Document:

<PAGE>

                                                                    Exhibit 10.1

                   SEPARATION AGREEMENT AND GENERAL RELEASE
                   ----------------------------------------

        Separation Agreement and General Release ("Agreement") executed this ___
day of September 1999, by and between Bernard Horowitz, Ph.D. ("Dr. Horowitz" or
"Releasor") and V.I. Technologies, Inc. ("VITEX" or "the Company").

        WHEREAS, Dr. Horowitz and VITEX entered into an Employment Agreement
dated January 15, 1998 (the "Employment Agreement") a copy of which is annexed
hereto as Exhibit "B"; and

        WHEREAS, Dr. Horowitz has expressed his intention to voluntarily
terminate his employment pursuant to the provisions of (P) 4.3 of the Employment
Agreement;

        NOW, THEREFORE, for good and valuable consideration, the sufficiency of
which is hereby acknowledged, it is hereby agreed that:

        1.   DR. HOROWITZ'S RESIGNATION
             --------------------------

        (a)  Dr. Horowitz hereby irrevocably gives notice of his intention to
        resign from his employment at VITEX, effective October 1, 1999, and
        VITEX accepts that resignation. Dr. Horowitz and VITEX expressly
        acknowledge that this Agreement supercedes and replaces the Employment
        Agreement and except as otherwise provided herein, effective October 1,
        1999, the Employment Agreement, and all terms, conditions, and
        obligations set forth therein, will expire and will be declared null and
        void.

        2.   THE SEVERANCE PAYMENT, VESTING OF STOCK OPTIONS, AND LIFE INSURANCE
             -------------------------------------------------------------------

        (a)  As used herein, the term "Severance Period" refers to the one year
        period beginning on October 1, 1999 and ending on September 30, 2000.

        (b)  Subject to Dr. Horowitz's execution of this Agreement, VITEX shall
        pay Dr. Horowitz severance equivalent to one year's salary at his
        current rate of pay, a total of $198,919.00 (the "Severance Payment"),
        less applicable withholding taxes and deductions. The Severance Payment
        will be made in two (2) equal installments, paid six months apart, less
        applicable withholding taxes and deductions. The first such payment will
        be made on or before October 20, 1999.

                     (i)   Dr. Horowitz expressly acknowledges that he will not
                           be entitled to any annual bonus payment pursuant to
                           (P) 3.2 of the Employment Agreement.

        (c)  Subject to the approval of the Compensation Committee of the Board
        of Directors of VITEX, (i) the stock options granted to Horowitz in 1995
        and 1997 to purchase 223,614 shares (at $2.795 per share) and 125,224
        shares (at $8.39 per

<PAGE>

        share) respectively, of VITEX common stock, $.01 par value per share
        under the Equity Incentive Plan (the "Stock Options"), shall fully vest,
        to the extent they have not previously vested, on October 1, 1999, and
        (ii) Horowitz shall be permitted to exercise the Stock Options at any
        time prior to the tenth anniversary of the date of grant of such
        options, in accordance with the terms of the Equity Incentive Plan and
        the stock option agreements executed thereunder (as modified by this
        Agreement).

        (d)  Dr. Horowitz's participation in VITEX's medical and dental benefit
        plans will continue for the duration of the Severance Period, and will
        terminate on September 30, 2000, at which time, and on an annual basis
        thereafter for as long as he is alive, he will be offered the
        opportunity to enroll in any major medical and dental insurance plans
        VITEX provides to its full time, senior management staff. If he chooses
        to enroll in such plans, the cost to Dr. Horowitz will be as though he
        were still actively employed by VITEX.

        (e)  The life insurance referenced in (P) 3.8 of the Employment
        Agreement will remain in force (to the extent the policy is payable to
        Dr. Horowitz's family), at VITEX's cost, until the end of the Severance
        Period (September 30, 2000).

        (f)  Except as provided herein, Dr. Horowitz's participation in all
        other benefit plans will cease on October 1, 1999.

        3.   CONTINUED MEMBERSHIP ON VITEX'S BOARD OF DIRECTORS
             --------------------------------------------------

        (a)  Dr. Horowitz will remain a member of VITEX's Board of Directors
        after October 1, 1999. Dr. Horowitz expressly acknowledges that he has
        been given no guarantees with respect to his continued membership on the
        Board of Directors. Dr. Horowitz agrees that if the Board of Directors
        requests his resignation from the Board of Directors for any reason, he
        will immediately tender his resignation as a Director of VITEX. After
        the expiration of the Severance Period, if Dr. Horowitz remains a member
        of the Board of Directors, he will be entitled to receive the same
        benefits received by other members of the Board of Directors.

        4.   CONSULTING SERVICES
             -------------------

        (a)  Although under no obligation to do so, Dr. Horowitz may perform
        consulting services to VITEX. Any such consulting services will be
        performed upon reasonable notice, at mutually agreeable times and
        locations. Dr. Horowitz agrees that during the Severance Period he will
        not seek, nor is he entitled to, any additional compensation for any
        such consulting services, unless he has provided more than 800 hours of
        services during the Severance Period. Dr. Horowitz will be compensated
        for each hour of consulting services provided during the Severance
        Period in excess of 800 hours at the rate of $200.00 per hour.

        (b)  After the expiration of the Severance Period, and beginning on
        October 1, 2000, Dr. Horowitz will begin receiving quarterly retainer
        payments of $25,000.00 as compensation for consulting services to be
        provided during the following calendar quarter (e.g. the October 1, 2000
        payment will cover services rendered

<PAGE>

        during the fourth quarter of 2000). Such payments will be made on the
        first day of each quarter during which the contemplated services are to
        be provided. These quarterly retainer payments will continue until such
        time as this consulting arrangement is terminated by VITEX or Dr.
        Horowitz in the manner described below. The $25,000.00 retainer will
        constitute full compensation for up to 200 hours of consulting services
        provided during the quarter. Dr. Horowitz will be compensated for each
        hour of consulting services in excess of 200 hours during a calendar
        quarter at the rate of $200.00 per hour.

              (i)  The consulting arrangement described in this sub paragraph
              "4(b)" can be terminated by either Dr. Horowitz or VITEX, at any
              time, with 90 days notice.

        5.    CONSIDERATION AND FULL DISCHARGE
              --------------------------------

           a) Dr. Horowitz agrees that the aggregate consideration provided in
              this Agreement:

                    (i)    exceeds any payment, benefit, or other thing of value
                           to which he might otherwise be entitled under any
                           policy, plan or procedure of VITEX, and

                    (ii)   is in full discharge of any and all of VITEX's
                           liabilities and obligations to him, whether written
                           or oral, including, without limitation, any bonus,
                           deferred bonus, accrued vacation pay, severance
                           payment or any other contractual or other obligation,
                           compensation or remuneration that may be owed to Dr.
                           Horowitz by VITEX.

        6.    GENERAL RELEASE
              ---------------

        (a)   For good and valuable consideration, the receipt of which is
        hereby acknowledged, Dr. Horowitz for himself and for his heirs,
        executors, administrators, trustees, legal representatives and assigns
        (hereinafter, collectively referred to as ("Releasors"), hereby forever
        release and discharge VITEX, or any of VITEX's past, present or future
        parent entities, partners, subsidiaries, affiliates, divisions, employee
        benefit and/or pension plans or funds, successors and assigns and any of
        its or their past, present or future directors, officers, attorneys,
        agents, trustees, administrators, employees, or assigns (whether acting
        as agents for VITEX or in their individual capacities) (collectively
        referred to as "Releasees") from any and all claims, demands, causes of
        action, and liabilities of any kind whatsoever (upon any legal or
        equitable theory, whether contractual, common-law, statutory, federal,
        state, local, or otherwise), whether known or unknown, by reason of any
        act, omission, transaction or occurrence which Releasors ever had, now
        have or hereafter can, shall or may have against Releasees up to and
        including the Agreement Effective Date, as defined in Paragraph 10(c)
        below.

        Without limiting the generality of the foregoing, Releasors hereby
        release and discharge Releasees from:

<PAGE>

                     (i)   any and all claims relating to Dr. Horowitz's
                           employment by VITEX, the terms and conditions of such
                           employment, the employee benefits related to his
                           employment and/or his separation from such
                           employment;

                     (ii)  any and all claims of employment discrimination
                           and/or retaliation under any federal, state or local
                           statute or ordinance, including without limitation,
                           any and all claims under Title VII of the Civil
                           Rights Act of 1964 as amended; the Age Discrimination
                           in Employment Act, the Older Workers Benefit
                           Protection Act, the Americans with Disabilities Act;
                           the Family and Medical Leave Act of 1993; the
                           Employee Retirement Income Security Act; the New York
                           State Human Rights Law; and the New York City Human
                           Rights Law;

                     (iii) any and all claims for wrongful discharge and/or
                           breach of employment contract (including, but not
                           limited to the Employment Agreement) or any claims
                           related to compensation or benefits, including claims
                           for bonus or deferred payments;

                     (iv)  any and all claims for defamation, libel or slander
                           against any Releasees; and

                     (v)   any and all claims for attorney's fees, costs
                           disbursements and the like;

        which Releasors ever had, now have or hereafter can, shall or may have
        against Releasees for, upon or by reason of any act, omission,
        transaction or occurrence up to and including the date of the execution
        of this Agreement.

        (b)  Dr. Horowitz agrees, unless such agreement is otherwise prohibited
        by law, that he will not commence, maintain, prosecute or participate
        (except as compelled by legal process) in any action or proceeding of
        any kind (judicial or administrative) against Releasees, arising out of
        any act, omission, transaction or occurrence occurring up to and
        including the Agreement Effective Date, as defined in paragraph 10(c)
        below.

        (c)  Dr. Horowitz further agrees, unless such agreement is otherwise
        prohibited by law, that he will not seek or accept any award or
        settlement from any source or proceeding with respect to any claim or
        right covered by paragraphs "6(a) and (b)" and that this Agreement shall
        act as a bar to recovery in any such proceedings.
<PAGE>

        7.   CONFIDENTIALITY
             ---------------

        (a)  Dr. Horowitz acknowledges that this Agreement and all terms and
        conditions thereof shall be kept strictly confidential and shall not be
        disclosed by Dr. Horowitz to anyone, except to the extent required by
        law; except that Dr. Horowitz may disclose the terms of this Agreement
        to his spouse, accountant, attorney and/or his financial advisor, who
        shall be instructed that the Agreement and its terms are to be kept
        confidential. In the event of any breach of this provision, Dr. Horowitz
        consents to the entry of injunctive relief in the United States District
        Court for the Southern District of New York, and further, inasmuch as
        the damages from any material breach of this confidentiality provision
        cannot be ascertained, Dr. Horowitz agrees that a material breach of
        this provision by Dr. Horowitz shall result in the payment by Dr.
        Horowitz to VITEX of liquidated damages in the amount of $198,919.00.
        Notwithstanding the foregoing, this paragraph shall not apply to Dr.
        Horowitz if he is acting in his capacity as director of VITEX.

        (b)  VITEX acknowledges that this Agreement and all terms and conditions
        thereof shall be kept strictly confidential and shall not be disclosed
        by any officer or director of VITEX to anyone, except to the extent
        required by law and to those persons whose efforts are required to
        effectuate the terms of this Agreement; except that VITEX, through its
        officers, may disclose the terms of this Agreement to VITEX's attorneys
        and/or accountants, who shall be instructed that the Agreement and its
        terms are to be kept confidential.

        (c)  The parties agree that this Agreement and the attached General
        Release may be used as evidence only in a subsequent proceeding in which
        any of the parties allege a breach of this Agreement or the attached
        General Release.

        8.   NON-DISPARAGEMENT
             -----------------

        (a)  Dr. Horowitz agrees that he will not disparage (or induce or
        encourage others to disparage) VITEX, any of its past or present
        directors, officers, agents, trustees, administrators, attorneys or
        employees with respect to any events relating to his employment with
        VITEX, including, without limitation, disparaging any of such parties in
        connection with disclosing the facts or circumstances surrounding his
        separation from employment with VITEX or criticizing VITEX's business
        strategy. For the purposes of this Agreement, the term "disparage" means
        any comments or statements which would adversely affect in any manner:
        (i) the conduct of VITEX's business; or (ii) the business reputation or
        relationships of VITEX and/or any of its past or present directors,
        officers, agents, trustees, administrators, attorneys or employees.
        Notwithstanding the foregoing, this paragraph shall not apply to Dr.
        Horowitz if he is acting in his capacity as a director of VITEX.

        (b)  VITEX agrees not to disparage Dr. Horowitz. For purposes of this
        subparagraph, the term "disparage" means any statements made by VITEX
        senior officers or directors, or any statements made officially by VITEX
        that adversely affect Dr. Horowitz's personal or professional
        reputation.
<PAGE>

        9.   COMPANY DOCUMENTS AND PROPERTY
             ------------------------------

        (a)  Dr. Horowitz agrees not to copy or take any books, notes or
        documents belonging to VITEX without its express written consent. In
        this regard, Dr. Horowitz acknowledges that he has had access to
        confidential, sensitive or proprietary information during the course of
        his employment at VITEX. Unless compelled by judicial process, Dr.
        Horowitz agrees that he will not, for herself or any other person or
        entity, directly or indirectly divulge, communicate or in any way make
        use of any confidential, sensitive, or proprietary information acquired
        in the performance of his services or in connection with the performance
        of such services for VITEX without the prior written consent of VITEX.
        Upon receipt of judicial process or governmental request for such
        information, Dr. Horowitz shall immediately notify VITEX and shall
        cooperate with VITEX in efforts to limit such disclosure and shall not
        make such disclosure unless compelled to do so. For the purpose of this
        Agreement, all information acquired during the course of Dr. Horowitz's
        employment and in connection with such employment shall be deemed to be
        confidential, sensitive or proprietary, unless VITEX shall have
        published said information. Not withstanding the foregoing, it is
        understood that (i) Dr. Horowitz brought certain materials with him when
        he joined VITEX and that such materials do not belong to VITEX, (ii) Dr.
        Horowitz may retain published scientific works and slides which he
        collected while an employee of VITEX.

        (b)  If Dr. Horowitz has not already done so, he shall immediately
        return to VITEX all Company property in his possession (with the
        exception of a computer which VITEX has permitted Dr. Horowitz to
        retain) including, but not limited to credit cards, building passes,
        airline tickets, facsimile machines, paging devices and portable
        telephones.

        (c)  If Dr. Horowitz has not already done so, he shall immediately
        deliver to VITEX all correspondence, documents, papers and other media
        containing information about the accounts, clients, interests, or
        business of VITEX together with all copies in his possession.

        10.  REVIEW AND REVOCATION PERIODS
             -----------------------------

        (a)  Dr. Horowitz shall have at least twenty-one (21) days from the date
        of receipt, or until September 30, 1999, to consider the terms and
        conditions of this Agreement. Dr. Horowitz may accept this Agreement by
        signing it, having his signature notarized and returning it to James
        Northrup, VITEX, Inc., 155 Duryea Road, Melville, NY 11747, by no later
        than 5:00 p.m. on September ___, 1999. Further, Dr. Horowitz may sign
        and return this Release at any time prior to September 30, 1999.

        (b)  After signing this Release, Dr. Horowitz shall have seven (7) days
        to revoke this Agreement by indicating his desire to do so in writing
        (a) addressed to James Northrup, at the address listed above, and (b)
        received by Mr. Northrup no later than 5:00 p.m. on the seventh (7th)
        day following the date Dr. Horowitz signs this Agreement.

        (c)  The effective date of this Agreement shall be the eighth (8th) day
        following Dr. Horowitz's signing of this Agreement (the "Agreement
        Effective Date"), provided Dr. Horowitz does not revoke this Agreement
        during the revocation
<PAGE>

        period. In the event Dr. Horowitz does not accept this Agreement as set
        forth above, or revokes this Agreement during the Revocation Period,
        this Agreement including but not limited to the obligation of the
        Releasees to provide the payments, and provide the benefits, referred to
        in paragraph "2" and "3" above, shall automatically be deemed null and
        void.

        11.  Dr. Horowitz acknowledges that: (a) he has carefully read this
        Agreement in its entirety; (b) he has had an opportunity to consider
        fully the terms of this Agreement for at least twenty-one (21) days; (c)
        he has been advised by VITEX in writing to consult with an attorney of
        his choosing in connection with this Agreement; (d) he fully understands
        the significance of all of the terms and conditions of this Agreement;
        (e) he has discussed it with his independent legal counsel, or has had a
        reasonable opportunity to do so; (f) he has had answered to his
        satisfaction any questions he has asked with regard to the meaning and
        significance of any of the provisions of this Agreement; (g) he is
        signing this Agreement voluntarily and of his own free will and assents
        to all the terms and conditions contained herein; (h) the amounts being
        paid hereunder are in excess of those amounts he would be entitled to if
        he did not sign this Agreement; and (i) that as of December 23, 1999 his
        employment relationship with VITEX will be permanently and irrevocably
        severed and that to the full extent permitted by law he will not be
        eligible for rehire or re-employment with any of the Releasees, that he
        will not apply for re-employment with any of the Releasees and that the
        Releasees have no obligation, now or at any time in the future, to
        rehire or re-employ him in any capacity, that any future decision by any
        of the Releasees not to hire him will be based upon this subparagraph
        and that he will not assert any claims against any Releasees based upon
        such decision.

ADDITIONAL PROVISIONS
---------------------
        12.  The making of this Agreement is not intended, and shall not be
        construed, as an admission that Releasees have violated any federal,
        state or local law (statutory or decisional), ordinance or regulation,
        breached any contract, or committed any wrong whatsoever against Dr.
        Horowitz.

        13.  This Agreement is binding upon, and shall inure to the benefit of,
        the parties and their respective heirs, executors, administrators,
        successors and assigns.

        14.  This Agreement shall be interpreted, construed and governed
        according to the laws of the State of New York.

        15.  If any provision of this Agreement shall be held by a court of
        competent jurisdiction to be illegal, void, or unenforceable, such
        provision shall be of no force and effect. However, the illegality or
        unenforceability of such provision shall have no effect upon, and shall
        not impair the enforceability of, any other provision of this Agreement;
        provided, however, that, upon any finding by a court of competent
        jurisdiction that the release and covenants provided for by paragraphs
        "5," and "6" of this Agreement are illegal, void, or unenforceable, Dr.
        Horowitz agrees, at the Releasees option, either to return promptly to
        VITEX the amounts paid to his or paid on his behalf pursuant to this
        Agreement or to execute a release, waiver and/or covenant that is legal
        and enforceable. Further, if Dr. Horowitz seeks to challenge
<PAGE>

        the validity of or otherwise vitiate this Agreement or any provision
        thereof (including, without limitation, paragraphs "5,"and "6"), Dr.
        Horowitz shall, as a precondition, be required to repay to VITEX the
        amounts paid to him or paid on his behalf pursuant to the terms of this
        Agreement. Finally, any breach of the terms of paragraphs "5," "6," "7,"
        "8," and/or "9" shall constitute a material breach of this Agreement as
        to which the Releasees may seek appropriate relief (including but not
        limited to repayment of the amounts paid to him or paid on his behalf
        referred to this Agreement) in a court of competent jurisdiction.

        17.  The paragraph and section headings contained herein are for
        reference purposes only and shall not in any way affect the meaning or
        interpretation of this Agreement.

        18.  This Agreement (together with the accompanying cover letter)
        constitutes the complete understanding between the parties and
        supersedes any and all Releases, understandings, and discussions,
        whether written or oral, between the parties. No other promises or
        agreements shall be binding unless in writing and signed after the
        Agreement Effective Date by the parties to be bound thereby.

        WHEREFORE, Dr. Horowitz places his hand on the dates hereinafter set
        forth.

Bernard Horowitz, Ph.D.

 /s/ Bernard Horowitz                               Date  September 13, 1999
---------------------------------                         ------------------

On this 13/th/ day of September, 1999, before me personally appeared Bernard
Horowitz, Ph.D., to me known personally and known to me to be the individual
described herein, whose name is subscribed to, and who executed the above
Agreement and General Release.

 /s/ Howell Bramson
--------------------------------
Notary Public

Agreed:

         V.I.Technologies, Inc.

By:      /s/ John Barr
         --------------
         John Barr
         President & Chief Executive Officer<PAGE>

                                                                     EXHIBIT 4.1

                 THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
                  CERTAIN PROVISIONS CONTAINED HEREIN AND TO
                         RESALE RESTRICTIONS UNDER THE
                      SECURITIES ACT OF 1933, AS AMENDED

          STOCK OPTION AGREEMENT, dated February 14, 2000, between Heritage
Bancorp, Inc., a Delaware corporation ("Issuer"), and SouthBanc Shares, Inc., a
Delaware corporation ("Grantee").

                             W I T N E S S E T H:
                             -------------------

          WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(this "Agreement");

          WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined); and

          WHEREAS, as a condition and inducement to Issuer's willingness to
enter into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree and Grantee has agreed, to grant Issuer an option to purchase
shares of Grantee's Common Stock on substantially the same terms as the Option
(as hereinafter defined).

          NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:

          1.   (a)  Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 855,916 fully paid and non assessable shares of Issuer's Common Stock, par
value $0.01 per share ("Common Stock"), at a price of $13.25 per share (the
"Option Price"); provided, however, that in no event shall the number of shares
                 -------- --------
of Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.

               (b)  In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to this Agreement) or (ii) redeemed, repurchased,
retired or otherwise cease to be outstanding after the date of this Agreement,
the number of shares of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such number equals
<PAGE>

19.9% of the number of shares of Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer or Grantee to breach any provision of the Merger
Agreement.

          2.   (a)  The Holder (as hereinafter defined) may exercise the Option,
in whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as here inafter defined) and a Subsequent Triggering Event (as
hereinafter defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined) and the Holder is not in material
beach of the agreements or covenants contained in this Agreement or the Merger
Agreement, provided that the Holder shall have sent the written notice of such
           --------
exercise (as provided in subsection (e) of this Section 2) within 90 days
following such Subsequent Triggering Event (or such longer period as provided in
Section 10), provided further, however, that if the Option cannot be exercised
             -------- -------  -------
on any day because of any 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 on
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. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time (as
defined in the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event except a termination by
Grantee pursuant to Section 6.1(e) of the Merger Agreement (unless the breach by
Issuer giving rise to such right of termination is non-volitional); or (iii) the
passage of 12 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event or is a
termination by Grantee pursuant to Section 6.1(e) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is non-
volitional). Notwithstanding any other provision of this Agreement, in no event
shall any of Issuer's obligations under this Agreement continue six months
beyond an Exercise Termination Event. The term "Holder" shall mean the holder or
holders of the Option.

               (b)  The term "Initial Triggering Event" shall mean any of the
following events or transactions occurring after the date hereof:

                    (i)  Issuer or any of its Subsidiaries (each an "Issuer
     Subsidiary"), without having received Grantee's prior written consent,
     shall have entered into an agreement to engage in an Acquisition
     Transaction (as hereinafter defined) with any person (the term "person" for
     purposes of this Agreement having the meaning as signed thereto in Sections
     3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as amended
     (the "1934 Act"), and the rules and regulations thereunder) other than
     Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or the
     Board of Directors of Issuer shall have recommended that the stockholders
     of Issuer approve or accept any Acquisition Transaction with any person
     other than Grantee or a Subsidiary of Grantee. For purposes of this
     Agreement, "Acquisition Transaction" shall mean (A) a merger or
     consolidation, or any similar transaction, involving Issuer or any
     Significant Subsidiary (as defined in Rule 1-02 of Regulation S-X
     promulgated by the Securities and Exchange

                                      -2-
<PAGE>

     Commission (the "SEC")) of Issuer, (B) a purchase, lease or other
     acquisition or assumption of all or a substantial portion of the assets or
     deposits of Issuer or any Significant Subsidiary of Issuer, (C) a purchase
     or other acquisition (including by way of merger, consolidation, share
     exchange or otherwise) of securities representing 10% or more of the voting
     power of Issuer, or (D) any substantially similar transaction; provided,
                                                                    --------
     however, that in no event shall any merger, consolidation, purchase or
     -------
     similar transaction involving only the Issuer and one or more of its
     Subsidiaries or involving only two or more of such Subsidiaries, be deemed
     to be an Acquisition Transaction, provided that any such transaction is not
     entered into in violation of the terms of the Merger Agreement;

                    (ii)  Issuer or any Issuer Subsidiary, without having
     received Grantee's prior written consent, shall have authorized,
     recommended, proposed or publicly announced its intention to authorize,
     recommend or propose, an Acquisition Transaction with any person other than
     Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
     have publicly withdrawn or modified, or publicly announced its intent to
     withdraw or modify, in any manner adverse to Grantee, its recommendation
     that the stockholders of Issuer approve the transactions contemplated by
     the Merger Agreement in anticipation of engaging in an Acquisition
     Transaction;

                    (iii) Any person, other than Grantee, any Grantee Subsidiary
     or any Issuer Subsidiary acting in a fiduciary capacity in the ordinary
     course of its business, shall have acquired beneficial ownership or the
     right to acquire beneficial ownership of 10% or more of the outstanding
     shares of Common Stock (the term "beneficial ownership" for purposes of
     this Agreement having the meaning assigned thereto in Section 13(d) of the
     1934 Act, and the rules and regulations thereunder);

                    (iv)  Any person other than Grantee or any Grantee
     Subsidiary shall have made a bona fide proposal to Issuer or its
     stockholders by public announcement or written communication that is or
     becomes the subject of public disclosure sure to engage in an Acquisition
     Transaction;

                    (v)   After a proposal is made by a third party to Issuer or
     its stockholders to engage in an Acquisition Transaction, Issuer shall have
     breached any covenant or obligation contained in the Merger Agreement and
     such breach (x) would entitle Grantee to terminate the Merger Agreement and
     (y) shall not have been cured prior to the Notice Date (as defined below);
     or

                    (vi)  Any person other than Grantee or any Grantee
     Subsidiary, other than in connection with a transaction to which Grantee
     has given its prior written consent, shall have filed an application or
     notice with the Federal Reserve Board, the Office of Thrift Supervision
     ("OTS") or any other federal or state bank regulatory authority for
     approval to engage in an Acquisition Transaction.

               (c)  The term "Subsequent Triggering Event" shall mean either of
the following events or transactions occurring after the date hereof:

                                      -3-
<PAGE>

                    (i)  The acquisition by any person of beneficial ownership
     of 25% or more of the then outstanding shares of Common Stock; or

                    (ii) The occurrence of the Initial Triggering Event
     described in paragraph (i) of subsection (b) of this Section 2, except that
     the percentage referred to in clause (c) shall be 25%.

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

               (e)  In the event the Holder is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of which
being herein referred to as the "Notice Date") specifying (i) the total number
of shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided that
                                                                   --------
if prior notification to or approval of the Federal Reserve Board, the OTS or
any other regulatory agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval and
shall expeditiously process the same and the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which any
required notification periods have expired or been terminated or such approvals
have been obtained and any requisite waiting period or periods shall have
passed. Any exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.

               (f)  At the closing referred to in subsection (e) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
--------
shall not preclude the Holder from exercising the Option.

               (g)  At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (f) of this Section 2,
Issuer shall deliver to the Holder a certificate or certificates representing
the number of shares of Common Stock purchased by the Holder and, if the Option
should be exercised in part only, a new Option evidencing the rights of the
Holder thereof to purchase the balance of the shares purchasable hereunder, and
the Holder shall deliver to Issuer this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.

               (h)  Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall read
substantially as follows:

          "The transfer of the shares represented by this certificate is subject
          to certain provisions of an agreement between the registered holder
          hereof and Issuer and to

                                      -4-
<PAGE>

          resale restrictions arising under the Securities Act of 1933, as
          amended. A copy of such agreement is on file at the principal office
          of Issuer and will be provided to the holder hereof without charge
          upon receipt by Issuer of a written request therefor."

It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under circumstances that do
not require the retention of such reference; and (iii) the legend shall be
removed in its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other legend
as may be required by law.

               (i)  Upon the giving by the Holder to Issuer of the written
notice of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in immediately
available funds, the Holder shall be deemed to be the holder of record of the
shares of 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 Common Stock shall not then be actually delivered to
the 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, issue and delivery of stock certificates under
this Section 2 in the name of the Holder or its assignee, transferee or
designee.

          3.   Issuer agrees: (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase 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 (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. (S) 18a and regulations promulgated
thereunder and (y) in the event, under the Bank Holding Company Act of 1956, as
amended, the Change in Bank Control Act of 1978, as amended, or any other
federal or state banking law, prior approval of or notice to the Federal Reserve
Board, the OTS or to any state regulatory authority is necessary before the
Option may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board, the OTS or such state regulatory authority as they may require) in order
to permit the Holder to exercise the Option and Issuer duly and effectively to
issue shares of Common Stock pursuant hereto; and (iv) promptly to take all
action provided herein to protect the rights of the Holder against dilution.

                                      -5-
<PAGE>

          4.   This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the 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,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
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.

          5.   In addition to the adjustment in the number of shares of Common
Stock that are purchasable upon exercise of the Option pursuant to Section 1 of
this Agreement, the number of shares of Common Stock purchasable upon the
exercise of the Option and the Option Price shall be subject to adjustment from
time to time as provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares, distributions on or in respect of the Common Stock that
would be prohibited under the terms of the Merger Agreement, or the like, the
type and number of shares of Common Stock purchasable upon exercise hereof and
the Option Price shall be appropriately adjusted in such manner as shall fully
preserve the economic benefits provided hereunder and proper provision shall be
made in any agreement governing any such transaction to provide for such proper
adjustments and the full satisfaction of the Issuer's obligations hereunder.

          6.   Upon the occurrence of a Subsequent Triggering Event that occurs
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
(whether on its own behalf or on behalf of any subsequent holder of this Option
(or part thereof) or any of the shares of Common Stock issued pursuant hereto)
delivered within 90 days of such Subsequent Triggering Event (or such longer
period as provided in Section 10), promptly prepare, file and keep current a
shelf registration statement under the 1933 Act covering this Option and any
shares issued and issuable pursuant to this Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of this Option and any
shares of Common Stock issued upon total or partial exercise of this Option
("Option Shares") in accordance with any plan of disposition requested by
Grantee. Issuer will use its reasonable best efforts to cause such registration
statement first to become effective and then to remain effective for such period
not in excess of 180 days from the day such registration statement first becomes
effective or such shorter time as may be reasonably necessary to effect such
sales or other dispositions. Grantee shall have the right to demand two such
registrations. The foregoing notwithstanding, if, at the time of any request by
Grantee for regis registration of the Option or Option Shares as provided above,
Issuer is in registration with respect to an underwritten public offering of
shares of Common Stock, and if in the good faith

                                      -6-
<PAGE>

judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or under writers, of such offering the inclusion of the
Holder's Option or Option Shares would interfere with the successful marketing
of the shares of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated hereby may be
reduced; provided, however, that after any such required reduction the number of
         --------  -------
Option Shares to be included in such offering for the account of the Holder
shall constitute at least 25% of the total number of shares to be sold by the
Holder and Issuer in the aggregate; and provided further, however, that if such
                                        ----------------  -------
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agree agreements for the Issuer. Upon receiving any
request under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to registration
rights under this Section 6, in each case by promptly mailing the same, postage
prepaid, to the address of record of the persons entitled to receive such
copies. Notwithstanding anything to the contrary contained herein, in no event
shall Issuer be obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement.

          7.   (a)  Immediately prior to the occurrence of a Repurchase Event
(as defined below) and prior to twelve months thereafter, (i) following a
request of the Holder, delivered prior to an Exercise Termination Event, Issuer
(or any successor thereto) shall repurchase the Option from the Holder at a
price (the "Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option Price, multiplied
by the number of shares for which this Option may then be exercised and (ii) at
the request of the owner of Option Shares from time to time (the "Owner"),
delivered within 90 days of such occurrence (or such longer period as provided
in Section 10), Issuer shall repurchase such number of the Option Shares from
the Owner as the Owner shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number of Option
Shares so designated. The term "Market/Offer Price" shall mean the highest of
(i) the price per share of Common Stock at which a tender offer or exchange
offer therefor has been made, (ii) the price per share of Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (iii) the highest
closing price for shares of Common Stock within the six-month period immediately
preceding the date the Holder gives notice of the required repurchase of this
Option or the Owner gives notice of the required repurchase of Option Shares, as
the case may be, or (iv) in the event of a sale of all or a substantial portion
of Issuer's assets, 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 the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such sale.
In determining the Market/Offer Price, the value of consideration other than
cash shall be determined by a nationally recognized investment

                                      -7-
<PAGE>

banking firm selected by the Holder or Owner, as the case may be, and reasonably
acceptable to Issuer.

                    (b)  The Holder and the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose to Issuer, at
its principal office, this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (i) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (ii) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Re purchase Price therefor or the portion thereof that
Issuer is not then prohibited under applicable law and regulation from so
delivering.

                    (c)  To the extent that Issuer is prohibited under
applicable law or regulation from repurchasing the Option and/or the Option
Shares in full, Issuer shall immediately so notify the Holder and/or the Owner
and thereafter deliver or cause to be delivered, from time to time, to the
Holder and/or the Owner, as appropriate, the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
                                   --------  -------
after delivery of a notice of repurchase pursuant to paragraph (b) of this
Section 7 is prohibited under applicable law or regulation from delivering to
the Holder and/or the Owner, as appropriate, the Option Repurchase Price and the
Option Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Holder, a new Stock Option Agreement evidencing the right of the Holder to
purchase that number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock Option
Agreement was exercisable at the time of delivery of the notice of repurchase by
a fraction, the numerator of which is the Option Repurchase Price less the
portion thereof theretofore delivered to the Holder and the denominator of which
is the Option Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.

                    (d)  For purposes of this Section 7, a Repurchase Event
shall be deemed to have occurred (i) upon the consummation of any merger,
consolidation or similar transaction involving Issuer or any purchase, lease or
other acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition Transaction
pursuant to the provisos to Section 2(b)(i) hereof or (ii) upon the

                                      -8-
<PAGE>

acquisition by any person of beneficial ownership of 50% or more of the then
outstanding shares of Common Stock, provided that no such event shall constitute
a Repurchase Event unless a Subsequent Triggering Event shall have occurred
prior to an Exercise Termination Event. The parties hereto agree that Issuer's
obligations to repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event unless no
Subsequent Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination nation Event.

          8.   (a)  In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or merge into any
person, other than Grantee or one of its Subsidiaries, and 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 Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting shares
and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets 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 provision 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
(the "Substitute Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined) or (y) any person that controls
the Acquiring Corporation.

               (b)  The following terms have the meanings indicated:

                    (1)  "Acquiring Corporation" shall mean (i) the continuing
     or surviving corporation of a consolidation or merger with Issuer (if other
     than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
     surviving person, and (iii) the transferee of all or substantially all of
     Issuer's assets.

                    (2)  "Substitute Common Stock" shall mean the common stock
     issued by the issuer of the Substitute Option upon exercise of the
     Substitute Option.

                    (3)  "Assigned Value" shall mean the Market/Offer Price, as
     defined in Section 7.

                    (4)  "Average Price" shall mean the average closing price of
     a share of the 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 the person
     merging into Issuer or by any company which controls or is controlled by
     such person, as the Holder may elect.

                                      -9-
<PAGE>

               (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 the Holder. The issuer of the Substitute
Option shall also enter into an agreement with the then Holder or Holders of
the Substitute Option 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 is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.

               (e)  In no event, pursuant to any of the foregoing paragraphs,
shall the Substitute Option be exercisable for more than 19.9% 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 19.9%
of the shares of Substitute Common Stock outstanding prior to exercise but for
this clause (e), the issuer of the Substitute Option (the "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 this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be determined
by a nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to the Acquiring
Corporation.

               (f)  Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.

          9.   (a)  At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to the amount by which (i) the Highest Closing
Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised, and at the request of the
owner (the "Substitute Share Owner") of shares of Substitute Common Stock (the
"Substitute Shares"), the Substitute Option Issuer shall repurchase the
Substitute Shares at a price (the "Substitute Share Repurchase Price") equal to
the Highest Closing Price multiplied by the number of Substitute Shares so
designated. The term "Highest Closing Price" shall mean the highest closing
price for shares of Substitute Common Stock within the six-month period
immediately preceding the date the Substitute Option Holder gives notice of the
required repurchase of the Substitute Option or the Substitute Share Owner gives
notice of the required repurchase of the Substitute Shares, as applicable.

                                      -10-
<PAGE>

               (b)  The Substitute Option Holder and the Substitute Share Owner,
as the case may be, may exercise its respective right to require the Substitute
Option Issuer to re purchase the Substitute Option and the Substitute Shares
pursuant to this Section 9 by surrendering for such purpose to the Substitute
Option Issuer, at its principal office, the agreement for such Substitute Option
(or, in the absence of such an agreement, a copy of this Agreement) and
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as the
case may be, elects to require the Substitute Option Issuer to repurchase the
Substitute Option and/or the Substitute Shares in accordance with the provisions
of this Section 9. As promptly as practicable, and in any event within five
business days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.

               (c)  To the extent that the Substitute Option Issuer is
prohibited under applicable law or regulation from repurchasing the Substitute
Option and/or the Substitute Shares in part or in full, the Substitute Option
Issuer following a request for repurchase pursuant to this Section 9 shall
immediately so notify the Substitute Option Holder and/or the Substitute Share
Owner and thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate, the
portion of the Substitute Share Repurchase Price, respectively, which it is no
longer prohibited from delivering, within five business days after the date on
which the Substitute Option Issuer is no longer so prohibited; provided,
                                                               --------
however, that if the Substitute Option Issuer is at any time after delivery of a
-------
notice of repurchase pursuant to subsection (b) of this Section 9 prohibited
under applicable law or regulation from delivering to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to receive all
required regulatory and legal approvals as promptly as practicable in order to
accomplish such repurchase), the Substitute Option Holder or Substitute Share
Owner may revoke its notice of repurchase of the Substitute Option or the
Substitute Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall promptly (i)
deliver to the Substitute Option Holder or Substitute Share Owner, as
appropriate, that portion of the Substitute Option Repurchase Price or the
Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.

                                      -11-
<PAGE>

          10.  The 90-day period for exercise of certain rights under Sections
2, 6, 7 and 14 shall be extended: (i) to the extent necessary to obtain all
regulatory approvals for the exercise of such rights, and for the expiration of
all statutory waiting periods; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such exercise.

          11.  Issuer hereby represents and warrants to Grantee as follows:

               (a)  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 so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.

               (b)  Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from 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
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.

          12.  Grantee hereby represents and warrants to Issuer that:

               (a)  Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. 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. This Agreement has been duly executed and delivered by Grantee.

               (b)  The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.

          13.  (a)  Grantee may, at any time following a Repurchase Event and
prior to the occurrence of an Exercise Termination Event (or such later period
as provided in Section 10), relinquish the Option (together with any Option
Shares issued to and then owned by Grantee) to Issuer in exchange for a cash fee
equal to the Surrender Price (as defined below); provided, however, that Grantee
                                                 --------  -------
may not exercise its rights pursuant to this Section 13 if Issuer has
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7.

                                      -12-
<PAGE>

The "Surrender Price" shall be equal to $1,600,000 (i) plus, if applicable,
Grantee's purchase price with respect to any Option Shares and (ii) minus, if
applicable, the sum of (A) the excess of (1) the net cash amounts, if any,
received by Grantee pursuant to the arms' length sale of Option Shares (or any
other securities into which such Option Shares were converted or exchanged) to
any unaffiliated party, over (2) Grantee's purchase price of such Option Shares
and (B) the net cash amounts, if any, received by Grantee pursuant to an arms'
length sale of a portion of the Option to any unaffiliated party.

               (b)  Grantee may exercise its right to relinquish the Option and
any Option Shares pursuant to this Section 13 by surrendering to Issuer, at its
principal office, this Agreement together with certificates for Option Shares,
if any, accompanied by a written notice stating (i) that Grantee elects to
relinquish the Option and Option Shares, if any, in accordance with the
provisions of this Section 13 and (ii) the Surrender Price. The Surrender Price
shall be payable in immediately available funds on or before the second business
day following receipt of such notice by Issuer.

               (c)  To the extent that Issuer is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from paying the
Surrender Price to Grantee in full, Issuer shall immediately so notify Grantee
and thereafter deliver or cause to be delivered, from time to time, to Grantee,
the portion of the Surrender Price that it is no longer prohibited from paying,
within five business days after the date on which Issuer is no longer so
prohibited, provided, however, that if Issuer at any time after delivery of a
            --------  -------
notice of surrender pursuant to paragraph (b) of this Section 13 is prohibited
under applicable law or regulation, or as a consequence of administrative
policy, from paying to Grantee the Surrender Price in full, (i) Issuer shall (A)
use its reasonable best efforts to obtain all required regulatory and legal
approvals and to file any required notices as promptly as practicable in order
to make such payments, (B) within five days of the submission or receipt of any
documents relating to any such regulatory and legal approvals, provide Grantee
with copies of the same, and (C) keep Grantee advised of both the status of any
such request for regulatory and legal approvals, as well as any discussions with
any relevant regulatory or other third party reasonably related to the same and
(ii) Grantee may revoke such notice of surrender by delivery of a notice of
revocation to Issuer and, upon delivery of such notice of revocation, the
Exercise Termination Date shall be extended to a date six months from the date
on which the Exercise Termination Date would have occurred if not for the
provisions of this Section 13(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
13).

          14.  Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 90 days
following such Subsequent Triggering Event (or such longer period as provided in
Section 10); provided, however, that until the date 15 days following the date
             --------  -------
on which the Federal Reserve Board or the OTS, as applicable, approves an
application by Grantee to acquire the shares of Common Stock subject to the
Option, Grantee may not assign its rights under the Option except

                                      -13-
<PAGE>

in (i) a widely dispersed public distribution, (ii) a private placement in which
no one party acquires the right to purchase in excess of 2% of the voting shares
of Issuer, (iii) an assignment to a single party (e.g., a broker or investment
                                                  ----
banker) for the purpose of conducting a widely dispersed public distribution on
Grantee's behalf, or (iv) any other manner approved by the Federal Reserve Board
or the OTS, as applicable.

          15.  Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the Nasdaq National Market upon
official notice of issuance and applying to the Federal Reserve Board and/or the
OTS, as applicable, for approval to acquire the shares issuable hereunder, but
Grantee shall not be obligated to apply to state banking authorities for
approval to acquire the shares of Common Stock issuable hereunder until such
time, if ever, as it deems appropriate to do so.

          16.  (a)  Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed
$2,000,000 and, if it otherwise would exceed such amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv)
any combination thereof, so that Grantee's actually realized Total Profit shall
not exceed $2,000,000 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 date of
exercise, result in a Notional Total Profit (as defined below) of more than
$2,000,000; provided, that nothing in this sentence shall restrict any exercise
            --------
of the Option permitted hereby on any subsequent date.

               (c)  As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount received by
Grantee pursuant to Issuer's repurchase of the Option (or any portion thereof)
pursuant to Section 7 of this Agreement, (ii)(x) the amount received by Grantee
pursuant to Issuer's repurchase of Option Shares pursuant to Section 7, less (y)
the Grantee's purchase price for such Option Shares, (iii)(x) 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 (y) the Grantee's purchase price of such Option Shares,
(iv) any amounts received by Grantee on the transfer of the Option (or any
portion thereof) to any unaffiliated party, and (v) any equivalent amount with
respect to the Substitute Option.

               (d)  As used herein, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee may propose to exercise this
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that this Option were exercised on such date for such number
of shares and assuming that such shares, together with all other Option Shares
held by Grantee and its affiliates as of such date, were sold for cash at the

                                      -14-
<PAGE>

closing market price for the Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).

          17.  The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the par ties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.

          18.  If any term, provision, covenant or restriction contained in this
Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in 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 regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.

          19.  All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.

          20.  This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.

          21.  This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.

          22.  Except as otherwise expressly provided 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.

          23.  Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.

                                      -15-
<PAGE>

          24.  Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.

                                      -16-
<PAGE>

          IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.

                                      HERITAGE BANCORP, INC.

                                      By: /s/ J. Edward Wells
                                         --------------------------------------
                                          J. Edward Wells
                                          President and Chief Executive Officer

                                      SOUTHBANC SHARES, INC.

                                      By: /s/ Robert W. Orr
                                         --------------------------------------
                                          Robert W. Orr
                                          President and Chief Executive Officer

                                      -17-

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