Document:

<PAGE>

                                                                  EXECUTION COPY

                      AMENDMENT NO. 1 TO CREDIT AGREEMENT

                                 This AMENDMENT NO. 1 TO CREDIT AGREEMENT is
                          made and entered into as of July 14, 2000, by and
                          among CENTURY MAINTENANCE SUPPLY, INC., a Delaware
                          corporation (the "Borrower"), and the Required Lenders
                          (as defined in Article I of the Credit Agreement).

                                   RECITALS

       A. The Borrower, the Lenders (as defined in Article I of the Credit
Agreement), Salomon Brothers Inc., and Citicorp USA, Inc., entered into a Credit
Agreement dated as of July 8, 1998 (as amended and otherwise modified to the
date hereof, the "Credit Agreement"). Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to them in the Credit
Agreement.

       B. The Borrower requested certain changes to the Credit Agreement, and
has agreed to certain changes to other provisions of the Credit Agreement.

       C. The Required Lenders are willing to so amend the Credit Agreement on
the terms and conditions set forth herein.

       D. The Borrower and the Required Lenders are entering into this Amendment
pursuant to Section 9.08(b) of the Credit Agreement.

                                  AGREEMENTS

       In Consideration of the foregoing Recitals, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Required Lenders agree as follows:

       1. Dividends and Distributions; Restrictions on Ability of Subsidiaries
to Pay Dividends. Section 6.05(a)(4) is amended by inserting new clauses (iv)
and (v) as follows:

              (iv) the Borrower may apply up to $5,000,000 to repurchase
       Exchangeable Preferred Stock (including accreted PIK liquidation
       preference thereon) currently owned by third party investors (but
       excluding shares owned by Freeman Spagli & Co. and Dennis Beardan and
       their affiliates), but only if, after giving effect to such repurchase,
       (A) the Borrower is in pro forma compliance with all covenants under this
       Agreement, based on Adjusted EBITDA for the four most recently ended
       fiscal quarters and after giving effect to any Borrowings needed to fund
       such repurchase and (B) no Default has occurred and is continuing; or

              (v) in addition to the amount referred to in clause (iv) above,
       the Borrower may apply up to an additional $5,000,000 to repurchase
       Exchangeable Preferred Stock (including accreted PIK liquidation
       preference thereon) currently owned by third party investors (but
       excluding shares owned by Freeman Spagli & Co. and Dennis Beardan and
       their affiliates), but only if, after giving effect to such repurchase,
       (A) the Borrower is in pro forma compliance with all covenants under this
       Agreement, based on Adjusted EBITDA for the four most recently ended
       fiscal quarters and after giving effect to any Borrowings needed to fund
       such repurchase, (B) no Default has occurred and is continuing and (c)
       the Debt/Adjusted EBITDA Ratio on a pro forma basis (taking account of
       such repurchase shall not exceed 3.0:1.0 for the most recently ended
       covenant reporting date and the preceding covenant reporting date; or

<PAGE>

       2. Debt/Adjusted EBITDA Ratio. Section 6.10 of the Credit Agreement is
amended in its entirety to read as follows:

       SECTION 6.10 Debt/Adjusted EBITDA Ratio. The Debt/Adjusted EBITDA Ratio
shall not exceed the following amounts as of the ends of fiscal quarters of the
Borrower ending nearest to the following dates:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
 Fiscal Quarter                              Debt/Adjusted EBITDA Ratio
    Ending        --------------------------------------------------------------------------------
   Nearest to        1998      1999      2000      2001      2002      2003      2004      2005
<S>                    <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
--------------------------------------------------------------------------------------------------
 March 31                        4.25      3.50      3.25      2.75      2.00      2.00      2.00
--------------------------------------------------------------------------------------------------
 June 30                         4.25      3.50      3.25      2.75      2.00      2.00      2.00
--------------------------------------------------------------------------------------------------
 September 30          4.25      4.25      3.50      3.25      2.75      2.00      2.00      2.00
--------------------------------------------------------------------------------------------------
 December 31           4.25      3.50      3.25      2.75      2.00      2.00      2.00      2.00
--------------------------------------------------------------------------------------------------
</TABLE>
              and thereafter, 2.00.

       3. Minimum EBITDA. Section 6.11 of the Credit Agreement is amended in its
entirety as follows:

SECTION 6.11 Minimum EBITDA.  The EBITDA for the fiscal year of the Borrower
shall not be less than the following amounts as of the end of the following
fiscal years:

<TABLE>
<CAPTION>

Fiscal Year Ending
    Nearest to
   December 31                          Minimum EBITDA
------------------                      --------------
<S>                                     <C>
      2000                               $29,000,000
      2001                                33,000,000
      2002                                38,000,000
      2003                                44,000,000
      2004                                50,000,000
      2005                                58,000,000

</TABLE>

       4. Interest Coverage Ratio. Sections 6.12(d) of the Credit Agreement is
amended in its entirety to read as follows:

       (d) The ratio of Adjusted EBITDA to Consolidated Interest Expense for the
period of four fiscal quarters ending nearest to each of the following dates,
shall not be less than the following ratios:

<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------------
                                         Consolidated Interest Coverage Ratio
       Fiscal Quarter    ----------------------------------------------------------------------
      Ending Nearest to     1999      2000      2001      2002      2003      2004      2005
     ------------------------------------------------------------------------------------------
      <S>                     <C>       <C>       <C>       <C>       <C>       <C>       <C>
      March 31                          2.75      3.25      3.75      4.50      4.50      4.50
     ------------------------------------------------------------------------------------------
      June 30                 2.25      2.75      3.25      3.75      4.50      4.50      4.50
     ------------------------------------------------------------------------------------------
      September 30            2.25      2.75      3.25      3.75      4.50      4.50      4.50
     ------------------------------------------------------------------------------------------
      December 31             2.75      3.25      3.75      4.50      4.50      4.50      4.50
     ------------------------------------------------------------------------------------------
</TABLE>
              and thereafter, 4.50.

       5. Fixed Charge Coverage Ratio. Section 6.13 of the Credit Agreement is
amended in its entirety to read as follows:

       SECTION 6.13 Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio
for the period of four fiscal quarters ending nearest to each of the following
dates, shall not be less than the following ratios:
<PAGE>

<TABLE>
<CAPTION>
        ----------------------------------------------------------------------
                            Fixed Charge Coverage Ratio
                            --------------------------------------------------
         Fiscal Quarter
        Ending Nearest to     2000    2001    2002    2003    2004    2005
        ----------------------------------------------------------------------
       <S>                   <C>     <C>     <C>      <C>     <C>     <C>
        March 31              1.20    1.10    1.10    1.05    1.05    1.05
        ----------------------------------------------------------------------
        June 30               1.20    1.10    1.10    1.05    1.05    1.05
        ----------------------------------------------------------------------
        September 30          1.20    1.10    1.10    1.05    1.05    1.05
        ----------------------------------------------------------------------
        December 31           1.10    1.10    1.10    1.05    1.05    1.05
        ----------------------------------------------------------------------
</TABLE>
               and thereafter, 1.05.

      6. Binding Effect and Effectiveness. This Amendment may be executed in as
many counterparts as may be convenient and shall become binding when the
Borrower, and the Required Lenders have each executed and delivered at least one
counterpart, and shall become effective upon satisfaction of the following
condition precedent: the Borrower shall have paid to each Lender that executes
this Agreement an amendment fee equal to 0.125% of such Lender's Revolving
Credit Commitment and outstanding Term Loans as of the date of this Amendment.

      7. Governing Law. This Amendment shall be a contract made under and
governed by the laws of the State of New York, without regard to the conflicts
of law provisions thereof.

      8. Reference to Credit Agreement. Except as amended hereby, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. On and after the effectiveness of the amendment to
the Credit Agreement accomplished hereby, each reference in the Credit
Agreement, to "this Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference to the Credit Agreement shall be deemed a reference
to the Credit Agreement, as amended hereby, as the case may be.

                                     3
<PAGE>

       IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Waiver to be duly executed by their respective officers as of the date first
above written.

                                       CENTURY MAINTENANCE SUPPLY, INC.

                                       by     /s/ Richard Penick
                                         ----------------------------
                                       Name:  Richard Penick
                                       Title: Vice-President

                                       Acknowledged by:

                                       CITICORP USA, INC., as Administrative
                                       Agent and Collateral Agent

                                       SALOMON SMITH BARNEY INC., as Arranger,
                                       Advisor and Syndication Agent,

<PAGE>

                                       LENDERS
                                       -------
                                       CITICORP USA, INC.

                                       FLOATING RATE POPRTFOLIO

                                       By:  INVESCO SENIOR SECURED
                                       MANAGEMENT INC., as attorney in
                                       fact

                                       FIRST UNION NATIONAL BANK,

                                       ING HIGH INCOME PRINCIPAL
                                       PRESERVATION FUND HOLDINGS, LDC

                                       ROYAL BANK OF CANADA,

                                       KZH ING - I LLC

                                       KZH ING - 2 LLC

                                       KZH SOLEIL - 2 LLC

                                       TRANSAMERICA LIFE INSURANCE AND
                                       ANNUITY COMPANY,

<PAGE>

                                       WELLS FARGO BANK,

                                       FIRST DOMINION,

                                       DRESDNER BANK,

                                       GALAXY CLO 1999-1 LTD,<PAGE>

                                                                    EXHIBIT 10.3

                         PARADIGM BANCORPORATION, INC.
                      1998 STOCK APPRECIATION RIGHTS PLAN
                           PLAN DATE JANUARY 1, 1998

   Section 1.  Purpose of the Plan.  The Paradigm Bancorporation, Inc. 1998
Stock Appreciation Rights Plan (the "Plan") is intended to provide a method for
attracting and retaining key individuals, either as employees or directors of
Paradigm Bancorporation, Inc. (the "Company") and its Affiliates (collectively,
the "Company Group"), to encourage such individuals to remain with the Company
Group and devote their best efforts to its affairs, and to enable such
individuals to participate in the long term growth of the Company Group.  As
used in this Plan, the term "Affiliates" means any parent of the Company and any
subsidiary of the Company within the meaning of Section 424(e) and (f) of the
Internal Revenue Code of 1986, as amended (the "Code").

   Section 2.  Administration of the Plan

        (a) Composition of Committee.  The Plan shall be administered by the
   Compensation Committee (the "Committee") designated by the Board of Directors
   of the Company (the "Board"), which shall also designate the Chairman of the
   Committee.  If the Company is governed by Section 16 of the Securities
   Exchange Act of 1934, as amended ("Exchange Act"), the Compensation Committee
   shall be composed solely of two or more "non-employee directors" within the
   meaning of Rule 16b-3 promulgated by the Securities and Exchange Commission
   ("Commission") under the Exchange Act ("Rule 16b-3").

        (b) Committee Action.  The Committee shall hold its meetings at such
   times and places as it may determine.  A majority of its members shall
   constitute a quorum, and all determinations of the Committee shall be made by
   not less than a majority of its members.  Any decision or determination
   reduced to writing and signed by a majority of the members shall be effective
   as if it had been made by a majority vote of its members at a meeting duly
   called and held.  The Committee may designate the Secretary of the Company or
   other Company employees to assist the Committee in the administration of the
   Plan, and may grant authority to such persons to execute agreements or other
   documents on behalf of the Committee and the Company.  Any duly constituted
   committee of the Board satisfying the qualifications of this Section 2 may be
   appointed as the Committee.

        (c) Committee Expenses.  All expenses and liabilities incurred by the
   Committee in the administration of the Plan shall be borne by the Company.
   The Committee may employ attorneys, consultants, accountants or other
   persons.

        (d)   Committee Authority.  Subject to the express provisions of the
   Plan, the Committee shall have discretionary authority to prescribe, amend
   and rescind rules and regulations relating to the Plan, to interpret the
   Plan, to prescribe and amend the terms of the Stock Appreciation Rights
   Agreements (the "SAR Agreements"), which need not be identical, and to make
   all other determinations deemed necessary or advisable for the administration
   of the Plan.
<PAGE>

   Section 3.  Eligibility.  The persons eligible to participate in the Plan as
a recipient of a stock appreciation right (the "Participant") shall include key
employees (including officers and directors who are also key employees) of the
Company Group and directors of the Company Group at the time the stock
appreciation right is granted.

   Section 4.  Units Subject to the Plan.  The aggregate number of Stock
Appreciation Right Units ("Units") which may be granted to Participants under
the Plan shall not exceed 50,000 Units, subject to adjustment as provided in
Section 9 below.  Should any Units theretofore granted to a Participant expire
pursuant to Sections 6.(c) or 6.(d), such Units may again be granted to a
Participant under the Plan.

   Section 5.  Grant of Units.  The Committee shall have discretionary authority
to determine, authorize and designate those key employees and directors of the
Company Group who are to receive Units under the Plan and to determine the
number of Units each such Participant is to receive.

   Section 6.  SAR Agreements.  Each Unit granted under the Plan shall be
exercisable only for cash (subject to Section 9) and shall be evidenced by an
SAR Agreement, in a form approved by the Committee, which shall be subject to
the following express terms and conditions and such other terms and conditions
as the Committee may deem appropriate.  Such SAR Agreement may include, without
limitation, provisions relating to (i) vesting of Units, subject to the
provisions hereof accelerating vesting on a Change of Control or IPO (as defined
in Sections 7 and 8), (ii) tax matters (including provisions covering applicable
wage withholding requirements), and (iii) any other matters not inconsistent
with the terms and provisions of this Plan, that the Committee shall in its sole
discretion determine.  The terms and conditions of SAR Agreements need not be
identical.

        (a) Stock Appreciation Right Period.  The Committee shall promptly
   notify the Participant of the stock appreciation right grant, and an SAR
   Agreement shall promptly be executed and delivered by and on behalf of the
   Company and the Participant, provided that the stock appreciation right grant
   shall expire if a written agreement is not signed by said Participant (or his
   agent or attorney) and returned to the Company within 60 days from date of
   receipt by the Participant of such agreement.  The date of grant shall be the
   date the Units are actually granted by the Committee, even though the SAR
   Agreement may be executed and delivered by the Company and the Participant
   after that date.  Each SAR Agreement shall specify the period for which the
   Units thereunder are granted (which in no event shall exceed ten years from
   the date of grant) and shall provide that the Units shall expire at the end
   of such period.  If the original term of an SAR Agreement is less than ten
   years from the date of grant, the SAR Agreement may be amended prior to its
   expiration, with the approval of the Committee and the Participant, to extend
   the term so that the term as amended is not more than ten years from the date
   of grant.

        (b) Exercise of Units.  The Committee may provide in the SAR Agreement
   that Units granted the Participant may be exercised in whole or in
   increments.  Units shall be exercised by the delivery of written notice to
   the Secretary of the Company setting forth the number of Units being
   exercised and the date on which such exercise is to be effective ("Exercise
   Date").  Subject to Section 9.(b), upon the exercise of Units by the
   Participant in accordance with the SAR Agreement, the Company shall pay the
   Participant within thirty (30)

                                       2
<PAGE>

   days of the Exercise Date an amount of cash (the "Compensation Amount") equal
   to the excess, if any, of the aggregate Unit Value (as defined below) of the
   Units exercised as of the Exercise Date over the aggregate exercise price (as
   set forth in the SAR Agreement) of the Units exercised. The value of one Unit
   (the "Unit Value") as of the Exercise Date shall be equal to the Fair Market
   Value (as defined below) of one share of common stock, $1.00 par value (the
   "Stock"), of the Company as of such date. For all purposes under the Plan,
   the "Fair Market Value" of a share of Stock on a particular date shall be
   equal to the mean of the reported high and low sales prices of the Stock on
   the exchange on which the Stock is traded on that date, or if no prices are
   reported on that date, on the last preceding date on which such prices of the
   Stock are so reported. If the Stock is not traded on such exchange at the
   time a determination of its Fair Market Value is required to be made
   hereunder, its Fair Market Value shall be deemed to be equal to the average
   between the closing bid and ask price of the Stock on the most recent date
   the Stock was publicly traded. In the event the Stock is not publicly traded
   at the time a determination of its value is required to be made hereunder,
   the determination of its Fair Market Value shall be made by the Committee in
   such manner as it deems appropriate.

        (c) Termination of Employment or Directorship.  If a Participant ceases
   to be employed by the Company Group or to serve as a director of the Company
   Group for any reason other than death or disability, any Units which are
   exercisable on the date of such termination of employment or directorship may
   be exercised during a three-month period beginning on such date, but in no
   event may any Unit be exercised after its expiration under the terms of the
   SAR Agreement; provided however, if a Participant's employment (or a
   Participant's service as a director) is terminated because of a Participant's
   theft or embezzlement from the Company Group, disclosure of trade secrets of
   the Company Group or the commission of a willful, felonious act while in the
   employment of the Company Group or while serving as a director of the Company
   Group, then any Units or unexercised portion thereof granted to said
   Participant shall expire upon such termination of employment or service as a
   director.

        (d)   Disability or Death of Participant.  In the event of the
   determination of disability or the death of a Participant while he is
   employed by (or serves as a director of) the Company Group, the Units
   previously granted to him may be exercised (to the extent he would have been
   entitled to do so at the date of the determination of disability or death) at
   any time and from time to time, within a three-month period after such
   determination of disability or death, by the former Participant, the guardian
   of his estate, the executor or administrator of his estate or by the person
   or persons to whom his rights under the SAR Agreement shall pass by will or
   the laws of descent and distribution, but in no event may any Unit be
   exercised after its expiration under the terms of the SAR Agreement.  A
   Participant shall be deemed to be disabled if, in the opinion of a physician
   selected by the Committee, he is incapable of performing services for the
   Company Group of the kind he was performing at the time the disability
   occurred by reason of any medically determinable physical or mental
   impairment which can be expected to result in death or to be of long,
   continued and indefinite duration.  The date of determination of disability
   for purposes hereof shall be the date of such determination by such
   physician.

        (e) Expiration of Units.  Any Units exercised pursuant to this Plan
   shall expire automatically as of the Exercise Date.  Additionally, Units
   shall expire upon the Participant's

                                       3
<PAGE>

   termination of service with the Company Group in accordance with paragraphs
   (c) and (d) above.

   Section 7.  Change of Control.  For purposes of the Plan, a "Change of
Control" shall mean any of the following events:

        (a) the Company is not the surviving entity in any merger or
   consolidation with an entity which is not an Affiliate (or survives only as a
   subsidiary of another entity which is not an Affiliate);

        (b) the Company sells all or substantially all of its assets to any
   other person or entity (other than an Affiliate);

        (c) any person or entity (including a "group" as contemplated by Section
   13(d)(3) of the Exchange Act) acquires or gains ownership or control of
   (including, without limitation, power to vote) more than 50% of the
   outstanding shares of Stock;

        (d) the Company is to be dissolved and liquidated; or

        (e) as a result of or in connection with a contested election of
   directors, the persons who were directors of the Company before such election
   shall cease to constitute a majority of the Board.

   "Change of Control Value" shall mean (i) the price per share offered to
stockholders of the Company in any merger, consolidation, reorganization, sale
of assets or dissolution transaction, (ii) the price per share offered to
stockholders of the Company in any tender offer or exchange offer whereby a
Change of Control takes place, or (iii) if such Change of Control occurs other
than in (i) or (ii) above, the Fair Market Value per share of Stock, as
determined by the Committee, whichever is applicable.  In the event that the
consideration offered to stockholders of the Company consists of anything other
than cash, the Committee shall determine the fair cash equivalent of the portion
of the consideration offered which is other than cash.

   Section 8.  Initial Public Offering.  For purposes of the Plan, an "Initial
Public Offering" or "IPO" shall mean the consummation of an underwritten public
offering of Stock pursuant to a registration statement of the Company filed
under the Securities Act of 1933, as amended, after the effective date of the
Plan (other than any registration statement (a) relating to warrants, options or
shares of capital stock of the Company granted or to be granted or sold
primarily to employees, directors, or officers of the Company, (b) filed in
connection with a transaction described in Rule 145 under the Securities Act of
1933, as amended, or any successor rule, (c) relating to employee benefit plans
or interests therein, or (d) primarily relating to preferred stock or other
securities issued in connection with any financing by the Company which is
principally debt or preferred stock financing) wherein the aggregate net
proceeds (after deducting all costs, discounts, commissions and other expenses
of the offering) to the Company are at least $5,000,000.  "IPO Price" shall mean
the price per share of Stock offered in an IPO.

                                       4
<PAGE>

   Section 9.  Recapitalization or Reorganization.

        (a) Solely for purposes of the Plan, each Unit has been equated with one
   share of Stock as constituted on the date of adoption of the Plan.  If, after
   the adoption of the Plan, the Company shall be recapitalized or otherwise
   change its capital structure or the number of issued and outstanding shares
   of Stock shall be changed as a result of a share dividend or a subdivision or
   consolidation of shares without receipt of consideration by the Company, the
   number of Units theretofore granted to each Participant and the maximum
   number of Units which may be granted under the Plan shall be appropriately
   adjusted to reflect such change.

        (b) In the event of an IPO or a Change of Control, all outstanding Units
   shall immediately vest and become exercisable.  The Committee, in its
   discretion, may determine that upon the occurrence of an IPO or a Change of
   Control, each Unit shall expire within a specified reasonable number of days
   after notice to the Participant, and such Participant shall receive, with
   respect to each Unit, cash in an amount equal to the excess, if any, of the
   IPO Price or Change of Control Value (as applicable) over the exercise price
   set forth in the SAR Agreement.  Alternatively, in the event of a Change of
   Control, the Committee, in its discretion, may provide that Units held by a
   Participant shall become Units covering the number and class of shares of
   stock or other securities or property (including, without limitation, cash)
   to which the Participant would have been entitled pursuant to the terms of
   the agreement of merger, consolidation or sale of assets or dissolution if,
   immediately prior to such merger, consolidation or sale of assets or
   dissolution the Participant had been the holder of record of the number of
   shares of Stock then covered by such Units.  The provisions contained in this
   paragraph shall not terminate any rights of a Participant to further payments
   pursuant to any other agreement with the Company Group following a Change of
   Control.

        (c) In the event of changes in the outstanding Stock by reason of
   recapitalization, reorganizations, mergers, consolidations, combinations,
   exchanges or other relevant changes in capitalization occurring after the
   date of the grant of a Unit and not otherwise provided for by this Section,
   any outstanding Units shall be subject to adjustment by the Committee at its
   reasonable discretion.  In the event of any such change in the outstanding
   Stock, the aggregate number of Units available under the Plan may be
   appropriately adjusted by the Committee, whose determination shall be
   reasonable and conclusive.

        (d) The existence of the Plan and the Units granted hereunder shall not
   affect in any way the right or power of the directors or the stockholders of
   the Company Group to make or authorize any adjustment, recapitalization,
   reorganization or other change in the Company Group=s capital structure or
   its business, any merger or consolidation of the Company or any Affiliate,
   any issue of debt or equity securities ahead of or affecting Stock or the
   rights thereof, the dissolution or liquidation of the Company or any
   Affiliate or any sale, lease, exchange or other disposition of all or any
   part of its assets or business or any other corporate act or proceeding.

        (e) Any adjustment provided for in paragraphs (a), (b) or (c) above
   shall be subject to any required stockholder action.

                                       5
<PAGE>

        (f) Except as hereinbefore expressly provided, the issuance by the
   Company of shares of stock of any class or securities convertible into shares
   of stock of any class, for cash, property, labor or services, upon direct
   sale, upon the exercise of rights or warrants to subscribe therefor, or upon
   conversion of shares or obligations of the Company convertible into such
   shares or other securities, and in any case whether or not for fair value,
   shall not affect, and no adjustment by reason thereof shall be made with
   respect to, the Units theretofore granted.

   Section 10.  Prohibition Against Assignment or Encumbrance.  Except as set
forth in Section 6.(d) and Section 14, no right, title, interest or benefit
hereunder shall ever be transferable or liable for or charged with any of the
torts or obligations of a Participant or any person claiming under a
Participant, or be subject to seizure by any creditor of a Participant or any
person claiming under a Participant.  No Participant or any person claiming
under a Participant shall have the power to anticipate or dispose of any right,
title, interest or benefit hereunder in any manner until the same shall have
been actually distributed free and clear of the terms of the Plan.

   Section 11.  Nature of the Plan.  The Plan shall constitute an unfunded,
unsecured obligation of the Company to make payments in accordance with the
provisions of the Plan.  Neither the establishment of the Plan, the granting and
vesting of Units nor the determination of Compensation Amounts shall be deemed
to create a trust.  No Participant shall have any security or other interest in
any assets of the Company, in Stock, or otherwise.

   Section 12.  Employment Relationship.  For all purposes of the Plan, a
Participant shall be considered to be in the employment of the Company Group as
long as he remains employed on a full-time basis by the Company and/or its
Affiliates, or any corporation to which substantially all of the assets and
business of the Company and/or its Affiliates are transferred.  Nothing in the
adoption of the Plan or the granting of Units shall confer on any Participant
the right to continued employment by the Company or any Affiliate or affect in
any way the right of the Company or any Affiliate to terminate such employment
at any time.  Any question as to whether and when there has been a termination
of a Participant's employment and the cause of such termination shall be
determined by the Committee, and its determination shall be final.

   Section 13.  Directorship.  For all purposes of the Plan, a Participant shall
be considered to serve as a director of the Company Group as long as he remains
a duly elected or appointed director of the Company and/or its Affiliates, or
any corporation to which substantially all of the assets and business of the
Company and/or its Affiliates are transferred.  Nothing in the adoption of the
Plan or the granting of Units shall confer on any Participant the right to
continued service as a director of the Company or any Affiliate.  Any question
as to whether and when there has been a termination of a Participant's service
as a director and the cause of such termination shall be determined by the
Committee, and its determination shall be final.

   Section 14.  Beneficiary Designation.  Each Participant under the Plan may
name, from time to time, any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any benefit under the Plan is to be paid
in the case of the death or disability of the Participant before he receives any
or all of such benefit.  Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Committee, and will
be effective only when

                                       6
<PAGE>

filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to his estate.

   Section 15.  Amendment and Termination of the Plan.  The Board in its sole
discretion may terminate the Plan at any time with respect to any Units which
have not theretofore been granted to Participants.  The Board shall have the
right to alter or amend the Plan or any part thereof from time to time, except
that the Board shall not make any alteration or amendment which would impair the
rights of a Participant with respect to Units theretofore granted to that
Participant without that Participant's consent.  If not sooner terminated under
the provisions of this Section 15, the Plan shall terminate as of the date on
which all Units theretofore granted to Participants have been exercised or
forfeited or have expired.

   Section 16.  Tax Withholding.  The Company or any Affiliate shall have the
power to withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state, and local withholding tax requirements on
any grant under the Plan.

   Section 17.  Indemnification.  Each person who is or shall have been a member
of the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit, or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf.  The foregoing right of
indemnification is in addition to any such rights to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.

   Section 18.  Requirements of Law.  The granting of Units and the exercise of
Units shall be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or national securities exchanges as
may be required.

   Section 19.  Governing Law.  The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Texas and,
to the extent applicable, federal law.

                                       7
<PAGE>

   IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing by the directors of the Company, Paradigm Bancorporation, Inc. has
caused these presents to be duly executed in its name and on its behalf by its
proper officers thereunto, duly authorized, as of this 1st  day of March, 1998.

                            PARADIGM BANCORPORATION, INC.

                            By:
                                   _____________________________________

                            Name:
                                   _____________________________________

                            Title:
                                   _____________________________________

                                       8
<PAGE>

                            FIRST AMENDMENT TO THE
                      1998 STOCK APPRECIATION RIGHTS PLAN

   This First Amendment to the Paradigm Bancorporation, Inc. 1998 Stock
Appreciation Rights Plan (the "Plan") is made effective as of August 1, 1999.

   The Plan is hereby amended in the following respect:

   a.  Section 4 of the Plan is hereby amended to read as follows:

       "Section 4.  Units Subject to the Plan.   The aggregate number of Stock
Appreciation Right Units ("Units") which may be granted to Participants under
the Plan shall not exceed 150,000 Units, subject to adjustment as provided in
Section 9 below.  Should any Units theretofore granted to a Participant expire
pursuant to Sections 6.(c) or 6.(d), such Units may again be granted to a
Participant under the Plan."

   Section 2.  Ratification.  Except as hereby amended, the Plan shall remain
               unchanged and is ratified and confirmed in all respects and it
               shall be continuing and binding upon the parties.

   Section 3.  Defined Terms.  All terms used in the First Amendment that are
               defined in the Plan shall have the same meaning as in the Plan.

   IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
executed as of the date first above written.

                            PARADIGM BANCORPORATION, INC.

                            By:
                                ----------------------------------------

                                       9

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