TF FINANCIAL CORPORATION

                             1997 STOCK OPTION PLAN


         1.  Purpose of the Plan.  The Plan  shall be known as the TF  Financial
Corporation  ("Company") 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  financial  incentives  to employees,
officers and  directors  providing  services to the  Company,  or any present or
future  parent or  subsidiary  of the  Company  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 Company,
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  Company;   (ii)  the  merger  or
recapitalization of the Company whereby the Company is not the surviving entity;
(iii) a change in control of the Company,  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 Company 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 Company stock,
or the purchase of shares of up to 25% of any class of securities of the Company
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.

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


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                  (f) "Common Stock" shall mean the common stock of the Company,
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 Company or any present or future Parent or Subsidiary of the
Company.  Employment  shall not be  considered  interrupted  in the case of sick
leave,  military leave or any other leave of absence  approved by the Company or
in the case of transfers  between payroll  locations,  of the Company or between
the Company, its Parent, its Subsidiaries or a successor.

                  (h)  "Company"  shall mean the TF Financial  Corporation,  the
parent corporation of the Savings Bank, or any successor or Parent thereof.

                  (i)  "Director"  shall  mean  a  member  of the  Board  of the
Company, 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 Company 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)  "Dividend  Equivalent  Rights"  shall  mean the rights to
receive a cash payment in accordance with Section 12 of the Plan.

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

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

                  (o) "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 last  reported  sale  price of the Common
Stock on the date of valuation or the date of grant of an option,  or if no such
sale is reported  on such date than 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 sale or
bid and ask price.  If no such sale or 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  valuation  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.  Notwithstanding  the
foregoing,  for transactions  under the Plan occurring prior to the commencement
of trading on a business  day, the Fair Market Value shall be  determined  based
upon information reported at the closing of the prior business day.


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                  (p) "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.

                  (q)  "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.

                  (r)  "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.

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

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

                  (u)  "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.

                  (v) "Participant"  means any employee,  officer or director of
the  Company or any Parent or  Subsidiary  of the Company who is selected by the
Committee  to  receive  an  Award,  or who by the  express  terms of the Plan is
granted an Award.

                  (w) "Plan" shall mean the TF Financial  Corporation 1997 Stock
Option Plan.

                  (x)  "Savings  Bank" shall mean Third  Federal  Savings  Bank,
Newtown, Pennsylvania, or any successor corporation thereto.

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

                  (z) "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  240,000  Shares.
Such  Shares  may  either  be from  authorized  but  unissued  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.


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         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.

          5.      Administration of the Plan.
                  --------------------------

                  (a)   Composition  of  the   Committee.   The  Plan  shall  be
administered by the Board of Directors of the Company or a Committee which shall
consist of not less than two Directors of the Company 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 Company and such other  officers as shall
be  designated  by the  Committee  are  hereby  authorized  to  execute  written
agreements  evidencing  Awards on behalf of the  Company 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  employees,  officers  and  Directors  of  the  Company  and  the
Subsidiaries 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
Company 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.


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                           (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  Company or any  present  or future  Parent or
Subsidiary of the Company) 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.

                           (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 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  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

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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  Company 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 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 shall give 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.

                  (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  12,000 shares of
Common  Stock will be  granted to each  Director  of the  Company  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.  Non-Incentive Stock Options to
purchase  8,000 shares of Common  Stock will be granted to each  Director of the
Savings Bank who is not otherwise a Director of the Company or 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 of
the Company or the Savings Bank.  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.
Nothwithstanding the foregoing,  upon the death or Disability of the Director or
Director Emeritus, such Options shall be deemed immediately 100% exercisable and
shall remain  exercisable for a period of three years from such date of death or
Disability.  In the event of the Optionee's death, such Options may be exercised
by the

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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  Options  awarded in
accordance  with this Section 9(a) as of the Effective  Date shall have Dividend
Equivalent  Rights  associated  with such  Options,  as  detailed  at Section 12
herein. All outstanding Awards shall become immediately exercisable in the event
of a Change in Control of the  Savings  Bank or the  Company.  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  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 shall give 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.


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                  (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 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.


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                  (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.

         12. Dividend Equivalent Rights. The Committee,  in its sole discretion,
may  include  as a term of any  Option,  the right of the  Optionee  to  receive
Dividend Equivalent Rights. Such rights shall provide that upon the payment of a
dividend on the Common Stock,  the holder of such Options shall receive  payment
of  compensation  in an amount  equivalent  to the  dividend  payable as if such
Options had been exercised and such Common Stock held as of the dividend  record
date.  Such  rights  shall  expire  upon  the  expiration  or  exercise  of such
underlying Options. Such rights are non-transferable and shall attach to Options
whether or not such Options are immediately exercisable. The dividend equivalent
payments  associated  with  Options  shall be paid to the  Option  holder at the
dividend  payment date of the Common Stock. All Options granted by the Committee
to Employees as of the  Effective  Date shall have  Dividend  Equivalent  Rights
associated with such Options.  All Options granted to non-employee  Directors of
the Company or the Savings Bank as of the Effective  Date in accordance  Section
9(a) of the Plan shall have  Dividend  Equivalent  Rights  associated  with such
Options.

         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.  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

                                       A-9

<PAGE>



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  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.

                  (e) Non-recurring Dividends.  Upon the payment of a special or
non-recurring  cash  dividend  that has the effect of a return of capital to the
stockholders,   the  Option   exercise   price  per  share   shall  be  adjusted
proportionately,  except to the  extent  that the  Participant  shall  otherwise
receive payments associated with Dividend Equivalent Rights attributable to such
Options with regard to such special or non-recurring cash dividends.


                                      A-10

<PAGE>



         Except as expressly provided in Sections 13(a), 13(b) and 13(e) hereof,
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  and  adoption  of the Plan by the  Board of the  Company,  subject  to
ratification of the Plan by the  stockholders of the Company.  The Committee may
make a determination related to Awards as of the Effective Date.

         16.  Ratification  by  Stockholders.  The  Plan  shall be  ratified  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.

         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.


                                      A-11

<PAGE>



         (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.

         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.  Withholding  Tax. The Company  shall have the right to deduct from
all amounts paid in cash with  respect to the  cashless  exercise of Options and
Dividend  Equivalent  Rights  under  the Plan 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.

         23. 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.


                                      A-12

<PAGE>


         24.  Governing  Law.  The Plan shall be  governed by and  construed  in
accordance  with the laws of the  Commonwealth  of  Pennsylvania,  except to the
extent that federal law shall be deemed to apply.



                                      A-13