FARNSWORTH BANCORP INC
S-8, 1999-06-11
SAVINGS INSTITUTION, FEDERALLY CHARTERED
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      As filed with the Securities and Exchange Commission on June 11, 1999
                                                   Registration No. 333-________

         -------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                             ----------------------

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                             ----------------------

                            Farnsworth Bancorp, Inc.
                            ------------------------
             (Exact Name of Registrant as Specified in Its Charter)

           New Jersey                                         22-3591051
- -------------------------------                            -------------------
(State or Other Jurisdiction of                            (I.R.S. Employer
Incorporation or Organization)                             Identification No.)

                              789 Farnsworth Avenue
                           Bordentown,New Jersey 08505
                                 (609) 298-0723
                                 --------------
                    (Address of Principal Executive Offices)

                            Farnsworth Bancorp, Inc.
                             1999 Stock Option Plan
                             ----------------------
                            (Full Title of the Plan)

                               Richard Fisch, Esq.
                              Evan M. Seigel, Esq.
                      Malizia, Spidi, Sloane & Fisch, P.C.
                               1301 K Street, N.W.
                                 Suite 700 East
                             Washington, D.C. 20005
                                 (202) 434-4660
            ---------------------------------------------------------
            (Name, Address and Telephone Number of Agent for Service)

<TABLE>
<CAPTION>
                                         CALCULATION OF REGISTRATION FEE
======================== ====================== ====================== ====================== ======================
                                                                         Proposed Maximum
       Title of                                   Proposed Maximum      Aggregate Offering          Amount of
     Securities To             Amount To         Offering Price Per             Price             Registration
     Be Registered           Be Registered              Share                                           Fee
     Common Stock
<S> <C>                    <C>                        <C>                <C>                       <C>
    $.10 par value         37,985 shares (1)                  (2)          $ 399,317(2)              $111.01
======================== ====================== ====================== ====================== ======================
</TABLE>

(1)      The maximum  number of shares of common stock issuable upon exercise of
         options  granted or to be granted under the  Farnsworth  Bancorp,  Inc.
         1999  Stock  Option  Plan  consists  of 37,985  shares  which are being
         registered   under  this   Registration   Statement  and  for  which  a
         registration fee is being paid.  Additionally,  an indeterminate number
         of  additional  shares  which may be  offered  and  issued  to  prevent
         dilution  resulting  from  stock  splits,  stock  dividends  or similar
         transactions are being registered hereunder for which no additional fee
         is required.

(2)      An aggregate of 37,985  shares are being  registered  hereby,  of which
         26,587 shares are under option at a weighted  average exercise price of
         $10.625 per share  ($282,487 in the  aggregate).  The remainder of such
         shares, which are not presently subject to options (11,398 shares), are
         being  registered  based upon the  average of the bid and ask prices of
         the Common  Stock of the  Registrant  as reported  on the OTC  Bulletin
         Board on June 8, 1999 of $10.25 per share  ($116,830 in the  aggregate)
         for a total offering of $399,317.


         Under Rule 462 of the 1933 Act, the Registration  Statement on Form S-8
shall be effective upon filing with the SEC.



<PAGE>
                                     PART I
              INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS

Item 1.  Plan Information. *
- ------

Item 2.  Registrant Information and Employee Plan Annual Information. *
- ------

         *This  Registration  Statement  relates to the  registration  of 37,985
shares of Farnsworth Bancorp, Inc. (the "Company" or "Registrant") common stock,
$.10 par value per share (the "Common  Stock")  issuable to employees,  officers
and directors of the Registrant or its subsidiaries as compensation for services
in  accordance  with the  Farnsworth  Bancorp,  Inc. 1999 Stock Option Plan (the
"Plan").  Documents  containing  the  information  required  by  Part I of  this
Registration  Statement  will be sent or  given to  participants  in the Plan as
specified by Rule  428(b)(1).  Such  documents are not filed with the Securities
and Exchange  Commission (the "Commission")  either as part of this Registration
Statement or as prospectuses or prospectus  supplements pursuant to Rule 424, in
reliance on Rule 428.

                                     PART II
               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3.  Incorporation of Certain Documents by Reference.
- ------

         The Company became  subject to the  informational  requirements  of the
Securities  Exchange  Act of 1934  (the  "1934  Act")  on  July  14,  1998  and,
accordingly,  files periodic reports and other  information with the Commission.
Reports,  proxy  statements and other  information  concerning the Company filed
with the  Commission  may be inspected and copies may be obtained (at prescribed
rates) at the  Commission's  Public  Reference  Section,  Room  1024,  450 Fifth
Street, N.W., Washington, D.C. 20549.

         The following  documents filed by the Company are  incorporated in this
Registration   Statement  and  the  Prospectus   constituting  Part  I  of  this
Registration Statement:

         (1) The Company's  Registration  Statement on Form SB-2 (No. 333-56689)
filed with the Commission on June 12, 1998 and amendments thereto;

         (2) The  Company's  Annual  Report on Form 10-KSB  filed for the fiscal
year ended September 30, 1998, as filed with the Commission;

         (3) The  Company's  Quarterly  Report on Form  10-QSB for the  quarters
ended March 31, 1999,  and December  31, 1998,  respectively,  as filed with the
Commission;

         (4) The Company's Definitive Proxy Statement related to the 1999 Annual
Meeting of Stockholders, as filed with the Commission;

         (5) The  Company's  Definitive  Proxy  Statement  related  the  Special
Meeting of Stockholders held on April 6, 1999, as filed with the Commission; and

         (6) The Company's  Registration Statement on Form 8-A as filed with the
Commission on July 14, 1998.

                                       1
<PAGE>


         All  documents  filed by the Company  pursuant  to Sections  13, 14, or
15(d) of the 1934 Act after the date hereof and prior to the  termination of the
offering  of the shares of Common  Stock shall be deemed to be  incorporated  by
reference into this Registration Statement and to be a part hereof from the date
of filing of such documents.

Item 4.  Description of Securities.
- ------

         Not Applicable.

Item 5.  Interests of Named Experts and Counsel.
- ------

         Not Applicable.

Item 6.  Indemnification of Directors and Officers.
- ------

         Section  14A:3-5 of the New Jersey  Business  Corporation Act describes
those circumstances under which directors, officers, employees and agents may be
insured  or  indemnified  against  liability  which  they  may  incur  in  their
capacities as such.

         Section 17 of the Articles of  Incorporation  of the  Company,  require
indemnification  of directors,  officers,  employees or agents of the Company to
the full extent permissible under New Jersey law.

         The registrant believes that these provisions assist the registrant in,
among other  things,  attracting  and retaining  qualified  persons to serve the
registrant and its subsidiary.  However, a result of such provisions could be to
increase the expenses of the  registrant and  effectively  reduce the ability of
stockholders  to sue on behalf of the registrant  because certain suits could be
barred or amounts that might  otherwise be obtained on behalf of the  registrant
could be required to be repaid by the registrant to an indemnified party.

         The Company may purchase and maintain insurance on behalf of any person
who is or was a director,  officer,  employee,  or agent of the Company or is or
was serving at the request of the Company as a director,  officer,  employee, or
agent of  another  corporation,  partnership,  joint  venture,  trust,  or other
enterprise against any liability asserted against the person and incurred by the
person in any such capacity or arising out of his status as such, whether or not
the Company would have the power to indemnify the person  against such liability
under the provisions of the Articles of Incorporation.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933 ("1933  Act") may be permitted to  directors,  officers,  or persons
controlling the Company  pursuant to the foregoing  provisions,  the Company has
been informed that in the opinion of the Securities and Exchange Commission such
indemnification  is against  public  policy as  expressed in the 1933 Act and is
therefore unenforceable.

Item 7.  Exemption from Registration Claimed.
- ------

         Not Applicable.

Item 8.  Exhibits.
- ------

         For a  list  of  all  exhibits  filed  or  included  as  part  of  this
Registration Statement,  see "Index to Exhibits" at the end of this Registration
Statement.

                                       2
<PAGE>


Item 9.  Undertakings.
- ------

    (a)      The undersigned registrant hereby undertakes:

             (1) To file,  during any period in which  offers or sales are being
             made, a post-effective amendment to this Registration Statement;

             (i)      To include any prospectus required by Section 10(a)(3)  of
             the Securities Act of 1933;

             (ii) To reflect in the prospectus any facts or events arising after
             the  effective  date of the  Registration  Statement  (or the  most
             recent post-effective amendment thereof) which,  individually or in
             the aggregate,  represent a fundamental  change in the  information
             set forth in the Registration Statement;

             (iii) To include any material  information with respect to the plan
             of  distribution  not  previously  disclosed  in  the  Registration
             Statement  or  any  material  change  to  such  information  in the
             Registration Statement;

provided  however,  that paragraphs  (a)(1)(i) and (a)(1)(ii) do no apply if the
Registration Statement is on Form S-3, Form S-8, and the information required to
be included in a  post-effective  amendment by those  paragraphs is contained in
periodic reports filed by the registrant  pursuant to Section 13 or 15(d) of the
Securities  Exchange  Act of 1934  that are  incorporated  by  reference  in the
Registration Statement.

             (2) That,  for the purpose of determining  any liability  under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such  securities at that time shall be deemed to be the initial bona
fide offering thereof.

             (3) To  remove  from  registration  by  means  of a  post-effective
amendment  any of the  securities  being  registered  which remain unsold at the
termination of the offering.

             (4) If the  registrant  is a  foreign  private  issuer,  to  file a
post-effective  amendment to the Registration Statement to include any financial
statements  required by Rule 3-19 of Regulation  S-X at the start of any delayed
offering or throughout a continuous offering.

    (b) The  undersigned  registrant  hereby  undertakes  that,  for purposes of
determining  any liability  under the Securities Act of 1933, each filing of the
registrant's  annual  report  pursuant to section  13(a) or section 15(d) of the
Securities  Exchange  Act of 1934  (and,  where  applicable,  each  filing of an
employee  benefit  plan's  annual  report  pursuant  to  section  15(d)  of  the
Securities  Exchange  Act of 1934)  that is  incorporated  by  reference  in the
Registration  Statement  shall  be  deemed  to be a new  Registration  Statement
relating to the securities offered therein,  and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.


                                       3
<PAGE>




    (c) The undersigned  registrant  hereby undertakes to deliver or cause to be
delivered with the prospectus,  to each person to whom the prospectus is sent or
given,  the latest annual report,  to security  holders that is  incorporated by
reference  in  the  prospectus  and  furnished   pursuant  to  and  meeting  the
requirements  of Rule 14a-3 or Rule 14c-3 under the  Securities  Exchange Act of
1934;  and,  where  interim  financial  information  required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus,  to deliver,  or
cause to be  delivered to each person to whom the  prospectus  is sent or given,
the latest  quarterly  report that is specifically  incorporated by reference in
the prospectus to provide such interim financial information.

    (d) Insofar as indemnification  for liabilities arising under the Securities
Act of 1933 may be permitted to directors,  officers, and controlling persons of
the  registrant  pursuant  to  the  foregoing  provisions,   or  otherwise,  the
registrant  has been advised that in the opinion of the  Securities and Exchange
Commission  such  indemnification  is against  public policy as expressed in the
1933  Act  and is,  therefore,  unenforceable.  In the  event  that a claim  for
indemnification  against  such  liabilities  (other  than  the  payment  by  the
registrant of expenses incurred or paid by a director,  officer,  or controlling
person of the  registrant  in the  successful  defense of any action,  suit,  or
proceeding) is asserted by such  director,  officer,  or  controlling  person in
connection with the securities being registered,  the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against  public  policy  expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

                                       4
<PAGE>

                                   SIGNATURES

    Pursuant to the  requirements  of the Securities Act of 1933, the Registrant
certifies  that it has  reasonable  grounds to believe  that it meets all of the
requirements  for  filing  on Form S-8 and has  duly  caused  this  Registration
Statement  to be  signed  on its  behalf  by  the  undersigned,  thereunto  duly
authorized, in the City of Bordentown in the State of New Jersey, on the 7th day
of June 1999.

                            FARNSWORTH BANCORP, INC.


                                       By: /s/ Gary N. Pelehaty
                                           -------------------------------------
                                           Gary N. Pelehaty
                                           President and Chief Executive Officer
                                           (Duly Authorized Representative)



                                POWER OF ATTORNEY

    We, the undersigned  directors and officers of Farnsworth Bancorp,  Inc., do
hereby severally  constitute and appoint Gary N. Pelehaty as our true and lawful
attorney  and  agent,  to do any and all  things  and  acts in our  names in the
capacities  indicated below and to execute any and all instruments for us and in
our names in the capacities indicated below which said Gary N. Pelehaty may deem
necessary  or advisable to enable  Farnsworth  Bancorp,  Inc. to comply with the
Securities Act of 1933, as amended, and any rules,  regulations and requirements
of the Securities and Exchange  Commission in connection  with the  Registration
Statement on Form S-8 relating to the registrant,  including  specifically,  but
not limited to, power and  authority to sign,  for any of us in our names in the
capacities  indicated  below,  this  Registration  Statement  and  any  and  all
amendments (including  post-effective  amendments) thereto; and we hereby ratify
and  confirm  all that  said  Gary N.  Pelehaty  shall do or cause to be done by
virtue hereof.

    Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration  Statement  has been signed below by the  following  persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
<S>                                      <C>
/s/ Gary N. Pelehaty                      /s/ Charles Alessi
- -------------------------------------     --------------------------------------------
Gary N. Pelehaty                          Charles Alessi
President and Chief Executive Officer     Vice President, Secretary and Treasurer
(Principal Executive Officer)             (Principal Accounting and Financial Officer)

Date: June 7, 1999                        Date: June 7, 1999
      -------------                             -------------


/s/ Herman Gutstein                       /s/ George G. Aaronson, Jr.
- -------------------------------------     --------------------------------------------
Herman Gutstein                           George G. Aaronson, Jr.
Chairman of the Board                     Director

Date:   June 7, 1999                      Date: June 7, 1999
        ------------                            -------------




<PAGE>



/s/ G. Edward Koenig, Jr.                 /s/ Edgar N. Peppler
- -------------------------------------     --------------------------------------
G. Edward Koenig, Jr.                     Edgar N. Peppler
Director                                  Director

Date:   June 7, 1999                      Date:    June 7, 1999
        ------------                               ------------


/s/ William H. Wainwright, Jr.            /s/ Charles E. Adams
- -------------------------------------     --------------------------------------
William H. Wainwright, Jr.                Charles E. Adams
Director                                  Director
Date:     June 7, 1999                    Date:     June 7, 1999
          ------------                              ------------
</TABLE>

<PAGE>



                                INDEX TO EXHIBITS


Exhibit                                     Description
- -------                                     -----------

  4.1                      Farnsworth Bancorp, Inc.
                           1999 Stock Option Plan

  4.2                      Form of Stock Option Agreement to be entered into
                           with respect to Incentive Stock Options

  4.3                      Form of Stock  Option  Agreement  to be entered  into
                           with  Directors with respect to  Non-Incentive  Stock
                           Options

 4.4                       Form of Stock Award Tax Notice

  5.1                      Opinion  of  Malizia  Spidi & Fisch,  P.C.  as to the
                           validity of the Common Stock being registered

  23.1                     Consent of Malizia Spidi & Fisch, P.C. (appears
                           in their opinion filed as Exhibit 5.1)

  23.2                     Consent of Kronick Kalada Berdy & Co.

  23.3                     Consent of Lewis W. Parker, III

  24                       Reference is made to the Signatures section of this
                           Registration Statement for the Power of Attorney
                           contained therein









                                   EXHIBIT 4.1

                            Farnsworth Bancorp, Inc.
                             1999 Stock Option Plan

<PAGE>
                            FARNSWORTH BANCORP, INC.

                             1999 STOCK OPTION PLAN


         1.  Purpose  of the  Plan.  The Plan  shall be known as the  FARNSWORTH
BANCORP,  INC.  ("Company") 1999 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 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.



<PAGE>



                  (f) "Common Stock" shall mean common stock of the Company,  or
any successor or parent corporation thereto.

                  (g) "Company"  shall mean the  Farnsworth  Bancorp,  Inc., the
parent corporation of the Savings Bank, or any successor or Parent thereof.

                  (h)  "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.


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

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

                  (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.


                                       2
<PAGE>



                  (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  Company or any  Parent or  Subsidiary  of the
Company or any other  person  providing a service to 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.

                  (v)      "Plan" shall mean the Farnsworth Bancorp,  Inc.  1999
Stock Option Plan.

                  (w) "Savings  Bank" shall mean Peoples  Savings  Bank,  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  37,985  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.

                                       3
<PAGE>

          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
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 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.

                  (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


                                       4
<PAGE>

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  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.


                                       5
<PAGE>

                  (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  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.

                  (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 1,899 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

                                       6
<PAGE>


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  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.

                                       7
<PAGE>

         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.

                  (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

                                       8
<PAGE>

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.  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


                                       9
<PAGE>

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;  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,


                                       10
<PAGE>

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.

         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,  regulation  or policy 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.


                                       11
<PAGE>

                  (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. 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 Jersey,  except to the extent that
federal law shall be deemed to apply.









                                   EXHIBIT 4.2

                Form of Stock Option Agreement to be entered into
                     with respect to Incentive Stock Options


<PAGE>
                             STOCK OPTION AGREEMENT
                             ----------------------

                  FOR INCENTIVE STOCK OPTIONS UNDER SECTION 422
                          OF THE INTERNAL REVENUE CODE
                                 PURSUANT TO THE
                            FARNSWORTH BANCORP, INC.
                             1999 STOCK OPTION PLAN
                             ----------------------

                           FOR OFFICERS AND EMPLOYEES

         STOCK  OPTIONS  for a total of ____________ shares of  Common  Stock of
Farnsworth Bancorp, Inc. (the "Company"), which Option is intended to qualify as
an  Incentive  Stock Option  under  Section 422 of the Internal  Revenue Code of
1986,  as  amended,  is  hereby  granted  to ___________, (the  "Optionee"),  at
the price  determined as provided in, and in all respects  subject to the terms,
definitions and provisions of the 1999 Stock Option Plan (the "Plan") adopted by
the Company  which is  incorporated  by  reference  herein,  receipt of which is
hereby acknowledged.

         1. Option Price. The Option price is $______ for each Share, being 100%
of the fair market value, as determined by the Committee, of the Common Stock on
the date of grant of this Option.

         2. Exercises of Option.  This Option shall be exercisable in accordance
with provisions of the Plan,  provided the holder of such Option is an employee,
director or director emeritus of the Company as of such date, as follows:

                  (a)      Schedule of Rights to Exercise.

                                                           Percentage of Total
                                                                 Shares
                                                            Awarded Which Are
                                                              Exercisable/
                                Date        Options          Non-forfeitable
                                ----        -------          ---------------

Upon grant..............................       0                      0%
As of April 6, 2000.....................      _____                  20%
As of April 6, 2001.....................      _____                  40%
As of April 6, 2002.....................      _____                  60%
As of April 6, 2003.....................      _____                  80%
As of April 6, 2004.....................      _____                 100%

         Options  awarded to the Optionee shall continue to vest annually during
such period  that he serves as an  employee,  director  or director  emeritus of
Peoples  Savings Bank or the Company.  Notwithstanding  any  provisions  in this
Section 2, in no event  shall  this  Option be  exercisable  prior to six months
following the date of grant.  Options shall be 100% vested and exercisable  upon
the death or  disability  of the  Optionee,  or upon a Change in  Control of the
Company, subject to

<PAGE>



limitations  under  applicable  regulations and policies of the Office of Thrift
Supervision.

                  (b) Method of Exercise.  This Option shall be exercisable by a
written notice which shall:

                            (i) State the election to exercise  the Option,  the
         number of  Shares  with  respect  to which it is being  exercised,  the
         person in whose name the stock  certificate  or  certificates  for such
         Shares of Common  Stock is to be  registered,  his  address  and Social
         Security  Number (or if more than one, the names,  addresses and Social
         Security Numbers of such persons);

                           (ii) Contain such  representations  and agreements as
         to the holder's investment intent with respect to such shares of Common
         Stock as may be satisfactory to the Company's counsel;

                          (iii) Be signed by the person or persons  entitled  to
         exercise the Option and, if the Option is being exercised by any person
         or  persons  other  than  the  Optionee,   be   accompanied  by  proof,
         satisfactory to counsel for the Company, of the right of such person or
         persons to exercise the Option; and

                           (iv) Be in  writing  and  delivered  in  person or by
         certified mail to the Treasurer of the Company.

         Payment of the  purchase  price of any Shares with respect to which the
Option is being  exercised  shall be by certified or bank  cashier's or teller's
check.  The certificate or  certificates  for shares of Common Stock as to which
the Option shall be exercised  shall be  registered in the name of the person or
persons exercising the Option.

                  (c) Restrictions on Exercise. This Option may not be exercised
if the issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or valid regulation.  As
a condition to the Optionee's  exercise of this Option,  the Company may require
the person exercising this Option to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

         3. Non-transferability of Option. This Option may not be transferred in
any manner otherwise than by will or the laws of descent or distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. The terms
of this  Option  shall be binding  upon the  executors,  administrators,  heirs,
successors and assigns of the Optionee.



<PAGE>

         4. Term of Option.  This Option may not be exercised more than ten (10)
years  from the date of grant of this  Option,  as set forth  below,  and may be
exercised  during  such term only in  accordance  with the Plan and the terms of
this Option.

         5. Related  Matters.  Notwithstanding  anything herein to the contrary,
additional  conditions or restrictions  related to such Options may be contained
in the Plan or the resolutions of the Plan Committee  authorizing  such grant of
Options.


                                                Farnsworth Bancorp, Inc.



Date of Grant:                                  By:
              ----------------------                ----------------------------


Attest:




- ------------------------------


[SEAL]















<PAGE>



                      INCENTIVE STOCK OPTION EXERCISE FORM
                      ------------------------------------

                                 PURSUANT TO THE
                            FARNSWORTH BANCORP, INC.
                             1999 STOCK OPTION PLAN


                                                                 _______________
                                                                          (Date)


Farnsworth Bancorp, Inc.
789 Farnsworth Avenue
Bordentown, New Jersey 08505

Dear Sir:

         The  undersigned  elects to  exercise  the  Incentive  Stock  Option to
purchase ____________ shares of Common Stock of Farnsworth  Bancorp,  Inc. under
and pursuant to a Stock Option Agreement dated ________________.

         Delivered  herewith is a certified or bank  cashier's or teller's check
and/or shares of Common  Stock,  valued at the fair market value of the stock on
the date of exercise, as set forth below.


                              $__________            of cash or check
                               __________            of Common Stock
                              $                      Total
                               ==========

         The name or names to be on the stock  certificate or  certificates  and
the address and Social Security Number of such person(s) is as follows:

         Name ____________________________________________

         Address _________________________________________

         Social Security Number __________________________


                                                  Very truly yours,




                                                  ___________________________







  EXHIBIT 4.3

                Form of Stock Option Agreement to be entered into
                   with respect to Non-Incentive Stock Options


<PAGE>




                             STOCK OPTION AGREEMENT
                             ----------------------

                         FOR NON-INCENTIVE STOCK OPTIONS
                                 PURSUANT TO THE
                            FARNSWORTH BANCORP, INC.
                             1999 STOCK OPTION PLAN
                             ----------------------

                             NON-EMPLOYEE DIRECTORS



         STOCK  OPTIONS  for a  total  of  ______  shares  of  Common  Stock  of
Farnsworth  Bancorp,  Inc. (the "Company") is hereby granted to ________________
(the  "Optionee")  at the price  determined  as provided in, and in all respects
subject to the terms,  definitions  and provisions of the 1999 Stock Option Plan
(the "Plan") adopted by the Company which is  incorporated by reference  herein,
receipt of which is hereby  acknowledged.  Such Stock Options do not comply with
Options  granted  under  Section 422 of the Internal  Revenue  Code of 1986,  as
amended.

         1. Option  Price.  The Option price is $_______  for each Share,  being
100% of the fair market value,  as determined  by the  Committee,  of the Common
Stock on the date of grant of this Option.

         2. Exercise of Option.  This Option shall be  exercisable in accordance
with provisions of the Plan as follows:

                  (a)      Schedule of Rights to Exercise.

                                                      Percentage of Total Shares
                                                            Awarded Which Are
                      Date        Options                    Non-forfeitable
                      ----        -------                    ---------------

Upon grant....................       0                              0%
As of April 6, 2000...........    _______                          20%
As of April 6, 2001...........    _______                          40%
As of April 6, 2002...........    _______                          60%
As of April 6, 2003...........    _______                          80%
As of April 6, 2004...........    _______                         100%

         Options  shall  continue  to vest  annually  provided  that such holder
remains a  director  or  director's  emeritus  of  Peoples  Savings  Bank or the
Company.  Notwithstanding  any  provisions  in this Section 2, in no event shall
this  Option be  exercisable  prior to six months  following  the date of grant.
Options shall be 100% vested and exercisable upon the death or disability of the
Optionee,


<PAGE>



or upon a Change  in  Control  of the  Company,  subject  to  limitations  under
applicable regulations and policies of the Office of Thrift Supervision.

                  (b) Method of Exercise.  This Option shall be exercisable by a
written notice which shall:

                            (i) State the election to exercise  the Option,  the
         number of  Shares  with  respect  to which it is being  exercised,  the
         person in whose name the stock  certificate  or  certificates  for such
         Shares of Common  Stock is to be  registered,  his  address  and Social
         Security  Number (or if more than one, the names,  addresses and Social
         Security Numbers of such persons);

                           (ii) Contain such  representations  and agreements as
         to the holder's investment intent with respect to such shares of Common
         Stock as may be satisfactory to the Company's counsel;

                          (iii) Be signed by the person or persons  entitled  to
         exercise the Option and, if the Option is being exercised by any person
         or  persons  other  than  the  Optionee,   be   accompanied  by  proof,
         satisfactory to counsel for the Company, of the right of such person or
         persons to exercise the Option; and

                           (iv) Be in  writing  and  delivered  in  person or by
         certified mail to the Treasurer of the Company.

         Payment of the  purchase  price of any Shares with respect to which the
Option is being  for  shares of  Common  Stock as to which the  Option  shall be
exercised  shall be registered  in the name of the person or persons  exercising
the Option.

                  (c) Restrictions on Exercise. This Option may not be exercised
if the issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or valid regulation.  As
a condition to the Optionee's  exercise of this Option,  the Company may require
the person exercising this Option to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

         3. Non-transferability of Option. This Option may not be transferred in
any manner otherwise than by will or the laws of descent or distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. The terms
of this  Option  shall be binding  upon the  executors,  administrators,  heirs,
successors and assigns of the Optionee.


<PAGE>


         4. Term of Option.  This Option may not be exercised more than ten (10)
years  from the date of grant of this  Option,  as set forth  below,  and may be
exercised  during  such term only in  accordance  with the Plan and the terms of
this Option.

         5. Related  Matters.  Notwithstanding  anything herein to the contrary,
additional  conditions or restrictions  related to such Options may be contained
in the Plan or the resolutions of the Plan Committee  authorizing  such grant of
Options.

                                                 Farnsworth Bancorp, Inc.




Date of Grant:                                   By:
               -------------------------             ---------------------------


Attest:




- --------------------------


[SEAL]





<PAGE>






                    NON-INCENTIVE STOCK OPTION EXERCISE FORM
                    ----------------------------------------

                                 PURSUANT TO THE
                            FARNSWORTH BANCORP, INC.
                             1999 STOCK OPTION PLAN


                                                                 _______________
                                                                          (Date)


Farnsworth Bancorp, Inc.
789 Farnsworth Avenue
Bordentown, New Jersey 08505

Dear Sir:

         The undersigned  elects to exercise the  Non-Incentive  Stock Option to
purchase ____________ shares of Common Stock of Farnsworth  Bancorp,  Inc. under
- -   and pursuant to a Stock Option Agreement dated __________________________.

         Delivered  herewith is a certified or bank  cashier's or teller's check
and/or shares of Common  Stock,  valued at the fair market value of the stock on
the date of exercise, as set forth below.


                              $______________        of cash or check
                               ______________        of Common Stock
                              $                      Total
                               ==============


         The name or names to be on the stock  certificate or  certificates  and
the address and Social Security Number of such person(s) is as follows:

         Name ___________________________________

         Address ________________________________

         Social Security Number _________________

                                                     Very truly yours,




                                                     ___________________________





                                   EXHIBIT 4.4

                         Form of Stock Award Tax Notice


<PAGE>




                 TAX ISSUES RELATED TO EXERCISE OF STOCK OPTIONS


  This  memorandum  reviews the tax effects upon the exercise of  "Non-Incentive
Stock Options"  ("NSOs") (those options  awarded to  non-employee  directors and
perhaps to some officers) and "Incentive Stock Options"  ("ISOs") (those options
generally awarded to officers and employees).

A.                         Exercise of an NSO
                           ------------------

  Upon the  exercise of an NSO, the amount by which the fair market value of the
shares on the date of exercise  exceeds the exercise  price will be taxed to the
optionee as ordinary income.  The Company will be entitled to a deduction in the
same amount,  provided it makes all required  withholdings  on the  compensation
element of the  exercise.  In general,  the  optionee's  tax basis in the shares
acquired by  exercising  an NSO is equal to the fair market value of such shares
on the date of exercise.  Upon a subsequent sale of any such shares in a taxable
transaction,  the optionee  will  realize  capital  gain or loss  (long-term  or
short-term,  depending  on whether  the shares were held for more than 12 months
before the sale) in an amount equal to the  difference  between his or her basis
in the shares and the sale price.

  Special  rules apply if an optionee  pays the exercise  price upon exercise of
NSOs with previously  acquired  shares of stock.  Except as described below with
respect to shares acquired  pursuant to ISOs, such a transaction is treated as a
tax-free  exchange of the old shares for the same number of new shares.  To that
extent,  the optionee's  basis in the new shares is the same as his or her basis
in the old shares,  i.e.,  there is a carryover  of basis,  and the capital gain
holding period runs without  interruption from the date when the old shares were
acquired.  The value of any new shares received by the optionee in excess of the
number of old shares  surrendered  less any cash the  optionee  pays for the new
shares will be taxed as ordinary income.  The optionee's basis in the additional
shares is equal to the fair  market  value of such shares on the date the shares
were  transferred,  and the capital  gain holding  period  commences on the same
date.  The  effect of these  rules is to defer the date when any gain in the old
shares  that are used to buy new shares  must be  recognized  for tax  purposes.
Stated differently,  these rules allow an optionee to finance the exercise of an
NSO by using shares of stock that he or she already owns, without paying current
tax on any unrealized appreciation in the value of all or a portion of those old
shares.

B.                         Exercise of an ISO
                           ------------------

  The  holder  of an ISO will not be  subject  to  federal  income  tax upon the
exercise of the ISO, and the Company will not be entitled to a tax  deduction by
reason of such  exercise,  provided  that the  holder is still  employed  by the
Company  (or  terminated  employment  no longer  than  three  months  before the
exercise date).  Additional exceptions to this exercise timing requirement apply
upon the death or disability of the optionee. A sale of the shares received upon
the  exercise of an ISO which  occurs both more than one year after the exercise
of the ISO and more than two years after the grant of the ISO will result in the
realization  of long-term  capital gain or loss in the amount of the  difference
between the amount  realized on the sale and the exercise price for such shares.
Generally,  upon a sale or  disposition  of the  shares  prior to the  foregoing
holding  requirements  (referred  to  as  a  "disqualifying  disposition"),  the
optionee  will  recognize  ordinary  income,  and the  Company  will  receive  a
corresponding deduction equal to the lesser of (i) the excess of the fair market
value of the shares on the date of transfer to the  optionee  over the  exercise
price,  or (ii) the excess of the amount  realized on the  disposition  over the
exercise  price for such shares.  Currently,  ISO exercises are exempt from FICA
and  FUTA  taxes  and  a  disqualifying  disposition  is  exempt  from  employer
withholding.


<PAGE>

  A special rule applies if an optionee  pays all or part of the exercise  price
of an ISO by surrendering  shares of stock that he or she previously acquired by
exercising  any other ISO. If the  optionee  has not held the old shares for the
full duration of the applicable  holding periods before  surrendering them, then
the  surrender  of such  shares to  exercise  the new ISO will be  treated  as a
disqualifying disposition of the old shares. As described above, the result of a
disqualifying disposition is the loss of favorable tax consequences with respect
to the acquisition of the old shares pursuant to the previously exercised ISO.

  Where the  applicable  holding period  requirements  have been met, the use of
previously  acquired  shares  of stock to pay all or a portion  of the  exercise
price of an ISO may offer significant tax advantages, particularly a deferral of
the recognition of any appreciation in the surrendered shares in the same manner
as discussed above with respect to NSOs.

C.                         Alternative Minimum Tax
                           -----------------------

  The  "alternative  minimum  tax" is paid  when such tax  exceeds a  taxpayer's
regular federal income tax. The alternative  minimum tax is calculated  based on
alternative  minimum taxable income,  which is taxable income for federal income
tax purposes,  modified by certain  adjustments  and increased by tax preference
items.

  The spread  under an ISO - i.e.,  the  difference  between (a) the fair market
value of the shares at exercise and (b) the exercise  price - is  classified  as
alternative minimum taxable income for the year of exercise. Alternative minimum
taxable  income  may be subject  to the  alternative  minimum  tax.  However,  a
disqualifying  disposition of the shares subject to the ISO during the same year
in which the ISO was exercised will  generally  cancel the  alternative  minimum
taxable income generated upon exercise of the ISO.

  When a taxpayer sells stock acquired through the exercise of an ISO, generally
only the  difference  between the fair market value of the shares on the date of
exercise and the date of sale is used in computing the alternative  minimum tax.
The portion of a taxpayer's  minimum tax  attributable  to certain  items of tax
preference  (including  the spread upon the  exercise of an ISO) can be credited
against  the  taxpayer's  regular  liability  in later  years to the extent that
liability exceeds the alternative minimum tax.







                                   EXHIBIT 5.1

                  Opinion of Malizia Spidi & Fisch, P.C. as to
                the validity of the Common Stock being registered



<PAGE>











June 11, 1999

Board of Directors
Farnsworth Bancorp, Inc.
789 Farnsworth Avenue
Bordentown, New Jersey  08505

         RE:      Registration Statement on Form S-8:
                  ----------------------------------
                  Farnsworth Bancorp, Inc. 1999 Stock Option Plan

Gentlemen:

         We have acted as special  counsel to  Farnsworth  Bancorp,  Inc., a New
Jersey  corporation (the  "Company"),  in connection with the preparation of the
Registration  Statement on Form S-8 to be filed with the Securities and Exchange
Commission (the  "Registration  Statement") under the Securities Act of 1933, as
amended,  relating to 37,985  shares of common  stock,  par value $.10 per share
(the  "Common  Stock") of the Company  which may be issued upon the  exercise of
options granted or which may be granted under the Farnsworth Bancorp,  Inc. 1999
Stock Option Plan (the  "Plan"),  as more fully  described  in the  Registration
Statement.  You have  requested the opinion of this firm with respect to certain
legal aspects of the proposed offering.

         We have examined such documents, records, and matters of law as we have
deemed  necessary for purposes of this opinion and based thereon,  we are of the
opinion  that the Common  Stock when issued  pursuant to the exercise of options
granted  under  and in  accordance  with the  terms of the Plan will be duly and
validly issued, fully paid, and nonassessable.

         We hereby  consent to the  filing of this  opinion as an exhibit to the
Registration Statement.

                                   Sincerely,


                                   /s/ Malizia Spidi & Fisch, P.C.
                                   Malizia Spidi & Fisch, P.C.










                                  EXHIBIT 23.1

                     Consent of Malizia Spidi & Fisch, P.C.
                 (appears in their opinion filed as Exhibit 5.1)








                                  EXHIBIT 23.2

                      Consent of Kronick Kalada Berdy & Co.



<PAGE>









                   [LETTERHEAD OF KRONICK KALADA BERDY & CO.]

                        INDEPENDENT ACCOUNTANTS' CONSENT





The Board of Directors and Stockholders
Farnsworth Bancorp, Inc.
789 Farnsworth Avenue
Bordentown, New Jersey  08505



         We consent to incorporation by reference in the Registration  Statement
on Form S-8, of our report dated  November 9, 1998 relating to the  consolidated
statement of financial condition of Farnsworth  Bancorp,  Inc. and subsidiary as
of September 30, 1998 and the related consolidated statements of income, changes
in stockholders'  equity,  and cash flows for the year ended September 30, 1998,
which report  appears in the  September 30, 1998 annual report on Form 10-KSB of
Farnsworth Bancorp, Inc.



                                              /s/ Kronick Kalada Berdy & Co.
                                              Kronick Kalada Berdy & Co.




June 10, 1999

Kingston, Pennsylvania












                                  EXHIBIT 23.3


                         Consent of Lewis W. Parker, III


<PAGE>









                      [LETTERHEAD OF LEWIS W. PARKER, III]

                        INDEPENDENT ACCOUNTANTS' CONSENT





The Board of Directors and Stockholders
Farnsworth Bancorp, Inc.
789 Farnsworth Avenue
Bordentown, New Jersey  08505



         I consent to incorporation  by reference in the Registration  Statement
on Form S-8, of my report dated  October 29, 1997  relating to the  statement of
financial  condition of Peoples  Savings  Bank as of September  30, 1997 and the
related statements of income, changes in stockholders' equity and cash flows for
the year ended  September  30, 1997,  which report  appears in the September 30,
1998 annual report on Form 10-KSB of Farnsworth Bancorp, Inc.



                                                 /s/ Lewis W. Parker, III
                                                 Lewis W. Parker, III





June 10, 1999

Lawrenceville, New Jersey



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