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                                                                   Exhibit 10.20

                               OPTION AGREEMENT

                      THE TRANSFER OF THE OPTION GRANTED
             BY THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS.

     This OPTION AGREEMENT, dated as of December 1, 1999 (this "Agreement"), is
entered into between MECH FINANCIAL, INC., a Connecticut corporation ("Issuer"),
and WEBSTER FINANCIAL CORPORATION, a Delaware corporation ("Grantee").

                                  WITNESSETH:

        WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger, dated as of December 1, 1999 (the "Plan"), which was executed by the
parties thereto prior to the execution of this Agreement; and

        WHEREAS, as a condition and inducement to Grantee's entering into the
Plan and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as defined below).

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

     SECTION 1. Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 994,150
fully paid and nonassessable shares common stock, par value $.01 per share of
Issuer ("Issuer Common Stock") (which number of shares is equal to 19.99% of the
total number of outstanding shares of Issuer Common Stock on the date hereof),
at a price per share equal to $34.50 (the "Initial Price"); provided, however,
that in the event Issuer issues or agrees to issue any additional shares of
Issuer Common Stock (other than shares issued upon the exercise of options
outstanding as of the date of the Plan in accordance with their terms pursuant
to existing stock option plans), or grants one or more options to purchase
additional shares of Issuer Common Stock at a price less than the Initial Price,
as adjusted pursuant to Section 5(b) hereof, such price shall be equal to such
lesser price (such price, as adjusted, is hereinafter referred to as the "Option
Price"). The number of shares of Issuer Common Stock that may be received upon
the exercise of the Option and the Option Price are subject to adjustment as
herein set forth.

     SECTION 2. (a) Grantee may exercise the Option, in whole or part, at any
time and from time to time following the occurrence of a Purchase Event (as
defined below); provided, however, that the Option shall terminate and be of no
further force and effect upon the earliest to occur of the following events
(which are collectively referred to as an "Exercise Termination Event"):

          (i)   The time immediately prior to the Effective Time;

          (ii)  12 months after the first occurrence of a Purchase Event;

          (iii) 12 months after the termination of the Plan following the
     occurrence of a Preliminary Purchase Event (as defined below), unless
     clause (vii) of this Section 2(a) is applicable;
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          (iv)  upon the termination of the Plan, prior to the occurrence of a
     Purchase Event or Preliminary Purchase Event, by Issuer pursuant to
     Sections 8.1(e) or (f) of the Plan, both parties pursuant to Section 8.1(a)
     of the Plan, or by either party pursuant to Section 8.1(b), (c) or (h) of
     the Plan;

          (v)   18 months after the termination of the Plan, by either party
     pursuant to Section 8.1(d) of the Plan based on the required vote of
     Issuer's shareholders not being received;

          (vi)  18 months after the termination of the Plan, by Grantee pursuant
     to Section 8.1(e) or (f) thereof as a result of a breach by Issuer, unless
     such breach was willful or intentional; or

          (vii) 24 months after the termination of the Plan, by Grantee pursuant
     to Section 8.1(e) or (f) thereof as a result of a willful or intentional
     breach by Issuer, or by Grantee pursuant to Section 8.1(g) or (i) of the
     Plan.

       (b) The term "Preliminary Purchase Event" shall mean any of the following
events or transactions occurring on or after the date hereof and prior to an
Exercise Termination Event:

          (i) Issuer or any of its subsidiaries without having received
     Grantee's prior written consent, shall have entered into any letter of
     intent or definitive agreement to engage in an Acquisition Transaction (as
     defined below) with any person (as defined below) other than Grantee or any
     of its subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
     of Issuer shall have recommended that the shareholders of Issuer approve or
     accept any Acquisition Transaction with any Person (as the term "person" is
     defined in Section 3(a)9 and 13(d)(3) of the Securities Exchange Act of
     1934, as amended (the "Exchange Act") and the rules and regulations
     thereunder) other than Grantee or any Grantee Subsidiary. For purposes of
     this Agreement "Acquisition Transaction" shall mean (x) a merger,
     acquisition, consolidation or other business combination involving Issuer
     or any subsidiary of Issuer, (y) a purchase, lease or other acquisition of
     all or substantially all of the assets of Issuer or any subsidiary of
     Issuer, (z) a purchase or other acquisition (including by way of merger,
     consolidation, share exchange or otherwise) of Beneficial Ownership (as the
     term "beneficial ownership" is defined in Regulation 13d-3(a) of the
     Exchange Act) of securities representing 10.0% or more of the voting power
     of Issuer; provided, however, that "Acquisition Transaction" shall not
     include a transaction entered into after the termination of the Plan in
     which the Issuer is the surviving entity, if in connection with such
     transaction, no person acquires Beneficial Ownership of 10.0% or more of
     the total voting power of the Issuer to be outstanding after giving effect
     to such transaction and in which the aggregate voting power of Issuer
     acquired by all persons is less than 15% of the total voting power of
     Issuer;

          (ii)  Any Person (other than Grantee, any Grantee Subsidiary or any
     current affiliate of Issuer) shall have acquired Beneficial Ownership of
     10.0% or more of the outstanding shares of Issuer Common Stock;

          (iii) (a) Any Person (other than Grantee or any Grantee Subsidiary)
     shall have made a bona fide proposal to Issuer or, by a public announcement
     or written communication that is or becomes the subject of public
     disclosure, to Issuer's shareholders to engage in an Acquisition
     Transaction (including, without limitation, any situation in which any
     Person other than Grantee or any Grantee Subsidiary shall have commenced
     (as such term is defined in Rule 14d-2 under the Exchange Act), or shall

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     have filled a registration statement under the Securities Act of 1933, as
     amended (the "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 have Beneficial Ownership of
     10.0% 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)), and (b) the shareholders of Issuer do not approve
     the Merger, as defined in the Plan, at the Special Meeting, as defined in
     the Plan;

               (iv) There shall exist a willful or intentional breach under the
     Plan by Issuer and such breach would entitle Grantee to terminate the Plan;

               (v)  The special meeting of Issuers' shareholders held for the
     purpose of voting on the Plan shall not have been held pursuant to the Plan
     or shall have been canceled prior to termination of the Plan, or for any
     reason whatsoever Issuer's Board of Directors shall have failed to
     recommend, or shall have withdrawn or modified in a manner adverse to
     Grantee the recommendation of Issuer's Board of Directors, that Issuer's
     shareholders approve the Plan, or if Issuer or Issuer's Board of Directors
     fails to oppose any proposal by any Person (other than Grantee or any
     Grantee Subsidiary); or

               (vi) Any Person (other than Grantee or any Grantee Subsidiary)
     shall have filed an application or notice with the Board of Governors of
     the Federal Reserve System (the "FRB"), the Federal Deposit Insurance
     Corporation (the "FDIC"), the Connecticut Banking Commissioner (the
     "Connecticut Commissioner") or other regulatory or administrative agency or
     commission (each, a "Governmental Authority") for approval to engage in an
     Acquisition Transaction.

          (c)  The term "Purchase Event" shall mean any of the following events
or transactions occurring on or after the date hereof and prior to an Exercise
Termination Event:

               (i)   The acquisition by any Person (other than Grantee or any
     Grantee Subsidiary) of Beneficial Ownership (other than on behalf of the
     Issuer) of 25% or more of the then outstanding Issuer Common Stock;

               (ii)  The occurrence of a Preliminary Purchase Event described in
     Section 2(b)(i) except that the percentage referred to in clause (z)
     thereof shall be 25%; or

               (iii) The termination of the Plan by Grantee pursuant to Section
     8.1(e) or (f) thereof as a result of a willful or intentional breach by
     Issuer, or by Grantee pursuant to Section 8.1(g) or (i) of the Plan.

          (d)  Issuer shall notify Grantee promptly in writing of the occurrence
of any Preliminary Purchase Event or Purchase Event known to Issuer; provided,
however, that the giving of such notice by Issuer shall not be a condition to
the right of Grantee to exercise the Option.

          (e)  In the event that Grantee is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the "Option Notice," the
date of which being hereinafter referred to as the "Notice Date") specifying (i)
the total number of shares of Issuer Common Stock it will purchase pursuant to
such exercise and (ii) the time (which shall be on a business day that is not
less than three nor more than 10 business days from the Notice Date) on which
the closing of such purchase shall take place (the "Closing Date"); such closing
to take place at the principal office of the Issuer; provided, however, that, if
prior notification to or approval of the OTS, the FDIC, the FRB, the Connecticut
Commissioner or any other Governmental Authority is required in connection with
such purchase (each, a "Notification" or an "Approval,"

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as the case may be), (a) Grantee shall promptly file the required notice or
application for approval ("Notice/Application"), (b) Grantee shall expeditiously
process the Notice/Application and (c) for the purpose of determining the
Closing Date pursuant to clause (ii) of this sentence, the period of time that
otherwise would run from the Notice Date shall instead run from the later of (x)
in connection with any Notification, the date on which any required notification
periods have expired or been terminated and (y) in connection with any Approval,
the date on which such approval has been obtained and any requisite waiting
period or periods shall have expired. For purposes of Section 2(a) hereof, any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto. On or prior to the Closing Date, Grantee shall have the right to revoke
its exercise of the Option by written notice to the Issuer given not less than
three business days prior to the Closing Date.

          (f)  At the closing referred to in Section 2(e) hereof, Grantee shall
pay to Issuer the aggregate purchase price for the number of shares of Issuer
Common Stock specified in the Option Notice in immediately available funds by
wire transfer to a bank account designated by Issuer; provided, however, that
failure or refusal of Issuer to designate such a bank account shall not preclude
Grantee from exercising the Option.

          (g)  At such closing, simultaneously with the delivery of immediately
available funds as provided in Section 2(f) hereof, Issuer shall deliver to
Grantee a certificate or certificates representing the number of shares of
Issuer Common Stock specified in the Option Notice and, if the Option should be
exercised in part only, a new Option evidencing the rights of Grantee thereof to
purchase the balance of the shares of Issuer Common Stock purchasable hereunder.

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

          The transfer of the shares represented by this certificate is subject
     to resale restrictions arising under the Securities Act of 1933, as
     amended, and applicable state securities laws and to certain provisions of
     an agreement between Webster Financial Corporation and MECH Financial,
     Inc., dated as of December 1, 1999. A copy of such agreement is on file at
     the principal office of Webster Financial Corporation, and will be provided
     to the holder hereof without charge upon receipt by Webster Financial
     Corporation of a written request therefor.

It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the Securities and Exchange
Commission (the "SEC") or Governmental Authority responsible for administering
any applicable state securities laws or an opinion of counsel, in form and
substance satisfactory to Issuer's counsel, to the effect that such legend is
not required for purposes of the Securities Act or applicable state securities
laws; (ii) the reference to the provisions of 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 Grantee to Issuer of an Option Notice and the
tender of the applicable purchase price in immediately available funds on the
Closing Date, unless prohibited by applicable law, Grantee shall be deemed to be
the holder of record of the number of shares of Issuer Common Stock specified in
the Option Notice, notwithstanding that the

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stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then actually be
delivered to Grantee. Issuer shall pay all expenses and other charges that may
be payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of Grantee.

     SECTION 3. Issuer agrees: (i) that it shall at all times until the
termination of this Agreement have reserved for issuance upon the exercise of
the Option that number of authorized and reserved shares of Issuer Common Stock
equal to the maximum number of shares of Issuer Common Stock at any time and
from time to time issuable hereunder, all of which shares will, upon issuance
pursuant hereto, be duly authorized, validly issued, fully paid, non-assessable,
and delivered free and clear of all claims, liens, encumbrances and security
interests and not subject to any preemptive rights; (ii) that it will not, by
amendment of its certificate of incorporation 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) that it will seek any necessary shareholder approval that is
necessary to exercise the Option; (iv) promptly to take all reasonable action as
may from time to time be requested by the Grantee, at Grantee's expense
(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 prior approval of or notice to the OTS, the
FDIC, the FRB, the Connecticut Commissioner or any other Governmental Authority,
under the Change in Bank Control Act of 1978, as amended, the Bank Holding
Company Act, as amended, or any other applicable federal or state banking law,
is necessary before the Option may be exercised, cooperating with Grantee in
preparing such applications or notices and providing such information to each
such Governmental Authority as it may require in order to permit Grantee to
exercise the Option and Issuer duly and effectively to issue shares of Issuer
Common Stock pursuant hereto; and (v) to take all action provided herein to
protect the rights of Grantee against dilution.

     SECTION 4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of Grantee, 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 Issuer Common Stock purchasable
hereunder. The terms "Agreement" and "Option" as used herein include any
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.

     SECTION 5. The number of shares of Issuer Common Stock purchasable upon the
exercise of the Option shall be subject to adjustment from time to time as
follows:

           (a)  In the event of any change in the type or number of shares of
Issuer Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or other issuances of additional shares (other than pursuant to the exercise of
the Option), the type and number of shares of Issuer Common Stock purchasable
upon exercise hereof shall be appropriately adjusted and proper provision shall
be made so that, in the event that any additional shares of Issuer Common Stock
are to be issued or otherwise become outstanding as a result of any such change
(other than pursuant to an exercise of the Option), the number of shares of
Issuer Common Stock that remain subject to the Option shall be increased or
decreased (as

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applicable) so that, after such issuance and together with the shares of Issuer
Common Stock previously issued pursuant to the exercise of the Option (as
adjusted on account of any of the foregoing changes in the Issuer Common Stock),
the Option shall equal the sum of 19.9% of the total of the number of shares of
Issuer Common Stock then issued and outstanding.

           (b)  Whenever the number of shares of Issuer Common Stock purchasable
upon exercise hereof is adjusted as provided in this Section 5, the Option Price
shall be adjusted by multiplying the Option Price by a fraction, the numerator
of which shall be equal to the number of shares of Issuer Common Stock
purchasable prior to the adjustment and the denominator of which shall be equal
to the number of shares of Issuer Common Stock purchasable after the adjustment.

     SECTION 6. (a) Upon the occurrence of a Purchase 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 the Option (or part
thereof) or of any of the shares of Issuer Common Stock issued pursuant hereto),
promptly prepare, file and keep current a shelf registration statement with the
SEC, under the Securities Act covering any shares issued and issuable pursuant
to the Option and shall use its reasonable best efforts to cause such
registration statement to become effective, and to remain current and effective
for a period not in excess of one year from the day such registration statement
first becomes effective, in order to permit the sale or other disposition of any
shares of Issuer Common Stock issued upon total or partial exercise of the
Option ("Option Shares") in accordance with any plan of disposition requested by
Grantee. Grantee shall have the right to demand four such registrations which
right shall be transferable. Grantee shall provide all information reasonably
requested by Issuer for inclusion in any registration statement to be filed
hereunder. In connection with any such registration statement, Issuer and
Grantee shall provide each other with representations, warranties, indemnities
and other agreements customarily given in connection with such registration. If
requested by Grantee in connection with such registration, Issuer and Grantee
shall become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating themselves in respect of
representations, warranties, indemnities and other agreements customarily
included in such underwriting agreements. Notwithstanding the foregoing, if
Grantee revokes any exercise notice or fails to exercise any Option with respect
to any exercise notice pursuant to Section 2(e) hereof, Issuer shall not be
obligated to continue any registration process with respect to the sale of
Option Shares issuable upon the exercise of such Option and Grantee shall not be
deemed to have demanded registration of Option Shares.

           (b)  In the event that Grantee requests Issuer to file a registration
statement following the failure to obtain any approval required to exercise the
Option as described in Section 9 hereof, the closing of the sale or other
disposition of the Issuer Common Stock or other securities pursuant to such
registration statement shall occur substantially simultaneously with the
exercise of the Option.

           (c)  Concurrently with the preparation and filing of a registration
statement under Section 6(a) hereof, Issuer shall also make all filings required
to comply with state securities laws in such number of states as Grantee may
reasonably request.

     SECTION 7. (a) Upon the occurrence of a Purchase Event that occurs prior to
an Exercise Termination Event, (i) at the request (the date of such request
being the "Option Repurchase Request Date") of Grantee, Issuer shall repurchase,
subject to compliance with applicable law and out of funds legally available
therefor, the Option from Grantee 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 the
Option may then be exercised and (ii) at the request (the date of such request
being the "Option

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Share Repurchase Request Date") of the owner of Option Shares from time to time
(the "Owner"), 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 Issuer Common Stock at which a tender offer or
exchange offer therefor has been made after the date hereof and on or prior to
the Option Repurchase Request Date or the Option Share Repurchase Request Date,
as the case may be, (ii) the price per share of Issuer Common Stock paid or to
be paid by any third party pursuant to an agreement with Issuer (whether by way
of a merger, consolidation or otherwise), (iii) the average of the 20 highest
last sale prices for shares of Issuer Common Stock as reported within the 90-day
period ending on the Option Repurchase Request Date or the Option Share
Repurchase Request Date, as the case may be, and (iv) in the event of a sale of
all or substantially all 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 an investment banking firm selected by Grantee or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Issuer Common Stock outstanding at the time of such sale. In
determining the market/offer price, the value of consideration other than cash
shall be the value determined by an investment banking firm selected by Grantee
or the Owner, as the case may be, and reasonably acceptable to Issuer. The
investment banking firm's determination shall be conclusive and binding on all
parties.

           (b)  Grantee or the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and/or any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that Grantee or
the Owner, as the case may be, elects to require Issuer to repurchase the Option
and/or the Option Shares in accordance with the provisions of this Section 7. As
promptly as practicable, and in any event within 30 business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto, Issuer shall deliver or
cause to be delivered to Grantee the Option Repurchase Price or to the Owner the
Option Share Repurchase Price.

           (c)  Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory, shareholder and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 7. Nonetheless, to the extent that
Issuer is prohibited under applicable law or regulation from repurchasing any
Option and/or any Option Shares in full, Issuer shall promptly so notify Grantee
and/or the Owner and thereafter deliver or cause to be delivered, from time to
time, to Grantee 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 Section 7(b)
hereof is prohibited as referred to above, from delivering to Grantee and/or the
Owner, as appropriate, the Option Repurchase Price or the Option Share
Repurchase Price, respectively, in full, Grantee or the Owner, as appropriate,
may revoke its notice of repurchase of the Option or the Option Shares either in
whole or in part whereupon, in the case of a revocation in part, Issuer shall
promptly (i) deliver to Grantee and/or the Owner, as appropriate, that portion
of the Option Purchase Price or the Option Share Repurchase Price that Issuer is
not prohibited from delivering after taking into account any such revocation and
(ii) deliver, as appropriate, either (A) to Grantee, a new Agreement evidencing
the right of Grantee to purchase that number of shares of Issuer Common Stock
equal to the number of shares of Issuer Common Stock purchasable immediately
prior to the delivery of the notice of repurchase less the number of shares of
Issuer Common Stock covered by the portion of the Option repurchased or, (B) to
the Owner, a certificate for the number of Option Shares covered by the
revocation.

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           (d)  Issuer shall not enter into any agreement with any Person (other
than Grantee or a Grantee Subsidiary) for an Acquisition Transaction unless the
other Person assumes all the obligations of Issuer pursuant to this Section 7 in
the event that Grantee or the Owner elects, in its sole discretion, to require
such other Person to perform such obligations.

     SECTION 8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into a letter of intent or definitive agreement (i) to
consolidate or merge with any Person (other than Grantee or a Grantee
Subsidiary), and Issuer shall not be the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any Person (other than Grantee or a
Grantee Subsidiary) 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 any other Person or cash or any other property or the then
outstanding shares of Issuer Common Stock 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 to
any Person (other than Grantee or a Grantee Subsidiary) then, and in each such
case, such letter of intent or definitive agreement governing such transaction
shall make proper provision so that the Option shall, upon the consummation of
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 Grantee, of either (x) the Acquiring Corporation (as defined below)
or (y) any person that controls the Acquiring Corporation (the Acquiring
Corporation and any such controlling person being hereinafter referred to as the
"Substitute Option Issuer").

           (b)  The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock (as is hereinafter defined) as is equal to the
market/offer price (as defined in Section 7 hereof) 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 the Substitute Common Stock (the "Substitute
Purchase Price") shall then be equal to the Option 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 for which the Substitute Option is exercisable.

           (c)  The Substitute Option shall otherwise 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 Grantee, provided, further that the terms
of the Substitute Option shall include (by way of example and not limitation)
provisions for the repurchase of the Substitute Option and Substitute Common
Stock by the Substitute Option Issuer on the same terms and conditions as
provided in Section 7 hereof.

           (d)  The following terms have the meanings indicated:

                (i)   "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 corporation, and (iii) the transferee of all or any substantial
     part of Issuer's assets.

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

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                (iii) "Average Price" shall mean the average closing price of a
     share of Substitute Common Stock for the one-year period 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 Issuer Common Stock issued by Issuer,
     the corporation merging into Issuer or by any company which controls or is
     controlled by such merging corporation, as Grantee may elect.

           (e)  In no event, pursuant to any of the foregoing paragraphs, shall
the Substitute Option be exercisable for more than 19.99% of the shares of
Substitute Common Stock outstanding immediately prior to the issuance of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than such number of shares of Substitute Common Stock but for this
clause (e), the Substitute Option Issuer shall make a cash payment to Grantee
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 Grantee and the Substitute Option Issuer. In addition,
the provisions of Section 5(a) hereof shall not apply to the issuance of any
Substitute Option and for purposes of applying Section 5(a) hereof thereafter to
any Substitute Option, the percentage referred to in Section 5(a) hereof shall
thereafter equal the percentage that the percentage of the shares of Substitute
Common Stock subject to the Substitute Option bears to the number of shares of
Substitute Common Stock outstanding.

     SECTION 9. Notwithstanding Sections 2, 6 and 7 hereof, if Grantee has given
the notice referred to in one or more of such Sections, the exercise of the
rights specified in any such Section shall be extended (a) if the exercise of
such rights requires obtaining regulatory approvals (including any required
waiting periods) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights, and (b) to the extent necessary to avoid liability
under Section 16(b) of the Exchange Act by reason of such exercise; provided,
that in no event shall any closing date occur more than 12 months after the
related notice date, and, if the closing date shall not have occurred within
such period due to the failure to obtain any required approval by the OTS, the
FDIC, the FRB, the Connecticut Commissioner or any other Governmental Authority
despite the best efforts of Issuer or the Substitute Option Issuer, as the case
may be, to obtain such approvals, the exercise of the rights shall be deemed to
have been rescinded as of the related notice date. In the event (a) Grantee
receives official notice that an approval of the OTS, the FDIC, the FRB, the
Connecticut Commissioner or any other Governmental Authority required for the
purchase and sale of the Option Shares will not be issued or granted or (b) a
closing date has not occurred within 12 months after the related notice date due
to the failure to obtain any such required approval, Grantee shall be entitled
to exercise the Option in connection with the concurrent resale of the Option
Shares pursuant to a registration statement as provided in Section 6 hereof.
Nothing contained in this Agreement shall restrict Grantee from specifying
alternative means of exercising rights pursuant to Sections 2, 6 or 7 hereof in
the event that the exercising of any such rights shall not have occurred due to
the failure to obtain any required approval referred to in this Section 9.

     SECTION 10. Issuer hereby represents and warrants to Grantee as follows:

           (a)  Issuer has the requisite 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 approved 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 executed and

                                      -9-
<PAGE>

delivered by, and constitutes a valid and binding obligation of, Issuer,
enforceable against Issuer in accordance with its terms, subject to any required
Governmental Approval, and except as enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.

           (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
Issuer Common Stock equal to the maximum number of shares of Issuer 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,
non-assessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.

     SECTION 11. (a) Neither of the parties hereto may assign any of its rights
or delegate any of its obligations under this Agreement or the Option created
hereunder to any other Person without the express written consent of the other
party, except that Grantee may assign this Agreement to a wholly owned
subsidiary of Grantee and Grantee may assign its rights hereunder in whole or in
part after the occurrence of a Preliminary Purchase Event. The term "Grantee" as
used in this Agreement shall also be deemed to refer to Grantee's permitted
assigns.

           (b)  Any assignment of rights of Grantee to any permitted assignee of
Grantee hereunder shall bear the restrictive legend at the beginning thereof
substantially as follows:

           The transfer of the option represented by this assignment and the
     related option agreement is subject to resale restrictions arising under
     the Securities Act of 1933, as amended, and applicable state securities
     laws and to certain provisions of an agreement between Webster Financial
     Corporation and MECH Financial, Inc., dated as of December 1, 1999. A copy
     of such agreement is on file at the principal office of Webster Financial
     Corporation, and will be provided to any permitted assignee of the Option
     without charge upon receipt of a written request therefor.

     SECTION 12. Each of Grantee and Issuer will use its reasonable 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, applying to the
OTS, the FDIC, the FRB, the Connecticut Commissioner and any other Governmental
Authority for approval to acquire the shares issuable hereunder.

     SECTION 13. 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 parties hereto shall be enforceable by either party
hereto through injunctive or 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.

     SECTION 14. 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

                                      -10-
<PAGE>

way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that Grantee is not permitted to acquire, or Issuer
is not permitted to repurchase pursuant to Section 7 hereof, the full number of
shares of Issuer Common Stock provided in Section 1 hereof (as adjusted pursuant
hereto), it is the express intention of Issuer to allow Grantee to acquire or to
require Issuer to repurchase such lesser number of shares as may be permissible
without any amendment or modification hereof.

     SECTION 15. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in the manner
and at the respective addresses of the parties set forth in the Plan.

     SECTION 16. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto shall be governed by and
construed in accordance with the laws of the State of Delaware (but not
including the choice of law rules thereof).

     SECTION 17. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement and shall be effective at the time of execution and delivery.

     SECTION 18. 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.

     SECTION 19. Except as otherwise expressly provided herein or in the Plan,
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 except as assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.

     SECTION 20. Capitalized terms used in this Agreement and not defined herein
but defined in the Plan shall have the meanings assigned thereto in the Plan.

     SECTION 21. Nothing contained in this Agreement shall be deemed to
authorize or require Issuer or Grantee to breach any provision of the Plan or
any provision of law applicable to the Grantee or Issuer.

     SECTION 22. In the event that any selection or determination is to be made
by Grantee or the Owner hereunder and at the time of such selection or
determination there is more than one Grantee or Owner, such selection shall be
made by a majority in interest of such Grantees or Owners.

     SECTION 23. In the event of any exercise of the option by Grantee, Issuer
and such Grantee 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.

     SECTION 24. Except to the extent Grantee exercises the Option, Grantee
shall have no rights to vote or receive dividends or have any other rights as a
shareholder with respect to shares of Issuer Common Stock covered hereby.

                                      -11-
<PAGE>

                            [SIGNATURE PAGE FOLLOWS]

                                      -12-
<PAGE>

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

                    Webster Financial Corporation

                    By:     /s/ James C. Smith
                         ---------------------------------------------
                         Name: James C. Smith
                         Title:   Chairman and Chief Executive Officer

                    MECH Financial, Inc.

                    By:     /s/ Edgar C. Gerwig
                         ---------------------------------------------
                         Name:  Edgar C. Gerwig
                         Title:EXHIBIT 10.2

                                  ORRSTOWN BANK
                          SALARY CONTINUATION AGREEMENT

     THIS AGREEMENT is made this lst day of October 1998, by and between
ORRSTOWN BANK, a Pennsylvania corporation located in Orrstown, Pennsylvania (the
"Company") and Kenneth R. Shoemaker (the "Executive").

                                  INTRODUCTION

     To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    Article 1
                                   Definitions

     1.1 Definitions. Whenever used in this Agreement, the following words and
phrases shall have the meanings specified:

     1.1.1 "Change of Control" shall mean any of the following:

          (A) any person (as such term is used in Sections 13(d) and 14(d)(2) of
     the Securities Exchange Act of 1934, as amended (the "Exchange Act"), other
     than the Corporation, a subsidiary of the Corporation, an employee benefit
     plan (or related trust) of the Corporation or a direct or indirect
     subsidiary of the Corporation, or affiliates of the Corporation (as defined
     in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as
     determined pursuant to Rule 13d-3 under the Exchange Act), directly or
     indirectly, of securities of the Corporation representing more than 20% of
     the combined voting power of the Corporation's then outstanding securities
     or announces a tender offer or exchange offer for securities of the
     Corporation representing more than 20% of the combined voting power of the
     Corporation's then outstanding securities; or

          (B) the liquidation or dissolution of the Corporation or the Company
     or the occurrence of, or execution of an agreement providing for, a sale of
     all or substantially all of the assets of the Corporation or the Company to
     an entity which is not a direct or indirect subsidiary of the Corporation;
     or

          (C) the occurrence of, or execution of an agreement providing for, a
     reorganization, merger, consolidation or other similar transaction or
     connected series of transactions of the Corporation as a result of which
     either (a) the Corporation does not survive or (b) pursuant to which shares
     of the Corporation common stock ("Common Stock") would be converted into
     cash, securities or other property, unless, in case of either (a) or (b)
     the holders of Corporation Common Stock immediately prior to such
     transaction will, following the consummation of the transaction,
     beneficially own, directly or indirectly, more than 50% of the combined
     voting power of the then outstanding voting securities entitled to vote
     generally in the election of directors of the corporation surviving,
     continuing or resulting from such transaction; or

          (D) the occurrence of, or execution of an agreement providing for, a
     reorganization, merger, consolidation, or similar transaction of the
     Corporation, or before any connected series of such transactions, if, upon
     consummation of such transaction or transactions, the persons who are
     members of the Board of Directors of the Corporation immediately before
     such transaction or transactions cease or, in the case of the execution of
     an agreement for such transaction or transactions, it is contemplated in
     such agreement that upon consummation such persons would cease, to
     constitute a majority of the Board of Directors of the Corporation or, in a
     case where the Corporation does not survive in such transaction, of the
     corporation surviving, continuing or resulting from such transaction or
     transactions; or

          (E) any other event which is at any time designated as a "Change of
     Control" for purposes of this Agreement by a resolution adopted by the
     Board of Directors of the Corporation with the affirmative vote of a
     majority of the non-employee directors in office at the time the resolution
     is adopted; in the event any such resolution is adopted, the Change of
     Control event specified thereby shall be deemed incorporated herein by
     reference and thereafter may not be amended, modified or revoked without
     the written agreement of Executive.

          Notwithstanding anything else to the contrary set forth in this
     Agreement, if (i) an agreement is executed by the Corporation or the
     Company providing for any of the transactions or events constituting a
     Change of Control as defined herein, and the agreement subsequently expires
     or is terminated without the transaction or event being consummated, and
     (ii) Executive's employment did not terminate during the period after the
     agreement and prior to such expiration or termination, for purposes of this
     Agreement it shall be as though such agreement was never executed and no
     Change of Control event shall be deemed to have occurred as a result of the
     execution of such agreement.

     1.1.2 "Code" means the Internal Revenue Code of 1986, as amended.

     1.1.3 "Corporation" means 0rrstown Financial Services, Inc.

     1.1.4 "Disability" means the Executive suffering a sickness, accident or
injury which, in the judgment of a physician satisfactory to the Company,
prevents the Executive from performing substantially all of the Executive's
normal duties for the Company. As a condition to any benefits, the Company may
require the Executive to submit to such physical or mental evaluations and tests
as the Company's Board of Directors deems appropriate

     1.1.5 "Early Termination" means the Termination of Employment before Normal
Retirement Age for reasons other than death, disability, termination for cause
or following a change of control.

     1.1.6 "Early Termination Date" means the month, day and year which early
termination occurs.

     1.1.7 "Norma1 Retirement Age" means the Executive's 62nd birthday.

     1.1.8 "Normal Retirement Date" means the later of the Normal Retirement Age
or Termination of Employment.

                                        1

<PAGE>

     1.1.9 "Plan Year" means a twelve-month period commencing on October 1 and
ending on September 30 of each year. The initial Plan Year shall commence on the
effective date of this Agreement.

     1.1.0 "Termination for Cause" See Section 5.2.

     1.1.11 "Termination of Employment" means that the Executive ceases to be
employed by the Company for any reason whatsoever other than by reason of a
leave of absence which is approved by the Company. For purposes of this
Agreement, if there is a dispute over the employment status of the Executive or
the date of the Executive's Termination of Employment, the Company shall have
the sole and absolute right to decide the dispute.

                                    Article 2
                                Lifetime Benefits

     2.1 Normal Retirement Benefit. Upon Termination of Employment on or after
the Normal Retirement Age for reasons other than death, the Company shall pay to
the Executive the benefit described in this Section 2.1 in lieu of any other
benefit under this Agreement.

     2.1.1 Amount of Benefit. The annual Normal Retirement Benefit under this
section 2.1 is $80,000 (eighty thousand dollars). The Company may increase the
annual benefit under this Section 2.1 at the sole and absolute discretion of the
Company's Board of Directors. Any increase in the annual benefit shall require
the recalculation of all the amounts on Schedule A attached hereto. The annual
benefit amounts on Schedule A are calculated by amortizing the annual normal
retirement benefit using the interest method of accounting, a 7.50% discount
rate, monthly compounding and monthly payments.

     2.1.2 Payment of Benefit. The Company shall pay the annual benefit to the
Executive in 12 equal monthly installments payable on the first day of each
month commencing with the month following the Executive's Normal Retirement Date
and continuing for 179 additional months.

     2.1.3 Benefit Increases. Commencing on the first anniversary of the first
benefit payment, and continuing on each subsequent anniversary, the Company's
Board of Directors, in its sole discretion, may increase the benefit.

     2.2 Early Termination Benefit. Upon Early Termination, the Company shall
pay to the Executive the benefit described in this Section 2.2 in lieu of any
other benefit under this Agreement.

     2.2.1 Amount of Benefit. The annual benefit under this Section 2.2 is the
Early Termination Annual Benefit set forth in Schedule A for the Plan Year
ending immediately prior to the Early Termination Date.

     2.2.2 Payment of Benefit. The Company shall pay the annual benefit to the
Executive in 12 equal monthly installments payable on the first day of each
month commencing with the month following the Executive's Normal Retirement Age
and continuing for 179 additional months.

     2.2.3 Benefit Increases. Benefit payments may be increased as provided in
Section 2.1.3.

     2.3 Disability Benefit. If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this section 2.3 in lieu of any other benefit
under this Agreement.

     2.3.1 Amount of Benefit. The annual benefit under this Section 2.3 is the
Disability Benefit amount set forth in Schedule A for the Plan Year ending
immediately prior to the date in which Termination of Employment occurs.

     2.3.2 Payment of Benefit. The Company shall pay the benefit to the
Executive in 12 equal monthly installments commencing within 90 days after the
date of the Executive's Termination of Employment and continuing for 179
additional months.

     2.3.3 Benefit Increases. Benefit payments may be increased as provided in
Section 2.1.3.

     2.4 Change of Control Benefit. If the Executive is in the active service of
the Company at the time of a Change of Control, the Company shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.

     2.4.1 Amount of Benefit. The annual benefit under this Section 2.4 is the
Normal Retirement Benefit described in Section 2.1.1.

     2.4.2 Payment of Benefit. The Company shall pay the annual benefit amount
to the Executive in 12 equal monthly installments payable on the first day of
each month commencing with the month following the Executive's Normal Retirement
Date and continuing for 179 additional months.

     2.4.3 Benefit Increases. Benefit payments may be increased as provided in
Section 2.1.3

                                    Article 3
                                 Death Benefits

     3.1 Death During Active Service. If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3. 1. This benefit shall be paid in lieu of
the Lifetime Benefits of Article 2.

     3.1.1 Amount of Benefit. The annual benefit under this Section 3.1 is the
Normal Retirement Benefit described Section 2.1.1.

     3.1.2 Payment of Benefit. The Company shall pay the annual benefit to the
beneficiary in 12 equal monthly installments payable on the first day of each
month commencing with the month following the Executive's death and continuing
for 179 additional months.

                                        2

<PAGE>

     3.2 Death During Benefit Period. If the Executive dies after the benefit
payments have commenced under this Agreement but before receiving all such
payments, the Company shall pay the remaining benefits to the Executive's
beneficiary at the same time and in the sameamounts they would have been paid to
the Executive had the Executive survived.

     3.3 Death Following Termination of Employment But Before Benefits Commence.
If the Executive is entitled to benefits under this Agreement, but dies prior to
receiving said benefits, the Company shall pay to the Executive's beneficiary
the same benefits, in the same manner, they would have been paid to the
Executive had the Executive survived; however, said benefit payments will
commence upon the Executive's death.

                                    Article 4
                                  Beneficiaries

     4.1 Beneficiary Designations. The Executive shall designate a beneficiary
by filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive, or if the Executive names a spouse as beneficiary and the
marriage is subsequently dissolved. If the Executive dies without a valid
beneficiary designation, all payments shall made to the Executive's estate.

     4.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incapacitated, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian , legal
representative or person having the care or custody of such minor, incapacitated
person or incapable person. The Company may require proof of incapacity,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.

                                    Article 5
                               General Limitations

     Notwithstanding any provision of this Agreement to the contrary, the
Company shall not pay any benefit under this Agreement:

     5.1 Excess Parachute Payment. To the extent the benefit would be an excess
parachute payment under Section 280G of the Code.

     5.2 Termination for Cause. If the Company terminates the Executive's
employment for:

     5.2.1 Gross negligence or gross neglect of duties;

     5.2.2 Commission of a felony or of a gross misdemeanor involving moral
turpitude; or

     5.2.3 Fraud, disloyalty, dishonesty or willful violation of any law or
significant Company policy committed in connection with the Executive's
employment and resulting in an adverse effect on the Company.

     5.3 Competition After Termination of Employment. If the Executive, without
the prior written consent of the Company, engages in, becomes interested in,
directly or indirectly, as a sole proprietor, as a partner in a partnership, or
as a substantial shareholder in a corporation, or becomes associated with, in
the capacity of employee, director, officer, principal, agent, trustee or in any
other capacity whatsoever, any enterprise conducted in the trading area (a 50
mile radius of the main office of the Company at the comer of King and Penn
Streets), which enterprise is, or may deemed to be, competitive with any
business carried on by the Company as of the date of termination of the
Executive's employment or his retirement. This section shall not apply following
a Change of Control.

     5.4 Suicide or Misstatement. If the Executive commits suicide within two
years after the date of this Agreement, or if the Executive has made any
material misstatement of fact on any application for life insurance purchased by
the Company.

                                    Article 6
                          Claims and Review Procedures

     6.1 Claims Procedure. The Company shall notify any person or entity that
makes a claim against the Agreement (the "Claimant") in writing, within ninety
(90) days of Claimant's written application for benefits, of his or her
eligibility or noneligibility for benefits under the Agreement. If the Company
determines that the Claimant is not eligible for benefits or full benefits, the
notice shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (4)
explanation of the Agreement's claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Claimant of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional ninety-day
period.

     6.2 Review Procedure. If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different benefits, the Claimant shall have the opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company within sixty (60) days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle him or her to benefits or to greater or different benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Claimant (and counsel, if any) an opportunity to present his or
her position to the Company orally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Claimant of its decision in writing within the sixty-day period, stating
specifically the basis of its decision, written a manner calculated to be
understood by the Claimant and the specific provisions of the Agreement on which
the decision is based. If, because of the need for a hearing, the sixty-day
period is not sufficient, the decision may be deferred for up to another
sixty-day period at the election of the Company, but notice of this deferral
shall be given to the Claimant.

                                        3

<PAGE>

                                    Article 7
                           Amendments and Termination

     This Agreement may be amended or terminated only by a written agreement
signed by the Company and the Executive.

                                    Article 8
                                  Miscellaneous

     8.1 Binding Effect. This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.

     8.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.

     8.3 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

     8.4 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.

     8.5 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the Commonwealth of Pennsylvania, except to the extent
preempted by the laws of the United States of America.

     8.6 Unfunded Arrangement. The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay such
benefits. The rights to benefits are not subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive's life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.

     8.7 Recovery of Estate Taxes. If the Executive's gross estate for federal
estate tax purposes includes any amount determined by reference to and on
account of this Agreement, and if the beneficiary is other than the Executive's
estate, then the Executive's estate shall be entitled to recover from the
beneficiary receiving such benefit under the terms of the Agreement, an amount
by which the total estate tax due by the Executive's estate, exceeds the total
estate tax which would have been payable if the value of such benefit had not
been included in the Executive's gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the beneficiary has a liability hereunder, the beneficiary may
petition the Company for a lump sum payment in an amount not to exceed the
beneficiary's liability hereunder.

     8.8 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.

     8.9 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:

     8.9.1 Interpreting the provisions of the Agreement;

     8.9.2 Establishing and revising the method of accounting for the Agreement;

     8.9.3 Maintaining a record of benefit payments; and

     8.9.4 Establishing rules and prescribing any forms necessary or desirable
to administer the Agreement,

<PAGE>

     IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.

EXECUTIVE:                                   COMPANY:
                                             ORRSTOWN BANK

_____________________________                By _______________________________
Kenneth R. Shoemaker
                                             Title ____________________________

     By execution hereof, Orrstown Financial Services, Inc. consents to and
agrees to be bound by the terms and condition of this Agreement.

ATTEST:                                       CORPORATION:
                                              ORRSTOWN FINANCIAL SERVICES, INC.

_____________________________                 By ______________________________

                                              Title ___________________________

                                        4

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