Document:

<PAGE>

                                                                      Exhibt 4.1
                                                                      ----------

                         REGISTRATION RIGHTS AGREEMENT

   AGREEMENT dated as of May 9, 2000 among and TranSwitch Corporation, a
Delaware corporation (the "Company") and the stockholders of the Company listed
on the signature pages hereto (the "Stockholders").

                             W I T N E S S E T H:

   WHEREAS, pursuant to the Purchase Agreement of even date herewith (the
"Purchase Agreement"), among the Company, the Stockholders and others, the
 ------------------
Company is acquiring all of the issued and outstanding shares of capital stock
of Easics NV, a Belgian corporation ("Easics").

   WHEREAS, in connection therewith, each Stockholder is acquiring unregistered
shares of Common Stock of the Company (the "Shares"); and

   WHEREAS, the Company and the Stockholders wish to set forth certain rights
and obligations with regard to the registration of the Shares;

   NOW, THEREFORE, the parties hereto agree as follows:

     1.  Certain Definitions.  As used in this Agreement, the following terms
         -------------------
shall have the following respective meanings:

     "Commission" shall mean the United States Securities and Exchange
      ----------
   Commission, or any other federal agency at the time administering the
   Securities Act.

     "Shares" shall mean the shares of Common Stock of the Company issued to
      ------
   the Stockholders on even date herewith pursuant to the Purchase Agreement.

     "Common Stock" shall mean the Common Stock, $.001 par value, of the
      ------------
   Company, as constituted as of the date of this Agreement.

     "Exchange Act" shall mean the United States Securities Exchange Act of
      ------------
   1934, as amended, or any similar federal statute, and the rules and
   regulations of the Commission thereunder, all as the same shall be in effect
   at the time.

     "Registration Expenses" shall mean the expenses so described in Section 7.
      ---------------------

     "Securities Act" shall mean the United States Securities Act of 1933, as
      --------------
   amended, or any similar federal statute, and the rules and regulations of the
   Commission thereunder, all as the same shall be in effect at the time.
<PAGE>

                                      -2-

     "Selling Expenses" shall mean the expenses so described in Section 7.
      ----------------

     2.  Securities Act Matters.  Each Stockholder acknowledges and agrees that
         ----------------------
the Shares have not been registered under the Securities Act or under the
securities laws of any state or foreign jurisdiction, in reliance upon certain
exemptive provisions of such statutes.  Each Stockholder recognizes and
acknowledges that such claims of exemption are based, in part, upon each
Stockholder's representations contained in this Agreement.  Each Stockholder
further recognizes and acknowledges that, because the Shares are unregistered
under federal and state laws, they are not presently eligible for public resale,
and may only be resold in the future pursuant to an effective registration
statement under the Securities Act and any applicable state securities laws, or
pursuant to a valid exemption from such registration requirements.  Each
Stockholder recognizes and acknowledges that Rule 144 or any other exemption
promulgated under the Securities Act (which facilitates routine sales of
securities in accordance with the terms and conditions of that Rule, including a
holding period requirement) is not now available for resale of the Shares, and
each Stockholder recognizes and acknowledges that, in the absence of the
availability of Rule 144 or any other exemption under the Securities Act, a sale
pursuant to a claim of exemption from registration under the Securities Act
would require compliance with some other exemption under the Securities Act,
none of which may be available for resale of the Shares.  Each Stockholder
recognizes and acknowledges that, except as set forth in this Agreement, the
Company is under no obligation to register the Shares, either pursuant to the
Securities Act or the securities laws of any state.

     3.  Restrictive Legend.  Each certificate representing Shares shall, except
         ------------------
as otherwise provided in this Section 3, be stamped or otherwise imprinted with
a legend substantially in the following form:

         "The Securities represented hereby have not been registered under the
     Securities Act of 1933, as amended, and may not be sold, transferred or
     otherwise disposed of except in accordance with the terms thereof and
     unless registered with the Securities and Exchange Commission of the United
     States and the securities regulatory authorities of certain states or
     unless an exemption from such registration is available."

     Such certificates shall not bear such legend if in the opinion of counsel
satisfactory to the Company the securities being sold thereby may be publicly
sold without registration under the Securities Act or if such securities have
been sold pursuant to Rule 144, any other exemption under the Securities Act or
an effective registration statement.

     4.  Required Registration on Form S-3.  Subject to the provisions set forth
         ---------------------------------
below, the Company agrees to use reasonable best efforts to (i) cause a
registration statement on Form S-3 under the Securities Act (the "S-3
Registration Statement") relating to the resale of the Shares to be filed as
soon as practicable and in any event no later than June 1, 2000; and (ii) cause
the S-3 Registration Statement to become effective no later than the expiration
date of the Pooling Restricted Period (as hereinafter defined) and thereafter
remain effective until the earlier of (A)
<PAGE>

                                      -3-

the first (1st) anniversary of the Closing Date (as defined in the Purchase
Agreement) (the "Distribution Period") or (B) the sale of all Shares covered
thereby. Anything to the contrary herein notwithstanding, the Company shall not
be required to take any action to cause the S-3 Registration Statement to be
declared effective by the Commission at any time prior to the publication by the
Company of financial results including at least thirty (30) days' post-closing
combined operating results of the Company and Easics (the "Pooling Restricted
Period"), and provided further, however, that the Company may suspend sales at
              -------- -------  -------
any time under the S-3 Registration Statement immediately upon notice to each of
the Stockholders at their last known addresses, for any of the reasons and for
the time periods set forth in Section 7. Any registration statement filed or
required to be filed by the Company pursuant to this Section 5 shall be referred
to herein as the "Registration Statement."

     5.  Registration Procedures.  If and whenever the Company is required by
         -----------------------
the provisions of Section 4 to use reasonable best efforts to effect the
registration of any Shares under the Securities Act, the Company will, as
expeditiously as possible:

         (a) prepare and file with the Commission such amendments and
supplements to the Registration Statement, and the prospectuses used in
connection therewith, as may be necessary to comply with the Securities Act;

         (b) furnish to each Stockholder such number of copies of the
Registration Statement and each such amendment and supplement thereto (in each
case including exhibits) and the prospectus included therein (including each
preliminary prospectus) as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Shares covered by the
Registration Statement;

         (c) register or qualify the Shares covered by the Registration
Statement under the securities or "blue sky" laws of the jurisdictions where the
Company is currently registered or qualified, provided, however, that the
Company shall not for any such purpose be required to qualify generally to
transact business as a foreign corporation in any jurisdiction where it is not
so qualified or to consent to general service of process in any such
jurisdiction;

         (d) have the Shares covered by the Registration Statement subject to
quotation on the Nasdaq National Market or listed on any exchange on which
shares of Common Stock are traded; and

         (e) promptly notify each Stockholder (at their last known addresses)
(i) of the effective date of the Registration Statement and the date when any
post-effective amendment to the Registration Statement becomes effective, (ii)
of any stop order or notification from the Commission or any other jurisdiction
as to the suspension of the effectiveness of the Registration Statement, or
(iii) of the end of any suspension under Section 7.

         (f) notify the Stockholder of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or
<PAGE>

                                      -4-

necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Stockholder prepare and
furnish to the Stockholder a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.

     6.  Suspension.
         ----------

         (a) The rights of the Stockholders to distribute the Shares pursuant to
this Agreement and the S-3 Registration Statement may be suspended by the
Company at any time immediately upon notice to the Stockholders at the last
known addresses of the Stockholders, for a period or periods of time not to
exceed 45 days consecutively or 90 days in the aggregate during any 12-month
period, if there then exists material, non-public information relating to the
Company, which, in the reasonable opinion of the Company, would not be
appropriate for disclosure during that time.

     7.  Expenses.  All expenses incurred by the Company in complying with
         --------
Section 5, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses incurred in connection with
complying with state securities or "blue sky" laws, fees of the National
Association of Securities Dealers, Inc., transfer taxes, fees of transfer agents
and registrars, and costs of issuance, but excluding any Selling Expenses (as
hereinafter defined), are called "Registration Expenses". All underwriting
                                  ------------ --------
discounts (if any) and selling commissions applicable to the sale of the Shares
covered by the S-3 Registration Statement, as well as all professional service
fees incurred by the Stockholders, are called "Selling Expenses".
                                               ----------------

     The Company will pay all Registration Expenses in connection with the
preparation and filing of the S-3 Registration Statement.  All Selling Expenses
shall be borne by the Stockholders in proportion to the number of Shares sold by
each.

     8.  Indemnification and Contribution.
         --------------------------------

         (a) In connection with the registration of the Shares under the
Securities Act pursuant to Section 4, the Company will indemnify and hold
harmless each Stockholder and each other person, if any, who controls such
Stockholder within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such Stockholder or
controlling person may become subject under the Securities Act, Exchange Act,
state securities laws or otherwise, insofar as such losses, claims, damages or
liabilities (or actions, proceedings or settlements in respect thereof) arise
out of or are based upon (i) any untrue statement or alleged untrue statement of
material fact contained in the registration statement under which such Shares
were registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, (ii) the omission
<PAGE>

                                      -5-

or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading or (iii) any violation
by the Company or its agents of any rule or regulation promulgated under the
Securities Act, Exchange Act or state securities laws applicable to the Company
or its agents and relating to action or inaction required of the Company in
connection with such registration, and the Company will reimburse each such
Stockholder and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that the
                                               --------  -------
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made based upon
information furnished in writing by any such Stockholder or any such controlling
person for use in such Registration Statement.

       (b) In connection with the registration of the Shares under the
Securities Act pursuant to Section 4, each Stockholder, severally and not
jointly, will indemnify and hold harmless the Company, each person, if any, who
controls the Company within the meaning of the Securities Act, each officer of
the Company who signs such registration statement and each director of the
Company, against all losses, claims, damages or liabilities, joint or several,
to which the Company or such officer or director may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions, proceedings or settlements in respect thereof) arise
out of or are based upon (i) the failure of such Stockholder to comply with the
provisions of Section 11 herein or (ii) any untrue statement or alleged untrue
statement of any material fact contained in the registration statement, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer and director for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action, provided, however, that such
                                               --------  -------
Stockholder will be liable hereunder in any such case if and only to the extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and based upon information pertaining to such Stockholder,
furnished in writing by or for such Stockholder for use in such registration
statement, provided, further, however, that the liability of each Stockholder
           --------  -------  -------
hereunder shall be limited to the proceeds received by such Stockholder from the
sale of the Shares covered by such registration statement; and provided,
                                                               --------
further, however, that the obligations of the Stockholder hereunder shall not
-------  -------
apply to amounts paid in settlement of any such loss, claim, damage, liability,
or action if such settlement is effected without the consent of the Stockholder.

       (c) Promptly after receipt by an indemnified party hereunder of notice of
the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 8 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 8 if and to the extent
<PAGE>

                                      -6-

the indemnifying party is prejudiced by such omission. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof and the approval
by the indemnified party of the counsel chosen by the indemnifying party, the
indemnifying party shall not be liable to such indemnified party under this
Section 8 for any legal expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected, provided, however, that,
                                                       --------  -------
if the defendants in any such action include both the indemnified party and the
indemnifying party and if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such separate counsel and other expenses
related to such participation to be reimbursed by the indemnifying party as
incurred.

       (d) In order to provide for just and equitable contribution to joint
liability in any case in which either (i) any Stockholder exercising rights
under this Agreement makes a claim for indemnification pursuant to this Section
8 but it is judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such Stockholder in circumstances for which
indemnification is provided under this Section 8; then, and in each such case,
the Company and such Stockholder will contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in proportion to the relative fault of the Company, on the one
hand, and each Stockholder, severally, on the other hand; provided, however,
                                                          --------  -------
that, in any such case, no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation and no such indemnifying party will be
required to contribute any amount in excess of the public offering price of all
shares offered by it pursuant to such registration statement.  The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.

       (e) The indemnities provided in this Section 8 shall survive the transfer
of any Shares by such Stockholder.

   9.  Reports Under Securities Exchange Act of 1934.  With a view to making
       ---------------------------------------------
available to the Stockholders the benefits of Rule 144 promulgated under the
Securities Act and any other
<PAGE>

                                      -7-

rule or regulation thereunder that may at any time permit a Stockholder to sell
securities of the Company to the public without registration, the Company agrees
to:

       (a) make and keep public information available, as those terms are
understood and defined in Rule 144;

       (b) maintain registration of its Common Stock under Section 12 of the
Exchange Act;

       (c) file in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act; and

       (d) furnish to any Stockholder, so long as the Stockholder owns any
Shares, forthwith upon request:  (i) a written statement by the Company that it
has complied with the reporting requirements of Rule 144, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company; and (iii) such other information as may be
reasonably requested in availing any Stockholder of any rule or regulation under
the Securities Act which permits the selling of any such securities without
registration or pursuant to such form.

   10. Changes in Common Stock.  If, and as often as, there is any change in the
       -----------------------
Common Stock by way of a stock split, stock dividend, combination or
reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Shares as so changed.

   11. Stockholders' Conduct.  With respect to any sale of Shares covered by the
       ---------------------
Registration Statement, each Stockholder understands and agrees as follows:

       (a) Each Stockholder will carefully review the information concerning him
or her contained in the Registration Statement and will promptly notify the
Company if such information is not complete and accurate in all respects,
including having properly disclosed any position, office or other material
relationship within the past three years with the Company or its affiliates;

       (b) Each Stockholder agrees to sell Shares only in the manner set forth
in (i) the Registration Statement  and (ii) the Affiliate Agreement (as defined
in the Purchase Agreement);

       (c) Each Stockholder agrees to comply with the anti-manipulation rules
under the Exchange Act in connection with purchases and sales of securities of
the Company during the time the Registration Statement remains effective;
<PAGE>

                                      -8-

       (d) Each Stockholder agrees to only sell Shares in a jurisdiction after
counsel for the Company has advised that such sale is permissible under the
applicable state securities or "Blue Sky" laws;

       (e) Each Stockholder agrees to comply with the prospectus delivery
requirements of the Exchange Act;

       (f) Each Stockholder agrees to suspend sales during the periods when
sales are to be suspended pursuant to Section 6.

       (g) In connection with the registration of the Shares, each Stockholder
will furnish to the Company in writing such information requested by the Company
with respect to themselves and the proposed distribution by them as shall be
necessary in order to assure compliance with federal and applicable state
securities laws.

       (h) Each Stockholder hereby agrees that he or she will not sell,
exchange, transfer, pledge, dispose or otherwise reduce his or her risk relative
to any Shares owned by him or her during the period which begins on the date
hereof and ends at such time as the Company publicly announces financial results
covering at least thirty days of combined operations of the Company and Easics.
The Company, at its discretion, may cause stop transfer orders to be placed with
its transfer agent with respect to the certificates representing the Shares,
provided that such stop transfer orders are consistent with the other provisions
of the Agreement.

   12. Representations and Covenants. Each Stockholder hereby represents and
       -----------------------------
warrants to the Company as follows:

       (a) EACH STOCKHOLDER UNDERSTANDS THAT HIS OR HER INVESTMENT IN THE SHARES
INVOLVES RISK.

       (b) EACH STOCKHOLDER HAS CONSULTED HIS OR HER OWN ATTORNEY, ACCOUNTANT OR
INVESTMENT ADVISOR WITH RESPECT TO THE INVESTMENT CONTEMPLATED HEREBY AND ITS
SUITABILITY FOR SUCH STOCKHOLDER.  ANY SPECIFIC ACKNOWLEDGMENT SET FORTH BELOW
WITH RESPECT TO ANY STATEMENT OR INFORMATION FURNISHED TO THE STOCKHOLDERS SHALL
NOT BE DEEMED TO LIMIT THE GENERALITY OF THIS REPRESENTATION AND WARRANTY.

       (c) The Company has made available to each Stockholder, during the course
of this transaction and prior to the acquisition of the Shares, the opportunity
to ask questions of and receive complete and correct answers from
representatives of the Company concerning the terms and conditions of the Shares
and to obtain any additional information relating to the financial condition and
business of the Company.
<PAGE>

                                      -9-

       (d) Each Stockholder understands that he or she must bear the economic
risk of this investment until such time as the Shares are registered; that the
Shares are not currently registered under the Securities Act, and, therefore,
cannot be resold unless they are subsequently registered under the Securities
Act or unless an exemption from such registration is available; that such
Stockholder is purchasing the Shares with no present view toward resale or other
distribution thereof; and that each Stockholder agrees not to resell or
otherwise dispose of all or any part of the Shares, except as permitted by law,
including, without limitation, any and all applicable provisions of the Purchase
Agreement and this Agreement and any regulations under the Securities Act and
applicable state securities laws.

       (e) Each Stockholder has adequate means of providing for his or her
current needs and personal contingencies and has no need for liquidity in
connection with this investment in the Shares.

       (f) Each Stockholder has reviewed the representations and warranties of
the Company set forth in the Purchase Agreement and has consulted with his or
her personal legal and financial advisors in evaluating the merits and risks of
the investment in the Shares.

       (h) Each Stockholder received an offer concerning the Shares and first
learned of this investment in the state or other jurisdiction listed in such
Stockholder's residence address on the signature page hereto, and intend that
the state securities laws of that state or other jurisdiction alone govern this
transaction.

       (i) Each Stockholder acknowledges and warrants that, prior to the
execution of this Agreement, he or she has had the opportunity to ask questions
and receive answers from the Company and Easics concerning the terms and
conditions of the transactions contemplated by the Purchase Agreement and the
issuance of the Shares, and concerning any of the documents identified above,
and to obtain such additional further information from the Company and Easics as
he or she has deemed necessary to verify the accuracy of the information
contained in the documents identified above or any other information furnished
to the Stockholders.

       (j) Each Stockholder has been advised that, as of the date hereof, he or
she may be deemed to be an "affiliate" of Easics, as the term "affiliate" is
used in and for purposes of Accounting Series Releases 130 and 135, as amended,
of the Commission.

       (k) Each Stockholder understands that the representations, warranties and
covenants set forth herein will be relied upon by Easics, other stockholders of
Easics, the Company, the stockholders of the Company and their respective
counsel and accounting firms.

       (l) Each Stockholder hereby represents and warrants that he or she has
not sold, exchanged, transferred, pledged, disposed or otherwise reduced his or
her risk relative to any shares of Easics capital stock owned by him or her
during the 30 day period preceding the date hereof.

   13. Miscellaneous.
       -------------
<PAGE>

                                      -10-

       (a) All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Shares, provided, that such transferee executes a
                                      --------
counterpart signature page to this Agreement), whether so expressed or not.

       (b) All notices and other communications which by any provision of this
Agreement are required or permitted to be given shall be given in writing and
shall be (a) mailed by an internationally recognized express courier service,
postage prepaid, (b) sent by telex, telegram, telecopy or other form of rapid
transmission, confirmed by mailing (by an internationally recognized express
courier service, postage prepaid) written confirmation at substantially the same
time as such rapid transmission, or (c) personally delivered to the receiving
party (which if other than an individual shall be an officer or other
responsible party of the receiving party).  All such notices and communications
shall be mailed, sent or delivered as follows:

       if to the Company, at 1953 Enterprise Drive, Shelton, Connecticut  06484,
    Attention: Michael F. Stauff, Chief Financial Officer, with a copy to Testa,
    Hurwitz & Thibeault, LLP, 125 High Street, Boston, Massachusetts 02110,
    Attn: Timothy C. Maguire

       if to any other party hereto, at the address of such party set forth on
    the signature page hereto, with a copy to David H. Murphree, Brown Rudnick
    Freed & Gesmer, 1 Financial Center, Boston, Massachusetts 02111;

       if to any subsequent Stockholder of Shares, to it at such address as may
    have been furnished to the Company in writing by such Stockholder;

or, in any case, at such other address or addresses as shall have been furnished
in writing to the Company (in the case of a Stockholder) or to the Stockholders
(in the case of the Company) in accordance with the provisions of this
paragraph.  Notices shall be deemed duly delivered three business days after
being sent via a reputable international express courier service.  Notices
delivered via any other means shall be deemed duly delivered upon actual receipt
by the individual for whom such notice is intended.  Any notice delivered to a
party hereunder shall be sent simultaneously, by the same means, to such party's
counsel as set forth above.

       (c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.

       (d) This Agreement may be amended or modified, and provisions hereof may
be waived, with the written consent of the Company and the holders of at least a
majority of the outstanding Shares.
<PAGE>

                                      -11-

       (e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

       (f) If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.
<PAGE>

                                      -12-

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                            TranSwitch Corporation

                            By:  /s/ Robert Pico
                                 ---------------------------------------
                            Name:  Robert Pico
                                   -------------------------------------
                            Title:  Vice President, Business Development
                                    ------------------------------------

                            Stockholders:

                            K.U. LEUVEN

                            By:  /s/ Ivo Vandeweerd
                                 ---------------------------------------
                            Represented by:  Ivo Vandeweerd, as Attorney-in-fact

                            /s/ Ivo Vandeweerd
                            --------------------------------------------
                            Dirk Callaerts
                            Represented by:  Ivo Vandeweerd, as Attorney-in-fact

                            /s/ Ivo Vandeweerd
                            --------------------------------------------
                            Jon Decaluwe
                            Represented by:  Ivo Vandeweerd, as Attorney-in-fact

                            /s/ Ivo Vandeweerd
                            --------------------------------------------
                            Ivo Vandeweerd

                            /s/ Ivo Vandeweerd
                            --------------------------------------------
                            Jan Zegers
                            Represented by:  Ivo Vandeweerd, as Attorney-in-fact

<PAGE>

                                      -13-

                            VLAAMSE INVESTERINGSVENNOOTSCAP N.V.

                            By:  /s/ Ivo Vandeweerd
                                 ---------------------------------------

                            Represented by:  Ivo Vandeweerd, as Attorney-in-fact

                            /s/ Ivo Vandeweerd
                            --------------------------------------------
                            Jos Verjans

                            Represented by:  Ivo Vandeweerd, as Attorney-in-fact

               [You must complete pages 14-15 of this Agreement]
                    ----
<PAGE>

                                      -14-

          If the Stockholder is a natural person and is an accredited investor
described by category 12 or 13 (or both) set forth on the attached Exhibit A,
                                                                   ---------
please check this box. [_]

          If the Stockholder has not checked the box above, please check this
box if at least one of the categories set forth on the attached Exhibit A
                                                                ---------
describes you. [_]
<PAGE>

                                      -15-

                                                                       Exhibit A

                                                to Registration Rights Agreement
                                                --------------------------------

     1.  A bank (as defined in Section 3(a)(2) of the Securities Act) or a
savings and loan association or other institution (as defined in Section
3(a)(5)(A) of the Securities Act), whether acting in regard to this investment
in its individual or a fiduciary capacity.

     2.  A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934.

     3.  An insurance company (as defined in Section 2(13) of the Securities
Act).

     4.  An investment company registered under the Investment Company Act.

     5.  A business development company (as defined in Section 2(a)(48) of the
Investment Company Act).

     6.  A Small Business Investment Company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958.

     7.  A plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if the plan has total assets in
excess of $5,000,000.

     8.  An employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974 (an "ERISA Plan") whose decision to
purchase the Interest was made by a plan fiduciary (as defined in Section 3(21)
of ERISA), which is either a bank, savings and loan association, insurance
company or registered investment adviser.

     9.  An ERISA Plan with total assets in excess of $5,000,000 or, if a self-
directed ERISA Plan, with investment decisions made solely by persons that are
"accredited investors."

     10. A private business development company (as defined in Section
202(a)(22) of the Investment Advisers Act of 1940).

     11. An organization described in Section 501(c)(3) of the Internal Revenue
Code of 1986, as amended, corporation, Massachusetts or similar business trust
or partnership, not formed for the specific purpose of acquiring the Interest,
with total assets in excess of $5,000,000.

     12. A natural person whose net worth (either individually or jointly with
such person's spouse) at the time of the Closing exceeds $1,000,000.
<PAGE>

                                      -16-

     13. A natural person who had an individual income in excess of $200,000 or
joint income with such person's spouse in excess of $300,000 in each of the last
two calendar years and who reasonably expects to reach the same income level in
the current calendar year.

     14. A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Interest, whose purchase of the Interest is
directed by a sophisticated person as described in Rule 506(b)(2)(ii) under the
Securities Act.

     15. An entity in which all of the equity owners fit into at least one of
the categories listed under paragraphs 1-14 above.<PAGE>

                                                                    Exhibit 10.1

                   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 as of May 23, 2000 (this "Agreement"),
between First Place Financial Corp., a Delaware corporation ("Grantee"), and FFY
Financial Corporation, a Delaware corporation ("Issuer").

                                   RECITALS

     A.   Merger Agreement. Grantee and Issuer have entered into an Agreement
          ----------------
and Plan of Merger, dated as of May 23, 2000 (the "Merger Agreement"), which
agreement was executed and delivered on the date of this Stock Option Agreement,
pursuant to which Grantee is to merge with and into Issuer (the "Merger"); and

     B.   Option. 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).

     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.   Grant of Option. (a) Issuer hereby grants to Grantee an unconditional,
          ---------------
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to an aggregate of 1,348,921 fully paid and nonassessable shares of the common
stock, par value $0.01 per share, of Issuer ("Common Stock") at a price per
share equal to $10.00 (the "Option Price"); provided, however, that in no event
shall the number of shares for which this Option is exercisable exceed 19.9% of
the issued and outstanding shares of Common Stock. 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 issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5 hereof), the number of shares of Common Stock subject to the Option
shall be increased so that, after such issuance, such number together with any
shares of Common Stock previously issued pursuant hereto, equals 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 to issue shares in breach of any provision of the Merger Agreement.

     2.   Exercise. (a) The Holder (as hereinafter defined) may exercise the
          --------
Option, in whole or part, if, but only if, both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the written
notice of such exercise (as provided in subsection (e) of this Section 2) within
six
<PAGE>

(6) months following the first such Subsequent Triggering Event (or such later
period as provided in Section 10). 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
8.1(e) or (f) of the Merger Agreement (unless the breach by Issuer giving rise
to such right of termination is non-volitional) (a "Listed Termination"); or
(iii) the passage of eighteen (18) months (or such longer period as provided in
Section 10) after termination of the Merger Agreement if such termination
follows the occurrence of an Initial Triggering Event or is a Listed
Termination. The term "Holder" shall mean the holder or holders of the Option.
Notwithstanding anything to the contrary contained herein, the Option may not be
exercised at any time when Grantee shall be in material breach of any of its
covenants or agreements contained in the Merger Agreement such that Issuer shall
be entitled to terminate the Merger Agreement pursuant to Sections 8.1(e) or
8.1(f) thereof.

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

          (i)   Issuer or any of its Significant Subsidiaries (as defined in
     Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
     Commission (the "SEC")) (the "Issuer Subsidiaries"), 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 assigned 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 (the
     "Issuer Board") shall have recommended that the stockholders of Issuer
     approve or accept any Acquisition Transaction other than as contemplated by
     the Merger Agreement. For purposes of this Agreement, (a)"Acquisition
     Transaction" shall mean (x) a merger or consolidation, or any similar
     transaction, involving Issuer or any Issuer Subsidiary (other than mergers,
     consolidations or similar transactions involving solely Issuer and/or one
     or more wholly-owned Subsidiaries of the Issuer, provided, any such
     transaction is not entered into in violation of the terms of the Merger
     Agreement), (y) a purchase, lease or other acquisition of all or any
     substantial part of the assets or deposits of Issuer or any Issuer
     Subsidiary, or (z) 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 any Issuer
     Subsidiary and (b) "Subsidiary" shall have the meaning set forth in Rule
     12b-2 under the 1934 Act;

          (ii)  Any person other than the Grantee or any Grantee Subsidiary,
     alone or together with such person's affiliates and associates (as such
     terms are defined in Rule 12b-2 under the 1934 Act) 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);

                                      -2-
<PAGE>

          (iii) The stockholders of Issuer shall have voted and failed to adopt
     the Merger Agreement at a meeting which has been held for that purpose or
     any adjournment or postponement thereof, or such meeting shall not have
     been held in violation of the Merger Agreement or shall have been canceled
     prior to termination of the Merger Agreement if, prior to such meeting (or
     if such meeting shall not have been held or shall have been canceled, prior
     to such termination), it shall have been publicly announced that any person
     (other than Grantee or any of its Subsidiaries) shall have made, or
     disclosed an intention to make, a proposal to engage in an Acquisition
     Transaction;

          (iv)  The Issuer Board shall have withdrawn, modified or qualified (or
     publicly announced its intention to withdraw, modify or qualify) in any
     manner adverse in any respect to Grantee its recommendation that the
     stockholders of Issuer adopt the Merger Agreement, or Issuer or any Issuer
     Subsidiary shall have authorized, recommended, proposed (or publicly
     announced its intention to authorize, recommend or propose) an agreement to
     engage in an Acquisition Transaction with any person other than Grantee or
     a Grantee Subsidiary;

          (v)   Any person other than Grantee or any Grantee Subsidiary shall
     have filed with the SEC a registration statement or tender offer materials
     with respect to a potential exchange or tender offer that would constitute
     an Acquisition Transaction (or filed a preliminary proxy statement with the
     SEC with respect to a potential vote by its stockholders to approve the
     issuance of shares to be offered in such an exchange offer);

          (vi)  Issuer shall have willfully breached any covenant or obligation
     contained in the Merger Agreement after an overture is made by a third
     party to Issuer or its stockholders to engage in an Acquisition
     Transaction, and (a) following such breach Grantee would be entitled to
     terminate the Merger Agreement (whether immediately or after the giving of
     notice or passage of time or both) and (b) such breach shall not have been
     cured prior to the Notice Date (as defined in Section 2(e)); or

          (vii) Any person other than Grantee or any Grantee Subsidiary, without
     Grantee's prior written consent, shall have filed an application or notice
     with the Board of Governors of the Federal Reserve System (the "Federal
     Reserve Board"), the Office of Thrift Supervision (the "OTS") or other
     federal or state bank regulatory or antitrust authority, which application
     or notice has been accepted for processing, for approval to engage in an
     Acquisition Transaction.

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

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

                                      -3-
<PAGE>

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

     (d)  Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (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 (or any portion thereof), 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
or any other regulatory or antitrust agency is required in connection with such
purchase, the Holder shall promptly file the required notice or application for
approval, shall promptly notify Issuer of such filing 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 (i) 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 and (ii)
present and surrender this Agreement to Issuer at its principal executive
offices, provided that the failure or refusal of the Issuer to designate such a
bank account or accept surrender of this Agreement 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.

     (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 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."

                                      -4-
<PAGE>

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 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 in the opinion of counsel to the Holder,
in form and substance reasonably satisfactory to the Issuer; 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, subject to the receipt of any necessary regulatory
approvals, 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.    Covenants of Issuer. 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 applicable premerger notification, reporting
and waiting period requirements specified in 15 U.S.C. Section 18a and
regulations promulgated thereunder and (y) in the event, under the Bank Holding
Company Act of 1956, as amended (the "BHCA"), the Home Owners' Loan Act, as
amended (the "HOLA") or the Change in Bank Control Act of 1978, as amended, or
any state or other federal banking law, prior approval of or notice to the
Federal Reserve Board, the OTS or to any state or other federal 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 or other federal
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.   Exchange. 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 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.   Certain Adjustments. 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 but not in duplication thereof, 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 Common Stock by reason of a stock
dividend, stock split, split-up, merger, recapitalization, stock combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Option Price therefor, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Holder shall receive, upon exercise of the
Option, at the aggregate exercise price calculated in accordance with Section 1
of this Agreement, the number and class of shares or other securities or
property that Holder would have received in respect of Common Stock if the
Option had been exercised immediately prior to such event, or the record date
therefor, as applicable.

     6.   Registration Rights. Upon the occurrence of a Subsequent Triggering
          -------------------
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee delivered within six (6) months (or such later period as
provided in Section 10) of such Subsequent Triggering Event (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), promptly prepare,
file and keep current a registration statement under the 1933 Act covering 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 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 promptly 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
Issuer shall bear the costs of such registrations (including, but not limited
to, Issuer's attorneys' fees, printing costs and filing fees, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto).

                                      -6-
<PAGE>

The foregoing notwithstanding, if, at the time of any request by Grantee for
registration of Option Shares as provided above, Issuer is in registration with
respect to an underwritten public offering by Issuer of shares of Common Stock,
and if in the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters, of such
offering the offer and sale of the 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 33 1/3% 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 Issuer shall file
a registration statement for the balance as promptly as practicable thereafter
as to which no reduction pursuant to this Section 6 shall be permitted or occur
and the Holder shall thereafter be entitled to one additional registration and
the six (6) month period referred to in the first sentence of this section shall
be increased to eighteen (18) months. 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 such underwriting agreements for
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 the number of registrations that Issuer is obligated to effect
be increased by reason of the fact that there shall be more than one Holder as a
result of any assignment or division of this Agreement.

     7.   Repurchase. (a) At any time after the occurrence of a Repurchase Event
          ----------
(as defined below) (i) at the request of the Holder, delivered prior to an
Exercise Termination Event (or such later period as provided in Section 10),
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 prior to an Exercise Termination Event (or such later period as
provided in Section 10), Issuer (or any successor thereto) 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 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 any substantial part of Issuer's assets or deposits, the sum of the
net price paid in such sale for such assets or deposits and the current market
value of the remaining net assets of Issuer as determined by a nationally

                                      -7-
<PAGE>

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 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, a copy of 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. The Owner shall also represent and warrant that it has sole record
and beneficial ownership of such Option Shares and that such Option Shares are
then free and clear of all liens. As promptly as practicable, and in any event
within five (5) 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 the
Holder the Option Repurchase Price and/or to the Owner the Option Share
Repurchase 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, or as a consequence of administrative policy, 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 (5) 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, or as a consequence of administrative policy, 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 reasonable 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 and/or the Option Shares whether 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 and/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 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 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, and/or (B) to the Owner, a certificate for the Option Shares
it is then so prohibited from repurchasing. If an Exercise Termination Event
shall have occurred prior to the date of the notice by Issuer described in the
first sentence of this subsection (c), or shall be scheduled to occur at any
time before the expiration of a period ending on the thirtieth day after

                                      -8-
<PAGE>

such date, the Holder shall nonetheless have the right to exercise the Option
until the expiration of such 30-day period.

     (d)  For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred upon the occurrence of any of the following events or
transactions after the date hereof:

          (i)   the acquisition by any person (other than Grantee or any Grantee
     Subsidiary) of beneficial ownership of 50% or more of the then outstanding
     Common Stock; or

          (ii)  the consummation of any Acquisition Transaction described in
     Section 2(b)(i) hereof, except that the percentage referred to in clause
     (z) shall be 25%.

     8.   Substitute Option. (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 a Grantee Subsidiary, or engage
in a plan of exchange 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 or the acquirer in such plan of exchange, (ii) to
permit any person, other than Grantee or a Grantee Subsidiary, to merge into
Issuer or be acquired by Issuer in a plan of exchange and Issuer shall be the
continuing or surviving or acquiring corporation, but, in connection with such
merger or plan of exchange, 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 or plan of exchange represent less than 50% of the outstanding
shares and share equivalents of the merged or acquiring company, or (iii) to
sell or otherwise transfer all or a substantial part of its or any Issuer
Subsidiary's assets or deposits to any person, other than Grantee or a Grantee
Subsidiary, 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:

          (i)   "Acquiring Corporation" shall mean (i) the continuing or
     surviving person of a consolidation or merger with Issuer (if other than
     Issuer), (ii) the acquiring person in a plan of exchange in which Issuer is
     acquired, (iii) the Issuer in a merger or plan of exchange in which Issuer
     is the continuing or surviving or acquiring person and (iv) the transferee
     of all or a substantial part of Issuer's assets or deposits (or the assets
     or deposits of any Issuer Subsidiary).

          (ii)  "Substitute Common Stock" shall mean the shares of capital stock
     (or similar equity interest) with the greatest voting power with respect to
     the election of directors of the issuer of the Substitute Option.

                                      -9-
<PAGE>

          (iii) "Assigned Value" shall mean the market/offer price, as defined
     in Section 7.

          (iv)  "Average Price" shall mean the average closing price of a share
     of the Substitute Common Stock for one (1) 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.

     (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 (after giving effect for
such purpose to the provisions of Section 9), which agreement 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 was exercisable
immediately prior to the event described in the first sentence of Section 8(a),
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 was exercisable immediately prior to the
event described in the first sentence of Section 8(a) 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 a majority in interest
of the Holders.

     (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.

                                      -10-
<PAGE>

     9.   Repurchase of Substitute Option. (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.

     (b)  The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective rights to require the Substitute Option
Issuer to repurchase 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/or 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 (5) 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 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, or as a consequence of administrative policy, from
repurchasing the Substitute Option and/ or the Substitute Shares in part or in
full, the Substitute Option Issuer 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 Option
Repurchase Price and/or the Substitute Share Repurchase Price, respectively,
which it is no longer prohibited from delivering, within five (5) 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, or as a consequence of
administrative policy, 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 reasonable best efforts to receive all
required regulatory and legal approvals as promptly as practicable in

                                      -11-
<PAGE>

order to accomplish such repurchase), the Substitute Option Holder and/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 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, and/or (B) to the Substitute
Share Owner, a certificate for the Substitute Option Shares it is then so
prohibited from repurchasing. If an Exercise Termination Event shall have
occurred prior to the date of the notice by the Substitute Option Issuer
described in the first sentence of this subsection (c), or shall be scheduled to
occur at any time before the expiration of a period ending on the thirtieth day
after such date, the Substitute Option Holder shall nevertheless have the right
to exercise the Substitute Option until the expiration of such 30-day period.

     10.  Extension of Periods Under Certain Circumstances. The periods for
          ------------------------------------------------
exercise of certain rights under Sections 2, 6, 7, 9 and 14 shall be extended:
(i) to the extent necessary to obtain all regulatory approvals for the exercise
of such rights (for so long as the Holder, Owner, Substitute Option Holder or
Substitute Share Owner, as the case may be, is using commercially reasonable
efforts to obtain such regulatory approvals), and for the expiration of all
statutory waiting periods; (ii) to the extent necessary to avoid liability under
Section 16(b) of the 1934 Act by reason of such exercise; and (iii) when there
exists an injunction, order or judgment that prohibits or delays exercise of
such right.

     11.  Representations and Warranties. (a) Issuer hereby represents and
          ------------------------------
warrants to Grantee as follows:

          (i)   Issuer has the requisite corporate power and authority to
     execute and deliver this Agreement and, subject to any required regulatory
     notices or approvals, 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 Issuer Board prior to the date hereof 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.

          (ii)  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

                                      -12-
<PAGE>

     hereunder, and all such shares, upon issuance pursuant thereto, will be
     duly authorized, validly issued, fully paid, nonassessable, and will be
     delivered free and clear of all claims, liens, encumbrances and security
     interests and not subject to any preemptive rights.

          (iii) The execution, delivery and subject to any required regulatory
     notices or approvals, performance of this Agreement does not or will not,
     and the consummation by Issuer of any of the transactions contemplated
     hereby will not, constitute or result in (a) a breach or violation of, or a
     default under, its certificate of incorporation or bylaws, or the
     comparable governing instruments of any of its subsidiaries, or (b) a
     breach or violation of, or a default under, any agreement, lease, contract,
     note, mortgage, indenture, arrangement or other obligation of it or any of
     its subsidiaries (with or without the giving of notice, the lapse of time
     or both) or under any law, rule, ordinance or regulation or judgment,
     decree, order, award or governmental or nongovernmental permit or license
     to which it or any of its subsidiaries is subject, that would, in any case
     referred to in this clause (b), give any other person the ability to
     prevent or enjoin Issuer's performance under this Agreement in any material
     respect.

     (b)  Grantee hereby represents and warrants to Issuer as follows: Grantee
has the requisite corporate power and authority to execute and deliver this
Agreement and, subject to any required regulatory notices or approvals, to
perform its obligations hereunder. The execution and delivery of this Agreement
by the Grantee and the performance of its obligations hereunder by the Grantee
have been duly and validly authorized by the Board of Directors of Grantee and
no other corporate proceedings on the part of the Grantee are necessary to
authorize this Agreement or for Grantee to perform its obligations hereunder.
This Agreement has been duly and validly executed and delivered by Grantee.

     (c)  This Option is not being, and any Option Shares 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.

     12.  Assignment. 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; provided, however,
that until the date fifteen (15) days following the date on which the OTS, as
the case may be, has approved 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 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
OTS.

                                      -13-
<PAGE>

     13.  Filings, Etc. Each of Grantee and Issuer will use its reasonable 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, applying to the
OTS under the HOLA for approval to acquire the shares issuable hereunder.

     14.  Surrender of Option. (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. The "Surrender Price"
shall be equal to $3.5 million (i) plus, if applicable, Grantee's purchase price
with respect to any Option Shares and (ii) minus, if applicable, the excess of
(A) the net price, if any, received by Grantee or a Grantee Subsidiary pursuant
to the sale of Option Shares (or any other securities into which such Option
Shares were converted or exchanged) to any unaffiliated party, over (B)
Grantee's purchase price of such Option Shares.

     (b)  Grantee may exercise its right to relinquish the Option and any Option
Shares pursuant to this Section 14 by surrendering to Issuer, at its principal
office, a copy of 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 14 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 (5) 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 14 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 (5) 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 (6)
months from the date on which the Exercise Termination Date would have occurred
if not for the provisions of this Section 14(c) (during which period Grantee may
exercise any of its rights hereunder, including any and all rights pursuant to
this Section 14).

     15.  Specific Performance. 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

                                      -14-
<PAGE>

of the parties hereto shall be enforceable by either party hereto through
injunctive or other equitable relief. In connection therewith, both parties
waive the posting of any bond or similar requirement.

     16.  Severability. 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 l(a) hereof (as adjusted pursuant to Section
l(b) or Section 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.

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

     18.  Governing Law. This Agreement shall be governed by and construed in
          -------------
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.

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

     20.  Expenses. 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.

     21.  Entire Agreement; Third-Party Rights. 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 assignees. 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 assignees, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.

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

                                      -15-
<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.

                                 FIRST PLACE FINANCIAL CORP.

                                     /s/ Steven R. Lewis
                                 By:________________________
                                    Name: Steven R. Lewis
                                    Title: President and Chief Executive Officer

                                 FFY FINANCIAL CORP.

                                     /s/ Jeffrey L. Francis
                                 By:________________________
                                    Name: Jeffrey L. Francis
                                    Title: President and Chief Executive Officer

                                      -16-

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