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                          AMERICAN BANK OF CONNECTICUT

                             STOCK OPTION AGREEMENT


      STOCK OPTION AGREEMENT, dated as of July 18, 2001 ("Agreement"), by and
between American Bank of Connecticut, a Connecticut chartered savings bank
("Issuer"), and American Financial Holdings, Inc., a Delaware corporation
("Grantee").

                                    RECITALS

      A. THE AGREEMENT AND PLAN OF MERGER. Grantee and Issuer have entered into
an Agreement and Plan of Merger, dated as of July 18, 2001 ("Merger Agreement"),
providing for, among other things, the merger of Issuer with and into Grantee's
wholly owned savings bank subsidiary, American Savings Bank ("ASB"), with ASB
being the surviving institution.

      B.    CONDITION TO AGREEMENT AND PLAN OF MERGER. As a condition and an
inducement to Grantee's execution and delivery of the Merger Agreement, Grantee
has required that Issuer agree, and Issuer has agreed, to grant Grantee the
Option (as hereinafter defined).

      NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:

      1.    DEFINED TERMS. Capitalized terms that are used but not defined in
this Agreement shall have the meanings ascribed to such terms in the Merger
Agreement.

      2. GRANT OF OPTION. Subject to the terms and conditions set forth in this
Agreement, Issuer hereby grants to Grantee an irrevocable option ("Option") to
purchase up to 477,090 shares of common stock, par value $1.00 per share
("Issuer Common Stock"), of Issuer (as adjusted as set forth herein, the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares, but in no event shall the number of Option Shares for which
this Option is exercisable exceed 10.0% of the issued and outstanding shares of
Issuer Common Stock), at a purchase price per Option Share (as adjusted as set
forth herein, the "Purchase Price") equal to $24.30.

      3.    EXERCISE OF OPTION.

            (a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Merger Agreement, and (ii) no preliminary or
permanent injunction or other order against the delivery of shares covered by
the Option issued by any court of competent jurisdiction in the United States
shall be in effect, the Holder may exercise the Option, in whole or in part, at
any time and from time to time, following the occurrence of a Purchase Event (as
hereinafter defined); provided, that, the Option shall terminate and be of no
further force or effect upon the



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earliest to occur of (A) the Effective Time, (B) termination of the Merger
Agreement in accordance with the terms thereof prior to the occurrence of a
Purchase Event or a Preliminary Purchase Event other than a termination thereof
by Grantee pursuant to Section 6.1(e) of the Merger Agreement (a termination of
the Merger Agreement by Grantee pursuant to Section 6.1(e) of the Merger
Agreement, being referred to herein as a "Default Termination"), (C) 6 months
after a Default Termination or (D) 12 months after termination of the Merger
Agreement (other than a Default Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event; provided, however, that any
purchase of shares upon exercise of the Option shall be subject to compliance
with applicable law; provided further, however, that if the Option cannot be
exercised on any day an injunction, order or similar restraint issued by a court
of competent jurisdiction, the period during which the Option may be exercised
shall be extended so that the Option shall expire no earlier than the tenth
business day after such injunction, order or restraint shall have been dissolved
or when such injunction, order or restraint shall have become permanent and no
longer subject to appeal, as the case may be. The term "Holder" shall mean the
holder or holders of the Option from time to time, and which initially is
Grantee. The rights set forth in Sections 8 and 9 of this Agreement shall
terminate when the right to exercise the Option and Substitute Option terminate
(other than as a result of a complete exercise of the Option) as set forth
herein.

            (b)   As used herein, a "Purchase Event" means any of the following
events:

                  (i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an intention to
authorize, recommend or propose, or Issuer shall have entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect (A)
a merger, consolidation or similar transaction involving Issuer or any of its
significant subsidiaries, (B) the disposition, by sale, lease, exchange or
otherwise, of assets or deposits of Issuer or any of its significant
subsidiaries representing in either case 25% or more of the consolidated assets
or deposits of Issuer and its subsidiaries, other than in the ordinary course of
business, or (C) the issuance, sale or other disposition by Issuer of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 25% or more of the voting power of Issuer or any of its
significant subsidiaries (each of (A), (B) or (C), an "Acquisition Transaction")
to a single person or entity or to a group of affiliates; or

                  (ii) Any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended ("Exchange
Act")) of, or the right to acquire beneficial ownership of, or any "group" (as
such term is defined in Section 13(d)(3) of the Exchange Act), other than a
group of which Grantee or any subsidiary of Grantee is a member, shall have been
formed which beneficially owns, or has the right to acquire beneficial ownership
of, 25% or more of the voting power of Issuer or any of its significant
subsidiaries.


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            (c)   As used herein, a "Preliminary Purchase Event" means any of
the following events:

                  (i) Any person (other than Grantee or any subsidiary of
Grantee) shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act) or shall have filed a registration statement under the Securities
Act of 1933, as amended, ("Securities Act"), with respect to, a tender offer or
exchange offer to purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 25% or more of the
then outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" or an "Exchange Offer," respectively); or

                  (ii) The stockholders of Issuer shall not have approved the
Merger Agreement by the requisite vote at the meeting of the stockholders of the
Issuer required to be called to approve the Merger Agreement ("Issuer Meeting"),
the Issuer Meeting shall not have been held or shall have been canceled prior to
termination of the Merger Agreement or Issuer's Board of Directors shall have
withdrawn or modified in a manner adverse to Grantee the recommendation of
Issuer's Board of Directors with respect to the Merger Agreement, in each case
after it shall have been publicly announced that any person (other than Grantee
or any subsidiary of Grantee) shall have (A) made, or disclosed an intention to
make, a bona fide proposal to engage in an Acquisition Transaction, (B)
commenced a Tender Offer or filed a registration statement under the Securities
Act with respect to an Exchange Offer or (C) filed an application (or given a
notice), whether in draft or final form, under the Bank Holding Company Act of
1956, as amended ("BHC Act"), the Home Owners' Loan Act, as amended ("HOLA"),
the Bank Merger Act, as amended ("BMA") or the Change in Bank Control Act of
1978, as amended ("CBCA"), for approval to engage in an Acquisition Transaction;
or

                  (iii) After a proposal is made by a third party to Issuer or
its stockholders to engage in an Acquisition Transaction, or such third party
states its intention to the Issuer to make such a proposal if the Merger
Agreement terminates, and thereafter Issuer shall have breached any
representation, warranty, covenant or agreement contained in the Merger
Agreement and such breach would entitle Grantee to terminate the Merger
Agreement under Section 6.1(e) thereof (without regard to the cure period
provided for therein unless such cure is promptly effected without jeopardizing
consummation of the Merger pursuant to the terms of the Merger Agreement).

      As used in this Agreement, the term "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.

            (d) Issuer shall notify Grantee promptly in writing of the
occurrence of any Preliminary Purchase Event or Purchase Event of which it has
knowledge, it being understood that the giving of such notice by Issuer shall
not be a condition to the right of Holder to exercise the Option.


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            (e) In the event Holder wishes to exercise the Option (in whole or
in part), it shall send to Issuer a written notice (the "Option Notice," the
date of which being herein referred to as the "Notice Date") specifying (i) the
total number of Option Shares it intends to purchase pursuant to such exercise
and (ii) a place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing ("Closing") of such purchase
("Closing Date"); provided, that the first Option Notice shall be sent to Issuer
within 180 days after the first Purchase Event of which Grantee has been
notified. If prior notification to or approval of any Governmental Entity is
required in connection with any such purchase, Issuer shall cooperate with the
Holder in the filing of the required notice of application for approval and the
obtaining of such approval, and the Closing shall occur promptly following such
regulatory approvals and any mandatory waiting periods. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.

      4.    PAYMENT AND DELIVERY OF CERTIFICATES.

            (a) On each Closing Date, Holder shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account designated by
Issuer, an amount equal to the Purchase Price multiplied by the number of Option
Shares to be purchased on such Closing Date and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in Section 14(f)
of this Agreement; provided that failure or refusal of Issuer to designate a
bank account shall not preclude Holder from exercising the Option.

            (b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a) of
this Agreement, (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens (as defined in the
Merger Agreement) and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.

            (c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:

THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS
OF JULY 18, 2001. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.


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            (d) Upon the giving by Holder to Issuer of an Option Notice, the
tender of the applicable purchase price in immediately available funds and the
tender of this Agreement to Issuer, Holder shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed or
that certificates representing such shares of Issuer Common Stock shall not then
be actually delivered to Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of Holder or its assignee,
transferee or designee.

            (e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.

      5.    REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:

            (a) CORPORATE AUTHORITY. Issuer has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby; the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer, and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions contemplated by this Agreement. This Agreement
has been duly and validly executed and delivered by Issuer.

            (b) BENEFICIAL OWNERSHIP. To the best knowledge of Issuer, as of the
date of this Agreement, no person or group has beneficial ownership of more than
10% of the issued and outstanding shares of Issuer Common Stock.

            (c) SHARES RESERVED FOR ISSUANCE; CAPITAL STOCK. Issuer has taken
all necessary corporate action to authorize and reserve and permit it to issue,
and at all times from

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the date hereof through the termination of this Agreement in accordance with its
terms, will have reserved for issuance upon the exercise of the Option, that
number of shares of Issuer Common Stock equal to the maximum number of shares of
Issuer Common Stock at any time and from time to time purchasable upon exercise
of the Option, and all such shares, upon issuance pursuant to the Option, will
be duly authorized, validly issued, fully paid and nonassessable, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests (other than those created by this Agreement) and not subject to any
preemptive rights.

            (d) NO VIOLATIONS. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by Issuer of any of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, its charter or bylaws, or the comparable
governing instruments of any of its subsidiaries, or (ii) a breach or violation
of, or a default under, any agreement, lease, contract, note, mortgage,
indenture, arrangement or other obligation of it or any of its subsidiaries
(with or without the giving of notice, the lapse of time or both) or under any
law, rule, ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which it or any of its
subsidiaries is subject, that would, in any case, give any other person the
ability to prevent or enjoin Issuer's performance under this Agreement in any
material respect.

      6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby represents
and warrants to Issuer that Grantee has full corporate power and authority to
enter into this Agreement and, subject to obtaining the approvals referred to in
this Agreement, to consummate the transactions contemplated by this Agreement;
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee; and this Agreement has been duly
executed and delivered by Grantee.

      7.    ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.

            (a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
any such transaction so that Holder shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a), upon exercise of any option to purchase Issuer Common Stock
outstanding on the date hereof or upon conversion into Issuer Common Stock of
any convertible security of Issuer outstanding on the date hereof), the number
of shares of Issuer Common Stock subject to the Option shall be adjusted so
that, after such issuance, the Option, together with any shares of Issuer Common
Stock previously issued pursuant hereto, equals



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10.0% of the number of shares of Issuer Common Stock then issued and
outstanding, without giving effect to any shares subject to or issued pursuant
to the Option. No provision of this Section 7 shall be deemed to affect or
change, or constitute authorization for any violation of, any of the covenants
or representations in the Merger Agreement.

            (b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any person, other than Grantee or
one of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property, or the outstanding shares of Issuer Common Stock immediately prior to
such merger shall, after such merger, represent less than 50% of the outstanding
shares and share equivalents of the merged company or (iii) to sell or otherwise
transfer all or substantially all of its assets or deposits to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provisions so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
("Substitute Option"), at the election of Holder, to purchase shares of either
(A) the Acquiring Corporation (as hereinafter defined), (B) any person that
controls the Acquiring Corporation or (C) in the case of a merger described in
clause (ii), Issuer (such person being referred to as "Substitute Option
Issuer").

            (c) The Substitute Option shall have the same terms as the Option,
provided, that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. The Substitute Option Issuer shall also enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.

            (d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided by
the Average Price (as hereinafter defined). The exercise price of the Substitute
Option per share of Substitute Common Stock ("Substitute Option Price") shall
then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of Issuer Common Stock for which the Option
was theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.

            (e)   The following terms have the meanings indicated:

                  (i) "Acquiring Corporation" shall mean (A) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in



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a merger in which Issuer is the continuing or surviving person, or (C) the
transferee of all or substantially all of Issuer's assets (or a substantial part
of the assets of its subsidiaries taken as a whole).

                  (ii) "Substitute Common Stock" shall mean the shares of
capital stock (or similar equity interest) with the greatest voting power in
respect of the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.

                  (iii) "Assigned Value" shall mean the highest of (A) the price
per share of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (B) the price per share of Issuer Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (C) the highest
closing price for shares of Issuer Common Stock within the 60-day period
immediately preceding the consolidation, merger or sale in question and (D) in
the event of a sale of all or substantially all of Issuer's assets or deposits,
an amount equal to (x) the sum of the price paid in such sale for such assets
(and/or deposits) and the current market value of the remaining assets of
Issuer, as determined by a nationally recognized investment banking firm
selected by Holder, divided by (y) the number of shares of Issuer Common Stock
outstanding at such time. In the event that a Tender Offer or an Exchange Offer
is made for Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for Issuer
Common Stock shall be determined by a nationally recognized investment banking
firm selected by Holder.

                  (iv) "Average Price" shall mean the average closing price of a
share of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding such
consolidation, merger or sale; provided, that, if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to a share
of common stock issued by Issuer, the person merging into Issuer or by any
company which controls such person, as Holder may elect.

            (f) In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 10.0% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 10.0% of the aggregate of the shares of Substitute Common Stock
outstanding but for the limitation in the first sentence of this Section 7(f),
Substitute Option Issuer shall make a cash payment to Holder equal to the excess
of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 7(f) over (ii) the value of the
Substitute Option after giving effect to the limitation in the first sentence of
this Section 7(f). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Holder.


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            (g) Issuer shall not enter into any transaction described in Section
7(b) of this Agreement unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights by reason of the issuance or exercise of the Substitute
Option and the shares of Substitute Common Stock are otherwise in no way
distinguishable from or have lesser economic value than other shares of common
stock issued by Substitute Option Issuer).

      8.    REPURCHASE AT THE OPTION OF HOLDER.

            (a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Issuer shall repurchase from Holder (i) the Option and
(ii) all shares of Issuer Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 8 is referred to as the "Request Date."
Such repurchase shall be at an aggregate price ("Section 8 Repurchase
Consideration") equal to the sum of:

                  (i) The aggregate Purchase Price paid by Holder for any shares
of Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;

                  (ii) The excess, if any, of (A) the Applicable Price (as
defined below) for each share of Issuer Common Stock over (B) the Purchase Price
(subject to adjustment pursuant to Section 7 of this Agreement), multiplied by
the number of shares of Issuer Common Stock with respect to which the Option has
not been exercised; and

                  (iii) The excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7 of this Agreement)
paid (or, in the case of Option Shares with respect to which the Option has been
exercised but the Closing Date has not occurred, payable) by Holder for each
share of Issuer Common Stock with respect to which the Option has been exercised
and with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.

            (b) If Holder exercises its rights under this Section 8, Issuer
shall, within 10 business days after the Request Date, pay the Section 8
Repurchase Consideration to Holder in immediately available funds, and
contemporaneously with such payment, Holder shall surrender to Issuer the Option
and the certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Holder then has beneficial ownership, and
Holder shall warrant that it has sole record and beneficial ownership of such
shares and that the same are


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then free and clear of all Liens. Notwithstanding the foregoing, to the extent
that prior notification to or approval of any Governmental Entity is required in
connection with the payment of all or any portion of the Section 8 Repurchase
Consideration, Holder shall have the ongoing option to revoke its request for
repurchase pursuant to this Section 8, in whole or in part, or to require that
Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If any
Governmental Entity disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Holder and Holder shall have the right (i) to revoke the repurchase request or
(ii) to the extent permitted by such Governmental Entity, determine whether the
repurchase should apply to the Option and/or Option Shares and to what extent to
each, and Holder shall thereupon have the right to exercise the Option as to the
number of Option Shares for which the Option was exercisable at the Request Date
less the number of shares covered by the Option in respect of which payment has
been made pursuant to Section 8(a)(ii) of this Agreement. Holder shall notify
Issuer of its determination under the preceding sentence within five business
days of receipt of notice of disapproval of the repurchase. Notwithstanding
anything herein to the contrary, in the event that Issuer delivers to the Holder
written notice accompanied by a certification of Issuer's independent auditor
each stating that a requested repurchase of Issuer Common Stock would result in
the recapture of Issuer's bad debt reserves under the Internal Revenue Code of
1986, as amended ("Code"), Holder's repurchase request shall be deemed to be
automatically revoked. Notwithstanding anything herein to the contrary, all of
Holder's rights under this Section 8 shall terminate on the date of termination
of this Option pursuant to Section 3(a) of this Agreement.

            (c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i) hereof, (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger, sale or other business combination
transaction described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement, or (iii) the highest closing sales price per share of Issuer Common
Stock as quoted on the New York Stock Exchange ("NYSE"), the American Stock
Exchange ("AMEX") or the National Market System of The Nasdaq Stock Market
("Nasdaq") (or if Issuer Common Stock is not quoted on the NYSE, AMEX or Nasdaq,
the highest bid price per share as quoted on the principal trading market or
securities exchange on which such shares are traded as reported by a recognized
source chosen by Holder) during the 40 business days preceding the Request Date;
PROVIDED, HOWEVER, that in the event of a sale of less than all of Issuer's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of Issuer as
determined by a nationally recognized investment banking firm selected by
Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally recognized investment banking firm


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selected by Holder and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of this Agreement.

            (d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3, promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, more than
50% of the then outstanding shares of Issuer Common Stock, or (ii) any of the
transactions described in Sections 7(b)(i), 7(b)(ii) or 7(b)(iii) of this
Agreement shall be consummated.

      9.    REPURCHASE OF SUBSTITUTE OPTION.

            (a) Subject to the last sentence of Section 3(a) of this Agreement,
at the request of Holder at any time commencing upon the first occurrence of a
Repurchase Event (as defined in Section 8(d) hereof) and ending 12 months
immediately thereafter, Substitute Option Issuer (or any successor entity
thereof) shall repurchase from Holder (i) the Substitute Option and (ii) all
shares of Substitute Common Stock purchased by Holder pursuant hereto with
respect to which Holder then has beneficial ownership. The date on which Holder
exercises its rights under this Section 9 is referred to as the "Section 9
Request Date." Such repurchase shall be at an aggregate price ("Section 9
Repurchase Consideration") equal to the sum of:

                  (i) The aggregate Purchase Price paid by Holder for any shares
of Substitute Common Stock acquired pursuant to the Substitute Option with
respect to which Holder then has beneficial ownership;

                  (ii) The excess, if any, of (A) the Highest Closing Price (as
defined below) for each share of Substitute Common Stock over (B) the Purchase
Price (subject to adjustment pursuant to Section 7 of this Agreement),
multiplied by the number of shares of Substitute Common Stock with respect to
which the Substitute Option has not been exercised; and

                  (iii) The excess, if any, of the Highest Closing Price over
the Purchase Price (subject to adjustment pursuant to Section 7 of this
Agreement) paid (or, in the case of Substitute Option Shares with respect to
which the Substitute Option has been exercised but the Closing Date has not
occurred, payable) by Holder for each share of Substitute Common Stock with
respect to which the Substitute Option has been exercised and with respect to
which Holder then has beneficial ownership, multiplied by the number of such
shares.

            (b) If Holder exercises its rights under this Section 9, Substitute
Option Issuer shall, within 10 business days after the Section 9 Request Date,
pay the Section 9 Repurchase Consideration to Holder in immediately available
funds, and contemporaneously with such


                                      11

<PAGE> 12



payment, Holder shall surrender to Substitute Option Issuer the Substitute
Option and the certificates evidencing the shares of Substitute Common Stock
purchased thereunder with respect to which Holder then has beneficial ownership,
and Holder shall warrant that it has sole record and beneficial ownership of
such shares and that the same are then free and clear of all Liens.
Notwithstanding the foregoing, to the extent that prior notification to or
approval of any Governmental Entity is required in connection with the payment
of all or any portion of the Section 9 Repurchase Consideration, Holder shall
have the ongoing option to revoke its request for repurchase pursuant to this
Section 9, in whole or in part, or to require that Substitute Option Issuer
deliver from time to time that portion of the Section 9 Repurchase Consideration
that it is not then so prohibited from paying and promptly file the required
notice or application for approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If any Governmental Entity
disapproves of any part of Substitute Option Issuer's proposed repurchase
pursuant to this Section 9, Substitute Option Issuer shall promptly give notice
of such fact to Holder and Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by such Governmental Entity,
determine whether the repurchase should apply to the Substitute Option and/or
Substitute Option Shares and to what extent to each, and Holder shall thereupon
have the right to exercise the Substitute Option as to the number of Substitute
Option Shares for which the Substitute Option was exercisable at the Section 9
Request Date less the number of shares covered by the Substitute Option in
respect of which payment has been made pursuant to Section 9(a)(ii) of this
Agreement. Holder shall notify Substitute Option Issuer of its determination
under the preceding sentence within five business days of receipt of notice of
disapproval of the repurchase. Notwithstanding anything herein to the contrary,
in the event that Substitute Option Issuer delivers to the Holder written notice
accompanied by a certification of Substitute Option Issuer's independent auditor
each stating that a requested repurchase of Substitute Common Stock would result
in the recapture of Substitute Option Issuer's bad debt reserves under the Code,
Holder's repurchase request shall be deemed to be automatically revoked.
Notwithstanding anything herein to the contrary, all of Holder's rights under
this Section 9 shall terminate on the date of termination of this Substitute
Option pursuant to Section 3(a) of this Agreement.

            (c) For purposes of this Agreement, the "Highest Closing Price"
means the highest of the closing sales price per share of Substitute Common
Stock, as quoted on the NYSE, AMEX or Nasdaq (or if the Substitute Common Stock
is not quoted on the NYSE, AMEX or Nasdaq, the highest bid price per share as
quoted on the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source) during the six- month
period preceding the Section 9 Request Date.

      10.   DISTRIBUTION RIGHTS.

            (a) DEMAND DISTRIBUTION RIGHTS. Issuer shall, subject to the
conditions of Section 10(c) of this Agreement, if requested by any Holder,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible, prepare and file, have



                                      12

<PAGE> 13



declared effective and keep current an offering circular under applicable laws
and regulations if such offering circular is necessary in order to permit the
sale or other disposition of any or all shares of Issuer Common Stock or other
securities that have been acquired by or are issuable to the Selling Shareholder
upon exercise of the Option in accordance with the intended method of sale or
other disposition stated by the Selling Shareholder in such request, including
without limitation a "shelf" registration statement under applicable laws and
regulations, and Issuer shall use its best efforts to qualify such shares or
other securities for sale under any applicable state securities laws.

            (b) ADDITIONAL DISTRIBUTION RIGHTS. If Issuer, at any time after the
exercise of the Option, proposes to file an offering circular with respect to
any shares of Issuer Common Stock under applicable laws and regulations in
connection with an underwritten public offering of such Issuer Common Stock,
Issuer will promptly give written notice to the Selling Shareholders of its
intention to do so and, upon the written request of any Selling Shareholder
given within 30 days after receipt of any such notice (which request shall
specify the number of shares of Issuer Common Stock intended to be included in
such underwritten public offering by the Selling Shareholder), Issuer will cause
all such shares for which a Selling Shareholder requests participation in such
filing, to be so filed and included in such underwritten public offering;
provided, however, that Issuer may elect to not cause some or all of such shares
to be so registered if the underwriters in the Public Offering in good faith
object for valid business reasons. If some, but not all the shares of Issuer
Common Stock, with respect to which Issuer shall have received requests for
distribution pursuant to this Section 10(b), shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
distributed among the Selling Shareholders desiring to distribute their shares
pro rata in the proportion that the number of shares requested to be distributed
by each such Selling Shareholder bears to the total number of shares requested
to be distributed by all such Selling Shareholders then desiring to have Issuer
Common Stock distributed for sale.

            (c) CONDITIONS TO REQUIRED DISTRIBUTION. Issuer shall use all
reasonable efforts to cause each offering circular referred to in Section 10(a)
of this Agreement to become effective and to obtain all consents or waivers of
other parties which are required therefor and to keep such offering circular
effective; PROVIDED, HOWEVER, that Issuer may delay any filing of an offering
circular with respect to Option Shares required pursuant to Section 10(a) of
this Agreement for a period not exceeding 180 days provided Issuer shall in good
faith determine that any such filing would adversely affect an offering or
contemplated offering of other securities by Issuer, and Issuer shall not be
required to file an offering circular with respect to Option Shares pursuant to
Section 10(a) hereof: (i) Prior to the earliest of (A) termination of the Merger
Agreement pursuant to Article VI thereof, (B) failure to obtain the requisite
stockholder approval pursuant to Section 6.1(b) of the Merger Agreement, and (C)
a Purchase Event or a Preliminary Purchase Event; (ii) On more than one occasion
during any calendar year; (iii) Within 90 days after the effective date of an
offering circular referred to in Section 10(b) of this Agreement pursuant to
which the Selling Shareholder or Selling Shareholders concerned were afforded
the opportunity to file an offering circular with respect to such shares under
applicable laws and regulations and

                                      13

<PAGE> 14



such offering circular was declared effective as requested; and (iv) Unless a
request therefor is made to Issuer by Selling Shareholders that hold at least
25% or more of the aggregate number of Option Shares (including shares of Issuer
Common Stock issuable upon exercise of the Option) then outstanding. In addition
to the foregoing, Issuer shall not be required to maintain the effectiveness of
any offering circular after the expiration of nine months from the effective
date of such offering circular. Issuer shall use all reasonable efforts to make
any filings, and take all steps, under all applicable state or local securities
laws to the extent necessary to permit the sale or other disposition of the
Option Shares so registered in accordance with the intended method of
distribution for such shares; PROVIDED, HOWEVER, that Issuer shall not be
required to consent to general jurisdiction or qualify to do business in any
state or locality where it is not otherwise required to so consent to such
jurisdiction or to so qualify to do business.

            (d) EXPENSES. Except where applicable state law prohibits such
payments, Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses (including the
fees and expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose offering circular for Option Shares
is being declared effective, printing expenses and the costs of special audits
or "cold comfort" letters, expenses of underwriters, excluding discounts and
commissions but including liability insurance if Issuer so desires or the
underwriters so require, and the reasonable fees and expenses of any necessary
special experts) in connection with each filing pursuant to Section 10(a) or
10(b) of this Agreement (including the related offerings and sales by holders of
Option Shares) and all other qualifications, notifications or exemptions
pursuant to Section 10(a) or 10(b) of this Agreement.

            (e)   INDEMNIFICATION.

                  (i) In connection with any filing under Section 10(a) or 10(b)
of this Agreement, Issuer hereby indemnifies the Selling Shareholders, and each
underwriter thereof, including each person, if any, who controls such holder or
underwriter within the meaning of Section 15 of the Securities Act of 1933, as
amended ("Securities Act"), against all expenses, losses, claims, damages and
liabilities caused by any untrue, or alleged untrue, statement of a material
fact contained in any notification or offering circular (including any
amendments or supplements thereto) or any preliminary offering circular, or
caused by any omission, or alleged omission, to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such notification or
offering circular (including any amendments or supplements thereto) in reliance
upon and in conformity with, information furnished in writing to Issuer by such
indemnified party expressly for use therein, and Issuer and each officer,
director and controlling person of Issuer shall be indemnified by such Selling
Shareholders, or by such underwriter, as the case may be, for all such expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement, that was included by Issuer in any such notification or offering
circular (including any amendments or supplements

                                      14

<PAGE> 15



thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such holder or such underwriter, as the case may be,
expressly for such use.

                  (ii) Promptly upon receipt by a party indemnified under this
Section 10(e) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section 10(e), such indemnified party
shall notify the indemnifying party in writing of the commencement of such
action, but the failure so to notify the indemnifying party shall not relieve it
of any liability which it may otherwise have to any indemnified party under this
Section 10(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and satisfactory to such
indemnified party. The indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel (other than reasonable costs of investigation)
shall be paid by the indemnified party unless (x) the indemnifying party either
agrees to pay the same, (y) the indemnifying party fails to assume the defense
of such action with counsel satisfactory to the indemnified party, or (z) the
indemnified party has been advised by counsel that one or more legal defenses
may be available to the indemnifying party that may be contrary to the interest
of the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear fees
and expenses of such counsel. No indemnifying party shall be liable for any
settlement entered into without its consent, which consent may not be
unreasonably withheld.

                  (iii) If the indemnification provided for in this Section
10(e) is unavailable to a party otherwise entitled to be indemnified in respect
of any expenses, losses, claims, damages or liabilities referred to herein, then
the indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party to
be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, the Selling Shareholders and the underwriters from
the offering of the securities and also the relative fault of Issuer, the
Selling Shareholders and the underwriters in connection with the statements or
omissions which resulted in such expenses, losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The amount
paid or payable by a party as a result of the expenses, losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall any Selling Shareholder be responsible, in the aggregate, for any
amount in excess of the net offering proceeds attributable to its Option Shares
included in the offering. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any obligation by any holder to indemnify shall be several
and not joint with other holders.

                                      15

<PAGE> 16



                  (iv) In connection with any filing pursuant to Section 10(a)
or 10(b) of this Agreement, Issuer and each Selling Shareholder (other than
Grantee) shall enter into an agreement containing the indemnification provisions
of Section 10(e) of this Agreement.

            (f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Selling Shareholders
thereof in accordance with and to the extent permitted by any rule or regulation
promulgated by the OTS from time to time. Issuer shall at its expense provide
the Selling Shareholders with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
applicable laws and regulations, or required pursuant to any state securities
laws or the rules of any stock exchange.

            (g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with
the issuance and the sale of the Option Shares and in connection with the
exercise of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all such
taxes.

      11. QUOTATION; LISTING. If Issuer Common Stock or any other securities to
be acquired in connection with the exercise of the Option are then authorized
for quotation or trading or listing on the NYSE, AMEX, Nasdaq or any other
securities exchange, Issuer, upon the request of Holder, will promptly file an
application, if required, to authorize for quotation or trading or listing the
shares of Issuer Common Stock or other securities to be acquired upon exercise
of the Option on the NYSE, AMEX, Nasdaq or such other securities exchange and
will use its best efforts to obtain approval, if required, of such quotation or
listing as soon as practicable.

      12. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.


                                      16

<PAGE> 17



      13.   PROFIT LIMITATION.

            (a) Notwithstanding any other provision of this Agreement, in no
event shall Grantee's Total Profit (as hereinafter defined) exceed Six Million
One Hundred Thousand Dollars ($6,100,000), plus Grantee's documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors) incurred in connection with the transactions contemplated
by the Merger Agreement, and, if it otherwise would exceed such amount, Grantee,
at its sole election, shall either (i) deliver to Issuer for cancellation Shares
previously purchased by Grantee, (ii) pay cash or other consideration to Issuer
or (iii) undertake any combination thereof, so that Grantee's Total Profit shall
not exceed $6,100,000, plus Grantee's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) incurred in connection with the transactions contemplated by the
Merger Agreement, after taking into account the foregoing actions.

            (b) Notwithstanding any other provision of this Agreement, this
Option may not be exercised for a number of Shares as would, as of the Notice
Date, result in a Notional Total Profit (as defined below) of more than
$6,100,000, plus Grantee's documented, reasonable out-of-pocket expenses
(including fees and expenses of legal, financial and accounting advisors)
incurred in connection with the transactions contemplated by the Merger
Agreement, and, if exercise of the Option otherwise would exceed such amount,
Grantee, at its discretion, may increase the Purchase Price for that number of
Shares set forth in the Option Notice so that the Notional Total Profit shall
not exceed 6,100,000, plus Grantee's documented, reasonable out-of-pocket
expenses (including fees and expenses of legal, financial and accounting
advisors) incurred in connection with the transactions contemplated by the
Merger Agreement; provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date at the Purchase
Price set forth in Section 2 hereof.

            (c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) any termination fee paid by Issuer
to Grantee pursuant to Section 6.2 of the Reorganization Agreement, (ii) the
amount of cash received by Grantee pursuant to Section (a)(ii) hereof, (iii) (x)
the amount received by Grantee pursuant to the repurchase of Option Shares
pursuant to Section 8 or Section 9 hereof, less Grantee's purchase price for
such Option Shares, and (iv) the net cash amounts received by Grantee pursuant
to the sale of Option Shares (or any other securities into which such Option
Shares are converted or exchanged) to any unaffiliated party, less Grantee's
purchase price for such Option Shares.

            (d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of the Option Notice
assuming that this Option were exercised on such date for such number of Shares
and assuming that such Option Shares, together with all other Option Shares held
by Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).


                                      17

<PAGE> 18



      14.   MISCELLANEOUS.

            (a) EXPENSES. Except to the extent expressly provided for herein,
each of the parties hereto shall bear and pay all costs and expenses incurred by
it or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.

            (b) WAIVER AND AMENDMENT. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.

            (c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES; SEVERABILITY.
This Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between Grantee and Issuer (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto (other than the indemnified parties under Section 10(e)
of this Agreement and any transferees of the Option Shares or any permitted
transferee of this Agreement pursuant to Section 14(h) of this Agreement) any
rights or remedies hereunder. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or Governmental
Entity to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. If
for any reason such court or Governmental Entity determines that the Option does
not permit Holder to acquire, or does not require Issuer to repurchase, the full
number of shares of Issuer Common Stock as provided in Section 3 of this
Agreement (as may be adjusted herein), it is the express intention of Issuer to
allow Holder to acquire or to require Issuer to repurchase such lesser number of
shares as may be permissible without any amendment or modification hereof.

            (d)   GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Connecticut without regard to any
applicable conflicts of law rules.

            (e)   DESCRIPTIVE HEADINGS. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.

            (f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the addresses set forth in the Merger Agreement (or
at such other address for a party as shall be specified by like notice).

                                      18

<PAGE> 19



            (g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.

            (h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.

            (i) FURTHER ASSURANCES. In the event of any exercise of the Option
by the Holder, Issuer, and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such exercise.

            (j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.

            (k) LIMITATION ON RESALE OF ISSUER COMMON STOCK. Grantee agrees that
no shares of Issuer Common Stock acquired by it upon exercise of the Option, if
any, shall be sold, transferred or otherwise disposed by it prior to the
termination of the Merger Agreement in accordance with the terms thereof, except
as follows. If the Grantee shall determine to accept a bona fide offer to
purchase the Issuer Common Stock then held by it or to sell any such Stock on
the open market, the Grantee shall give notice thereof to the Issuer specifying
(i) the Issuer Common Stock to be sold and (ii) the purchase price to be offered
therefor (or in the case of open market sales, that the sales are to be at
prices prevailing on the market) and any other significant terms of the proposed
transaction. Upon receipt of such notice, the Issuer shall, for a period of
three business days immediately following such receipt, have the right of first
refusal to purchase the Issuer Common Stock then held by Grantee that is
proposed to be sold at the purchase price set forth in such notice or, if such
shares are to be sold in open market transaction, at a purchase price equal to
the average of the closing prices therefor (and if there is no such closing
price on any of such days, then the mean of the closing bid and the closing
asked prices on that day) on the principal market on which Issuer Common Stock
is traded for the five trading days immediately prior to the Issuer's receipt of
such notice. Payment for such shares shall be made to the Grantee in immediately
available funds within three business days immediately following receipt of the
notice of the proposed sale.

                                      19

<PAGE> 20



                            [Signature page follows]













                                      20

<PAGE> 21



      IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.

                           AMERICAN BANK OF CONNECTICUT



                           By:  /s/ William E. Solberg
                                ------------------------------------------------
                                William E. Solberg
                                President and Chief Executive Officer


                           AMERICAN FINANCIAL HOLDINGS, INC.



                           By:  /s/ Robert T. Kenney
                                ------------------------------------------------
                                 Robert T. Kenney
                                 Chairman, President and Chief Executive Officer





                                       21