be  Incentive  and/or  Non-Incentive  Stock  Options.  In  selecting
Participants  and in  determining  the  number of  Shares of Common  Stock to be
granted to each such  Participant,  the Committee may consider the nature of the
prior and anticipated  future services rendered by each such  Participant,  each
such  Participant's  current and potential  contribution  to the Corporation and
such other factors as the Committee may, in its sole discretion,  deem relevant.
Participants  who have been  granted an Award may,  if  otherwise  eligible,  be
granted additional Awards.

                           (b)       The aggregate Fair Market Value (determined
as of the date the  Option is  granted)  of the  Shares  with  respect  to which
Incentive  Stock  Options are  exercisable  for the first time by each  Employee
during any calendar year (under all Incentive  Stock Option plans, as defined in
Section 422 of the Code, of the  Corporation  or any present or future Parent or
Subsidiary of the Corporation)  shall not exceed $100,000.  Notwithstanding  the
prior provisions of this Section 6, the Committee may grant Options in excess of
the  foregoing   limitations,   provided  said  Options  shall  be  clearly  and
specifically designated as not being Incentive Stock Options.

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                           (c) In no  event  shall  Shares  subject  to  Options
granted to non-employee Directors
in the  aggregate  under this Plan exceed  more than 30% of the total  number of
Shares  authorized  for delivery under this Plan pursuant to Section 3 herein or
more than 5% to any individual  non-employee  Director. In no event shall Shares
subject to Options  granted to any  Employee  exceed  more than 25% of the total
number of Shares authorized for delivery under the Plan.

          7. Term of the Plan.  The Plan shall  continue in effect for a term of
ten (10) years from the Effective  Date,  unless sooner  terminated  pursuant to
Section 18  hereof.  No Option  shall be  granted  under the Plan after ten (10)
years from the Effective Date.

          8. Terms and Conditions of Incentive  Stock Options.  Incentive  Stock
Options may be granted only to  Participants  who are Employees.  Each Incentive
Stock Option granted pursuant to the Plan shall be evidenced by an instrument in
such form as the Committee shall from time to time approve. Each Incentive Stock
Option  granted  pursuant to the Plan shall comply with,  and be subject to, the
following terms and conditions:

                  (a)      Option Price.

                            (i) The  price  per  Share at which  each  Incentive
Stock Option granted by the Committee under the Plan may be exercised shall not,
as to any particular  Incentive Stock Option, be less than the Fair Market Value
of the Common Stock on the date that such Incentive Stock Option is granted.

                            (ii) In the  case of an  Employee  who  owns  Common
Stock  representing more than ten percent (10%) of the outstanding  Common Stock
at the time the Incentive  Stock Option is granted,  the Incentive  Stock Option
exercise  price shall not be less than one hundred and ten percent (110%) of the
Fair  Market  Value of the  Common  Stock on the date that the  Incentive  Stock
Option is granted.

                  (b)  Payment.  Full  payment  for each  Share of Common  Stock
purchased upon the exercise of any Incentive Stock Option granted under the Plan
shall be made at the time of exercise of each such  Incentive  Stock  Option and
shall be paid in cash (in United States Dollars),  Common Stock or a combination
of cash and Common Stock.  Common Stock  utilized in full or partial  payment of
the  exercise  price  shall be  valued at the Fair  Market  Value at the date of
exercise.  The Corporation  shall accept full or partial payment in Common Stock
only to the extent  permitted by applicable law. No Shares of Common Stock shall
be issued  until full  payment  has been  received  by the  Corporation,  and no
Optionee shall have any of the rights of a stockholder of the Corporation  until
Shares of Common Stock are issued to the Optionee.

                  (c) Term of Incentive Stock Option. The term of exercisability
of each Incentive  Stock Option  granted  pursuant to the Plan shall be not more
than ten (10) years from the date each such  Incentive  Stock Option is granted,
provided that in the case of an Employee who owns stock  representing  more than
ten percent  (10%) of the Common  Stock  outstanding  at the time the  Incentive
Stock  Option is granted,  the term of  exercisability  of the  Incentive  Stock
Option shall not exceed five (5) years.

                  (d)  Exercise  Generally.  Except  as  otherwise  provided  in
Section  10 hereof,  no  Incentive  Stock  Option  may be  exercised  unless the
Optionee  shall have been in the employ of the  Corporation  at all times during
the period  beginning with the date of grant of any such Incentive  Stock Option
and  ending on the date three (3) months  prior to the date of  exercise  of any
such Incentive Stock

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Option.  The Committee  may impose  additional  conditions  upon the right of an
Optionee to exercise any Incentive Stock Option granted  hereunder which are not
inconsistent with the terms of the Plan or the requirements for qualification as
an Incentive Stock Option. Except as otherwise provided by the terms of the Plan
or by  action of the  Committee  at the time of the  grant of the  Options,  the
Options will be first exercisable at the rate of 20% on the one year anniversary
of the date of grant and 20% annually  thereafter during such periods of service
as an Employee, Director or Director Emeritus.

                  (e) Cashless  Exercise.  Subject to vesting  requirements,  if
applicable,  an Optionee who has held an Incentive Stock Option for at least six
months may engage in the  "cashless  exercise"  of the  Option.  Upon a cashless
exercise,  an Optionee gives the  Corporation  written notice of the exercise of
the Option  together with an order to a registered  broker-dealer  or equivalent
third party,  to sell part or all of the Optioned Stock and to deliver enough of
the  proceeds  to the  Corporation  to pay the  Option  exercise  price  and any
applicable  withholding  taxes. If the Optionee does not sell the Optioned Stock
through a registered  broker-dealer  or equivalent third party, the Optionee can
give the Corporation  written notice of the exercise of the Option and the third
party  purchaser of the Optioned Stock shall pay the Option  exercise price plus
any applicable withholding taxes to the Corporation.

                  (f)   Transferability.   An  Incentive  Stock  Option  granted
pursuant to the Plan shall be exercised  during an  Optionee's  lifetime only by
the Optionee to whom it was granted and shall not be assignable or  transferable
otherwise than by will or by the laws of descent and distribution.

          9.  Terms  and  Conditions  of  Non-Incentive   Stock  Options.   Each
Non-Incentive Stock Option granted pursuant to the Plan shall be evidenced by an
instrument in such form as the Committee  shall from time to time approve.  Each
Non-Incentive Stock Option granted pursuant to the Plan shall comply with and be
subject to the following terms and conditions.

                  (a) Options  Granted to Directors.  Subject to the limitations
of Section 6(c), Non- Incentive Stock Options to purchase 7,273 shares of Common
Stock  will  be  granted  to  each  Director  who is not an  Employee  as of the
Effective  Date,  at an exercise  price  equal to the Fair  Market  Value of the
Common Stock on such date of grant. The Options will be first exercisable at the
rate of 20% on the one year  anniversary  of the Effective Date and 20% annually
thereafter  during such  periods of service as a Director or Director  Emeritus.
Upon the death or Disability of the Director or Director  Emeritus,  such Option
shall be deemed immediately 100% exercisable.  Such Options shall continue to be
exercisable for a period of ten years following the date of grant without regard
to the continued  services of such Director as a Director or Director  Emeritus.
In the event of the  Optionee's  death,  such  Options may be  exercised  by the
personal  representative  of his  estate or person or persons to whom his rights
under  such  Option  shall  have  passed by will or by the laws of  descent  and
distribution.  Options may be granted to newly appointed or elected non-employee
Directors  within the sole  discretion of the Committee.  The exercise price per
Share of such  Options  granted  shall be equal to the Fair Market  Value of the
Common Stock at the time such Options are granted.  All outstanding Awards shall
become  immediately  exercisable  in the  event of a Change  in  Control  of the
Savings  Bank or the  Company,  provided  that such  accelerated  vesting is not
inconsistent with applicable  regulations of the Office of Thrift Supervision or
other  appropriate  banking  regulatory  agency  at the time of such  Change  in
Control. Unless otherwise  inapplicable,  or inconsistent with the provisions of
this  paragraph,  the  Options  to be granted to  Directors  hereunder  shall be
subject to all other provisions of this Plan.

                  (b) Option Price. The exercise price per Share of Common Stock
for each  Non-Incentive  Stock Option  granted  pursuant to the Plan shall be at
such price as the Committee may

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determine  in its sole  discretion,  but in no event  less than the Fair  Market
Value of such Common Stock on the date of grant as  determined  by the Committee
in good faith.

                  (c)  Payment.  Full  payment  for each  Share of Common  Stock
purchased upon the exercise of any Non-Incentive  Stock Option granted under the
Plan  shall be made at the time of  exercise  of each such  Non-Incentive  Stock
Option and shall be paid in cash (in United States  Dollars),  Common Stock or a
combination  of cash and Common Stock.  Common Stock utilized in full or partial
payment of the  exercise  price shall be valued at its Fair Market  Value at the
date of exercise.  The Company  shall  accept full or partial  payment in Common
Stock only to the extent  permitted by applicable law. No Shares of Common Stock
shall be issued  until full  payment  has been  received  by the  Company and no
Optionee  shall have any of the rights of a stockholder of the Company until the
Shares of Common Stock are issued to the Optionee.

                  (d) Term.  The term of  exercisability  of each  Non-Incentive
Stock Option granted  pursuant to the Plan shall be not more than ten (10) years
from the date each such Non-Incentive Stock Option is granted.

                  (e) Exercise  Generally.  The Committee may impose  additional
conditions upon the right of any Participant to exercise any Non-Incentive Stock
Option granted  hereunder which is not inconsistent  with the terms of the Plan.
Except  as  otherwise  provided  by the  terms of the Plan or by  action  of the
Committee  at the time of the grant of the  Options,  the Options  will be first
exercisable at the rate of 20% on the one year  anniversary of the date of grant
and 20%  annually  thereafter  during  such  periods of service as an  Employee,
Director or Director Emeritus.

                  (f) Cashless  Exercise.  Subject to vesting  requirements,  if
applicable,  an Optionee who has held a Non-Incentive  Stock Option for at least
six months may engage in the "cashless  exercise" of the Option. Upon a cashless
exercise,  an Optionee  gives the Company  written notice of the exercise of the
Option together with an order to a registered  broker-dealer or equivalent third
party,  to sell part or all of the Optioned  Stock and to deliver  enough of the
proceeds  to the  Company to pay the Option  exercise  price and any  applicable
withholding  taxes.  If the Optionee does not sell the Optioned  Stock through a
registered  broker-dealer  or equivalent  third party, the Optionee can give the
Company  written  notice of the  exercise  of the  Option  and the  third  party
purchaser of the  Optioned  Stock shall pay the Option  exercise  price plus any
applicable withholding taxes to the Company.

                  (g)  Transferability.  Any Non-Incentive  Stock Option granted
pursuant to the Plan shall be exercised  during an  Optionee's  lifetime only by
the Optionee to whom it was granted and shall not be assignable or  transferable
otherwise than by will or by the laws of descent and distribution.

         10.  Effect  of  Termination  of  Employment,  Disability  or  Death on
Incentive Stock Options.

                  (a)   Termination  of  Employment.   In  the  event  that  any
Optionee's  employment  with the Company shall  terminate for any reason,  other
than Disability or death,  all of any such  Optionee's  Incentive Stock Options,
and all of any such  Optionee's  rights to purchase or receive  Shares of Common
Stock pursuant thereto, shall automatically  terminate on (A) the earlier of (i)
or  (ii):  (i) the  respective  expiration  dates of any  such  Incentive  Stock
Options, or (ii) the expiration of not more than three (3) months after the date
of such termination of employment; or (B) at such later date as is determined by
the  Committee at the time of the grant of such Award based upon the  Optionee's
continuing status as a

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Director or Director  Emeritus of the Savings Bank or the Company,  but only if,
and to the extent that, the Optionee was entitled to exercise any such Incentive
Stock Options at the date of such  termination of  employment,  and further that
such Award shall thereafter be deemed a Non-Incentive Stock Option. In the event
that a Subsidiary  ceases to be a Subsidiary of the Company,  the  employment of
all of its employees who are not immediately thereafter employees of the Company
shall be deemed to  terminate  upon the date such  Subsidiary  so ceases to be a
Subsidiary of the Company.

                  (b)  Disability.  In the event that any Optionee's  employment
with the  Company  shall  terminate  as the  result  of the  Disability  of such
Optionee,  such Optionee may exercise any Incentive Stock Options granted to the
Optionee  pursuant  to the Plan at any  time  prior  to the  earlier  of (i) the
respective expiration dates of any such Incentive Stock Options or (ii) the date
which is one (1) year after the date of such termination of employment, but only
if, and to the extent  that,  the  Optionee  was  entitled to exercise  any such
Incentive Stock Options at the date of such termination of employment.

                  (c)  Death.  In the  event of the  death of an  Optionee,  any
Incentive  Stock Options granted to such Optionee may be exercised by the person
or persons to whom the Optionee's  rights under any such Incentive Stock Options
pass  by  will  or by the  laws  of  descent  and  distribution  (including  the
Optionee's estate during the period of  administration) at any time prior to the
earlier  of (i) the  respective  expiration  dates of any such  Incentive  Stock
Options or (ii) the date which is two (2) years  after the date of death of such
Optionee  but only if, and to the extent  that,  the  Optionee  was  entitled to
exercise any such Incentive Stock Options at the date of death.  For purposes of
this Section  10(c),  any  Incentive  Stock Option held by an Optionee  shall be
considered  exercisable  at the  date  of his  death  if  the  only  unsatisfied
condition  precedent to the exercisability of such Incentive Stock Option at the
date of death is the passage of a specified period of time. At the discretion of
the Committee,  upon exercise of such Options the Optionee may receive Shares or
cash or a  combination  thereof.  If cash shall be paid in lieu of Shares,  such
cash shall be equal to the  difference  between  the Fair  Market  Value of such
Shares and the exercise price of such Options on the exercise date.

                  (d) Incentive Stock Options Deemed  Exercisable.  For purposes
of Sections 10(a), 10(b) and 10(c) above, any Incentive Stock Option held by any
Optionee  shall  be  considered  exercisable  at  the  date  of  termination  of
employment if any such  Incentive  Stock Option would have been  exercisable  at
such date of termination of employment without regard to the Disability or death
of the Participant.

                  (e) Termination of Incentive  Stock Options.  Except as may be
specified by the Committee at the time of grant of an Option, to the extent that
any  Incentive  Stock  Option  granted  under  the  Plan to any  Optionee  whose
employment with the Company  terminates shall not have been exercised within the
applicable period set forth in this Section 10, any such Incentive Stock Option,
and all rights to purchase or receive Shares of Common Stock  pursuant  thereto,
as the case may be, shall terminate on the last day of the applicable period.

         11.  Effect  of  Termination  of  Employment,  Disability  or  Death on
Non-Incentive  Stock Options.  The terms and conditions of  Non-Incentive  Stock
Options relating to the effect of the termination of an Optionee's employment or
service,  Disability  of an  Optionee  or his  death  shall  be such  terms  and
conditions as the Committee shall, in its sole discretion, determine at the time
of termination of service,  unless specifically provided for by the terms of the
Agreement at the time of grant of the Award.


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

         13.  Recapitalization,  Merger,  Consolidation,  Change in Control  and
Other Transactions.

                  (a)  Adjustment.   Subject  to  any  required  action  by  the
stockholders of the Company,  within the sole  discretion of the Committee,  the
aggregate  number of Shares of Common  Stock for which  Options  may be  granted
hereunder,  the number of Shares of Common  Stock  covered  by each  outstanding
Option,  and the  exercise  price per Share of Common Stock of each such Option,
shall all be proportionately adjusted for any increase or decrease in the number
of issued and outstanding Shares of Common Stock resulting from a subdivision or
consolidation   of  Shares   (whether   by  reason  of  merger,   consolidation,
recapitalization,   reclassification,   split-up,   combination  of  shares,  or
otherwise) or the payment of a stock  dividend (but only on the Common Stock) or
any other  increase or  decrease  in the number of such  Shares of Common  Stock
effected  without the receipt or payment of  consideration by the Company (other
than Shares held by dissenting stockholders).

                  (b) Change in Control.  All  outstanding  Awards  shall become
immediately  exercisable in the event of a Change in Control of the Company,  as
determined  by the  Committee,  provided  that such  accelerated  vesting is not
inconsistent with applicable  regulations of the Office of Thrift Supervision or
other  appropriate  banking  regulatory  agency  at the time of such  Change  in
Control.  In the event of such a Change in Control,  the Committee and the Board
of Directors  will take one or more of the following  actions to be effective as
of the date of such Change in Control:

                  (i) provide that such Options shall be assumed,  or equivalent
options  shall  be  substituted,  ("Substitute  Options")  by the  acquiring  or
succeeding  corporation (or an affiliate  thereof),  provided that: (A) any such
Substitute  Options  exchanged  for  Incentive  Stock  Options  shall  meet  the
requirements of Section 424(a) of the Code, and (B) the shares of stock issuable
upon  the  exercise  of such  Substitute  Options  shall  constitute  securities
registered in accordance  with the  Securities  Act of 1933, as amended,  ("1933
Act") or such  securities  shall be exempt from such  registration in accordance
with  Sections  3(a)(2) or 3(a)(5) of the 1933 Act,  (collectively,  "Registered
Securities"),  or in  the  alternative,  if the  securities  issuable  upon  the
exercise of such Substitute Options shall not constitute Registered  Securities,
then the  Optionee  will  receive  upon  consummation  of the  Change in Control
transaction a cash payment for each Option  surrendered  equal to the difference
between (1) the Fair Market Value of the  consideration  to be received for each
share of Common Stock in the Change in Control  transaction  times the number of
shares  of  Common  Stock  subject  to  such  surrendered  Options,  and (2) the
aggregate exercise price of all such surrendered Options, or

                  (ii) in the  event of a  transaction  under the terms of which
the holders of the Common Stock of the Company  will  receive upon  consummation
thereof a cash  payment  (the  "Merger  Price")  for each share of Common  Stock
exchanged in the Change in Control transaction, to make or to provide for a cash
payment to the Optionees  equal to the  difference  between (A) the Merger Price
times the number of shares of Common Stock  subject to such Options held by each
Optionee (to the extent then exercisable

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at prices not in excess of the  Merger  Price)  and (B) the  aggregate  exercise
price of all such surrendered Options in exchange for such surrendered Options.

                  (c)  Extraordinary   Corporate  Action.   Notwithstanding  any
provisions  of the Plan to the contrary,  subject to any required  action by the
stockholders   of  the  Company,   in  the  event  of  any  Change  in  Control,
recapitalization,   merger,   consolidation,   exchange  of  Shares,   spin-off,
reorganization,   tender  offer,   partial  or  complete  liquidation  or  other
extraordinary  corporate action or event, the Committee, in its sole discretion,
shall have the power, prior or subsequent to such action or event to:

                            (i)  appropriately  adjust  the  number of Shares of
Common Stock  subject to each  Option,  the Option  exercise  price per Share of
Common Stock, and the  consideration to be given or received by the Company upon
the exercise of any outstanding Option;

                            (ii) cancel any or all previously  granted  Options,
provided that  appropriate  consideration  is paid to the Optionee in connection
therewith; and/or

                            (iii) make such other adjustments in connection with
the Plan as the Committee, in its sole discretion,  deems necessary,  desirable,
appropriate or advisable;  provided,  however,  that no action shall be taken by
the Committee which would cause Incentive Stock Options granted  pursuant to the
Plan to fail to meet the  requirements  of Section  422 of the Code  without the
consent of the Optionee.

                  (d)  Acceleration.  The Committee  shall at all times have the
power to accelerate  the exercise date of Options  previously  granted under the
Plan;  provided  that such action is not contrary to  regulations  of the OTS or
other appropriate banking regulatory agency then in effect.

         Except as expressly  provided in Sections 13(a) and 13(b),  no Optionee
shall have any rights by reason of the occurrence of any of the events described
in this Section 13.

         14. Time of Granting Options.  The date of grant of an Option under the
Plan  shall,  for all  purposes,  be the date on which the  Committee  makes the
determination of granting such Option. Notice of the grant of an Option shall be
given to each  individual  to whom an Option is so granted  within a  reasonable
time after the date of such grant in a form determined by the Committee.

         15.  Effective  Date. The Plan shall become  effective upon the date of
approval of the Plan by the stockholders of the Company,  subject to approval or
non-objection by the Office of Thrift Supervision,  if applicable. The Committee
may make a determination related to Awards prior to the Effective Date with such
Awards to be effective upon the date of stockholder approval of the Plan.

         16.   Approval  by   Stockholders.   The  Plan  shall  be  approved  by
stockholders  of the Company  within twelve (12) months before or after the date
the Plan is approved by the Board.

         17.  Modification  of Options.  At any time and from time to time,  the
Board may  authorize  the  Committee to direct the  execution  of an  instrument
providing  for the  modification  of any  outstanding  Option,  provided no such
modification, extension or renewal shall confer on the holder of said Option any
right or benefit  which could not be conferred on the Optionee by the grant of a
new  Option  at such  time,  or shall not  materially  decrease  the  Optionee's
benefits  under the Option  without  the  consent  of the holder of the  Option,
except as otherwise permitted under Section 18 hereof.

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         18. Amendment and Termination of the Plan.

                  (a)  Action by the  Board.  The Board may  alter,  suspend  or
discontinue  the Plan,  except that no action of the Board may  increase  (other
than as provided in Section 13 hereof) the maximum number of Shares permitted to
be  optioned  under the Plan,  materially  increase  the  benefits  accruing  to
Participants   under  the  Plan  or  materially   modify  the  requirements  for
eligibility for  participation in the Plan unless such action of the Board shall
be subject to approval or ratification by the stockholders of the Company.

                  (b)  Change  in  Applicable  Law.  Notwithstanding  any  other
provision  contained  in the Plan,  in the event of a change in any  federal  or
state law,  rule or  regulation  which would make the exercise of all or part of
any previously  granted  Option  unlawful or subject the Company to any penalty,
the Committee may restrict any such exercise without the consent of the Optionee
or other holder thereof in order to comply with any such law, rule or regulation
or to avoid any such penalty.

         19. Conditions Upon Issuance of Shares; Limitations on Option Exercise;
Cancellation of Option Rights.

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

         (b)  The   inability   of  the   Company   to  obtain   any   necessary
authorizations,  approvals or letters of non-objection  from any regulatory body
or  authority  deemed by the  Company's  counsel to be  necessary  to the lawful
issuance and sale of any Shares issuable  hereunder shall relieve the Company of
any liability with respect to the non-issuance or sale of such Shares.

         (c) As a  condition  to the  exercise  of an Option,  the  Company  may
require  the  person  exercising  the  Option to make such  representations  and
warranties as may be necessary to assure the  availability  of an exemption from
the registration requirements of federal or state securities law.

         (d)  Notwithstanding   anything  herein  to  the  contrary,   upon  the
termination  of  employment  or service  of an  Optionee  by the  Company or its
Subsidiaries  for "cause" as defined at 12 C.F.R.  563.39(b)(1) as determined by
the Board of Directors,  all Options held by such Participant  shall cease to be
exercisable as of the date of such termination of employment or service.

         (e) Upon the  exercise of an Option by an Optionee  (or the  Optionee's
personal  representative),  the Committee,  in its sole and absolute discretion,
may make a cash  payment to the  Optionee,  in whole or in part,  in lieu of the
delivery  of shares of Common  Stock.  Such cash  payment  to be paid in lieu of
delivery  of Common  Stock  shall be equal to the  difference  between  the Fair
Market  Value of the  Common  Stock on the date of the Option  exercise  and the
exercise  price per share of the Option.  Such cash payment shall be in exchange
for the cancellation of such Option.  Such cash payment shall not be made in the
event that such  transaction  would  result in  liability to the Optionee or the
Company under Section 16(b) of the Securities  Exchange Act of 1934, as amended,
and regulations promulgated thereunder.

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<PAGE>



         20.  Reservation  of Shares.  During the term of the Plan,  the Company
will  reserve and keep  available a number of Shares  sufficient  to satisfy the
requirements of the Plan.

         21. Unsecured Obligation.  No Participant under the Plan shall have any
interest  in any fund or special  asset of the  Company by reason of the Plan or
the grant of any  Option  under the Plan.  No trust  fund  shall be  created  in
connection with the Plan or any grant of any Option hereunder and there shall be
no required funding of amounts which may become payable to any Participant.

         22. No Employment  Rights. No Director,  Employee or other person shall
have a right to be selected as a  Participant  under the Plan.  Neither the Plan
nor any action  taken by the  Committee in  administration  of the Plan shall be
construed  as giving  any person any rights of  employment  or  retention  as an
Employee,  Director or in any other capacity with the Company,  the Savings Bank
or other Subsidiaries.

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





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