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                          AGREEMENT AND PLAN OF MERGER



      THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of December

17, 2004 is by and among Center Bancorp, Inc., a New Jersey corporation

("Buyer"), Union Center National Bank, a national bank and a wholly-owned

Subsidiary of Buyer ("Buyer Subsidiary Bank"), and Red Oak Bank, a commercial

bank chartered under the laws of the State of New Jersey (the "Company"). Buyer,

Buyer Subsidiary Bank and the Company are sometimes collectively referred to

herein as the "Constituent Corporations". As used in this Agreement, the word

"Subsidiary" when used with respect to any party means any corporation,

partnership or other organization, whether incorporated or unincorporated, which

is consolidated with such party for financial reporting purposes.



                                    RECITALS



      A. Buyer desires to acquire the Company and the Company's Board of

Directors has determined, based upon the terms and conditions hereinafter set

forth, that the acquisition is in the best interests of the Company and its

shareholders. The acquisition will be accomplished by (i) merging the Company

with and into Buyer Subsidiary Bank with Buyer Subsidiary Bank as the surviving

corporation (the "Merger") and (ii) the Company's shareholders receiving the

Aggregate Merger Consideration hereinafter set forth. The Boards of Directors of

the Company, Buyer and Buyer Subsidiary Bank have duly adopted and approved this

Agreement and the Board of Directors of the Company has directed that it be

submitted to its shareholders for approval.



      B. Concurrently with the execution and delivery of this Agreement, and as

a condition and inducement to Buyer's willingness to enter into this Agreement,

certain shareholders of the Company have entered into a shareholders' agreement

with Buyer (the "Shareholders' Agreement").



      C. The parties desire to make certain representations, warranties and

agreements in connection with the Merger and also to prescribe certain

conditions to the Merger.



      D. Independent of this Agreement, the Board of Directors of the Company

has declared a 5% stock dividend payable on December 10, 2004 to stockholders of

record as of November 19, 2004 (the "Stock Dividend"). All figures herein

relating to the Company's capitalization and the consideration payable hereunder

have been adjusted to give effect to the Stock Dividend.



      NOW, THEREFORE, in consideration of the mutual covenants, representations,

warranties and agreements contained herein, and intending to be legally bound

hereby, the parties agree as follows:





<PAGE>



                                    ARTICLE I



                                   THE MERGER



      1.1 The Merger. Subject to the terms and conditions of this Agreement, in

accordance with applicable banking statutes and regulations, at the Effective

Time (as defined in Section 1.2 hereof) the Company shall merge with and into

Buyer Subsidiary Bank under the charter of Buyer Subsidiary Bank in accordance

with the National Bank Act and the New Jersey Banking Act of 1948, as amended.

Buyer Subsidiary Bank shall be the surviving bank (hereinafter sometimes called

the "Surviving Corporation") in the Merger, and shall continue its corporate

existence under the National Bank Act. The name of the Surviving Corporation

shall continue to be Union Center National Bank. Upon consummation of the

Merger, the separate corporate existence of the Company shall terminate.



      1.2 Closing, Closing Date, Determination Date and Effective Time. Unless a

different date, time and/or place are agreed to by the parties hereto, the

closing of the Merger (the "Closing") shall take place at 10:00 a.m., at the

offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey

07068, on a date determined by Buyer on at least five business days notice (the

"Closing Notice") given to the Company, which date (the "Closing Date") shall be

not more than ten (10) business days following the receipt of all necessary

regulatory, governmental and shareholder approvals and consents and the

expiration of all statutory waiting periods in respect thereof and the

satisfaction or waiver of all of the conditions to the consummation of the

Merger specified in Article VI hereof (other than the delivery of certificates

and other instruments and documents to be delivered at the Closing). In the

Closing Notice, Buyer shall specify the "Determination Date", which date shall

be the first date on which all bank regulatory approvals (and waivers, if

applicable) necessary for consummation of the Merger have been received

(disregarding any waiting period) and either party has notified the other in

writing that all such approvals (and waivers, if applicable) have been received.

The Merger shall become effective (and be consummated) at the date and time (the

"Effective Time") specified in a notice (the "OCC Notice") to the Office of the

Comptroller of the Currency (the "OCC") which will be filed by Buyer with the

approval of the Company, which approval shall not be unreasonably withheld or

delayed, such filing to occur immediately after the Closing is consummated. In

the event that the parties fail to specify the date and time in the OCC Notice,

the Merger shall become effective upon (and the "Effective Time" shall be) the

time of the filing of the OCC Notice with the OCC.



      1.3 Effect of the Merger. At the Effective Time, the Surviving Corporation

shall be considered the same business and corporate entity as each of Buyer

Subsidiary Bank and the Company and thereupon and thereafter, all the property,

rights, privileges, powers and franchises of each of Buyer Subsidiary Bank and

the Company shall vest in the Surviving Corporation and the Surviving

Corporation shall be subject to and be deemed to have assumed all of the debts,

liabilities, obligations and duties of each of Buyer Subsidiary Bank and the

Company and shall have succeeded to all of each of their relationships, as fully

and to the same extent as if such property, rights, privileges, powers,

franchises, debts, liabilities, obligations, duties and relationships had been

originally acquired, incurred or entered into by the Surviving Corporation. In

addition, any reference to either of Buyer Subsidiary Bank and the Company in

any contract or document, whether executed or taking effect before or after the

Effective Time, shall be considered a reference to the Surviving Corporation if

not inconsistent with the other provisions of the contract or document; and any

pending action or other judicial proceeding to which either of Buyer Subsidiary

Bank or the Company is a party shall not be deemed to have abated or to have

discontinued by reason of the Merger, but may be prosecuted to final judgment,

order or decree in the same manner as if the Merger had not been made; or the

Surviving Corporation may be substituted as a party to such action or

proceeding, and any judgment, order or decree may be rendered for or against it

that might have been rendered for or against either of Buyer Subsidiary Bank or

the Company if the Merger had not occurred.





                                      -2-

<PAGE>



      1.4 Conversion of Company Common Stock.



            (a) At the Effective Time, subject to the other provisions of this

Section 1.4, Section 1.5, Section 1.8 and Section 2.2(e), each share of common

stock, par value $5.00 per share, of the Company ("Company Common Stock"),

issued and outstanding immediately prior to the Effective Time (other than (i)

shares of Company Common Stock held in the Company's treasury and (ii) shares of

Company Common Stock held directly or indirectly by Buyer or the Company or any

of their respective Subsidiaries (except for Trust Account Shares and DPC

Shares, as such terms are defined in Section 1.4(b) hereof), shall by virtue of

this Agreement and without any action on the part of the Company, Buyer or the

holder thereof, cease to be outstanding and shall be converted into and become

the right to receive, at the election of the holder thereof as provided in

Section 1.5, either:



                  (i) a fraction of a share of common stock, no par value, of

Buyer ("Buyer Common Stock") equal to the quotient of the Per Share Cash

Consideration (as hereinafter defined) divided by $13.07 (such quotient, the

"Exchange Ratio"), such fraction to be rounded to four decimal places; or



                  (ii) cash in an amount equal to the Per Share Cash

Consideration.



            (b) At the Effective Time, (i) all shares of Company Common Stock

that are owned by the Company as treasury stock and (ii) all shares of Company

Common Stock that are owned directly or indirectly by Buyer or the Company or

any of their respective Subsidiaries (other than shares of Company Common Stock

(x) held directly or indirectly in trust accounts, managed accounts and the like

or otherwise held in a fiduciary capacity for the benefit of third parties (any

such shares, and shares of Buyer Common Stock which are similarly held, whether

held directly or indirectly by Buyer or the Company, as the case may be, being

referred to herein as "Trust Account Shares") or (y) held by Buyer or the

Company or any of their respective Subsidiaries in respect of a debt previously

contracted (any such shares of Company Common Stock, and shares of Buyer Common

Stock which are similarly held, being referred to herein as "DPC Shares")),

shall be canceled and shall cease to exist and no stock of Buyer or other

consideration shall be delivered in exchange therefor. All shares of Buyer

Common Stock that are owned by the Company or any of its Subsidiaries (other

than Trust Account Shares and DPC Shares) shall become treasury stock of Buyer.





                                      -3-

<PAGE>



            (c) On and after the Effective Time, holders of certificates which

immediately prior to the Effective Time represented outstanding shares of

Company Common Stock (the "Certificates") shall cease to have any rights as

shareholders of the Company, except the right to receive the consideration set

forth in this Article I for each such share held by them. The consideration

which any one Company shareholder may receive pursuant to this Article I is

referred to herein as the "Merger Consideration" and the consideration which all

of the Company shareholders are entitled to receive pursuant to this Article I

is referred to herein as the "Aggregate Merger Consideration".



            (d) Notwithstanding any provision herein to the contrary, if,

between the date of this Agreement and the Effective Time, the shares of Buyer

Common Stock shall be changed into a different number or class of shares by

reason of any reclassification, recapitalization, split-up, combination,

exchange of shares or readjustment, or a stock dividend thereon shall be

declared with a record date within said period, appropriate adjustments shall be

made to the Exchange Ratio.



            (e) For purposes of this Agreement, the following terms shall have

the following meanings:



                  (i) "Differential" shall mean the dollar amount, if any, by

which the Metavante Termination Fee exceeds $739,000; provided that in no event

shall the Differential exceed $623,000.



                  (ii) "Negative Adjustment" shall mean the Differential divided

by the number of shares of Company Common Stock outstanding immediately prior to

the Effective Time. The Negative Adjustment shall be rounded to the nearest

penny.



                  (iii) "Per Share Cash Consideration" shall mean $12.35 minus

the Negative Adjustment, if any.



                  (iv) "Metavante Agreement" shall mean that certain Technology

Outsourcing Agreement, dated as of September 30, 2003, by and between the

Company and Metavante Corporation ("Metavante"), and all related agreements and

schedules, including, without limitation, that certain Branch Automation

Agreement, dated as of September 30, 2003, by Metavante and the Company and that

certain StarPC Software License Agreement, dated as of September 30, 2003, by

Metavante and the Company.



                  (v) "Metavante Termination Fee" shall mean all fees and

expenses due and payable in connection with the termination of the Metavante

Agreement, as confirmed in writing or invoiced by Metavante.





                                      -4-

<PAGE>



      1.5 Election Procedures.



            (a) Allocation. The allocation of the Aggregate Merger Consideration

between cash and shares of Buyer Common Stock shall be determined pursuant to

this Section 1.5.



            (b) Ratio of Buyer Common Stock to Cash. Subject to Section 1.5(j),

the number of shares of Company Common Stock to be converted into the right to

receive the Per Share Cash Consideration in the Merger (the "Cash Election

Number") shall be equal to 50% (the "Cash Percentage") of the number of shares

of Company Common Stock outstanding immediately prior to the Effective Time.

Subject to Section 1.5(j), the number of shares of Company Common Stock to be

converted into the right to receive Buyer Common Stock in the Merger (the "Stock

Election Number") shall be equal to 50% (the "Stock Percentage") of the number

of shares of Company Common Stock outstanding immediately prior to the Effective

Time.



            (c) Elections by Holders of Stock or Cash. Subject to the allocation

and election procedures set forth in this Section 1.5, each record holder

immediately prior to the Effective Time of shares of Company Common Stock will

be entitled (i) to elect to receive the Per Share Cash Consideration for a

portion of such holder's shares specified by such holder or all of such shares

(each, a "Cash Election"), (ii) to elect to receive Buyer Common Stock for a

portion of such holder's shares specified by such holder or all of such shares

(each, a "Stock Election"), or (iii) to indicate that such record holder has no

preference as to the receipt of cash or Buyer Common Stock for such shares (a

"Non-Election"). In the event that any such holder makes elections which

together cover more than 100% of the shares of Company Common Stock which such

Person owns as of the Effective Time, such holder shall be deemed to have made a

Stock Election with respect to 50% of such holder's shares and a Cash Election

with respect to 50% of such holder's shares. In the event that any such holder

makes elections which together cover less than 100% of the shares of Company

Common Stock which such Person owns as of the Effective Time, such holder shall

be deemed to have made a Non-Election with respect to the number of shares for

which no Cash Election, Stock Election or Non-Election was made. All such

elections shall be made on a form designed for that purpose (a "Form of

Election") and in form and substance satisfactory to Buyer and the Company.

Holders of record of shares of Company Common Stock who hold such shares as

nominees, trustees or in other representative capacities (a "Representative")

may submit multiple Forms of Election, provided that each such Form of Election

covers all the shares of Company Common Stock held by each Representative for a

particular beneficial owner.



            (d) Oversubscription for Cash Election. If the aggregate number of

shares of Company Common Stock covered by Cash Elections (the "Cash Election

Shares") exceeds the Cash Election Number, all shares of Company Common Stock

covered by Stock Elections (the "Stock Election Shares") and all shares of

Company Common Stock covered by Non-Elections (the "Non-Election Shares") shall

be converted into the right to receive Buyer Common Stock, and the Cash Election

Shares shall be converted into the right to receive Buyer Common Stock and cash

in the following manner:





                                      -5-

<PAGE>



                  (i) the Exchange Agent (as hereinafter defined) will select

from among the holders of Cash Election Shares (other than Dissenting Shares),

on a pro rata basis, a sufficient number of such shares ("Stock Designated

Shares") such that the number of Stock Designated Shares will, when added to the

number of Stock Election Shares and Non-Election Shares, be equal as closely as

practicable to the Stock Election Number, and all Stock Designated Shares shall

be converted into the right to receive Buyer Common Stock; and



                  (ii) the Cash Election Shares not so selected as Stock

Designated Shares shall be converted into the right to receive cash.



            (e) Oversubscription for Stock Election. If the aggregate number of

Stock Election Shares exceeds the Stock Election Number, all Cash Election

Shares and all Non-Election Shares shall be converted into the right to receive

cash, and all Stock Election Shares shall be converted into the right to receive

Buyer Common Stock or the right to receive cash in the following manner:



                  (i) the Exchange Agent will select from among the holders of

Stock Election Shares, on a pro rata basis, a sufficient number of such shares

("Cash Designated Shares") such that the number of Cash Designated Shares will,

when added to the number of Cash Election Shares and Non-Election Shares, be

equal as closely as practicable to the Cash Election Number, and all such Cash

Designated Shares shall be converted into the right to receive cash; and



                  (ii) the Stock Election Shares not so selected as Cash

Designated Shares shall be converted into the right to receive Buyer Common

Stock.



            (f) Selection of Non-Election Shares If No Oversubscription. In the

event that neither subparagraph (d) nor subparagraph (e) above is applicable,

all Cash Election Shares shall be converted into the right to receive cash, all

Stock Election Shares shall be converted into the right to receive Buyer Common

Stock, and the Non-Election Shares shall be converted into either the right to

receive Buyer Common Stock or the right to receive cash by random selection by

the Exchange Agent so that the Stock Election Number and the Cash Election

Number equal their respective percentages of the number of shares of Company

Common Stock outstanding as closely as possible.



            (g) Procedures for Holders' Elections. Elections shall be made by

holders of Company Common Stock by mailing to the Exchange Agent a Form of

Election. To be effective, a Form of Election must be properly completed, signed

and submitted to the Exchange Agent by the holder and accompanied by the

certificates representing the shares of Company Common Stock as to which the

election is being made (or properly completed, signed and submitted to the

Exchange Agent by an appropriate bank or trust company in the United States or a

member of a registered national securities exchange or the National Association

of Securities Dealers, Inc. (the "NASD")). Buyer will have the discretion, which

it may delegate in whole or in part to the Exchange Agent, to determine whether

Forms of Election have been properly completed, signed and submitted and to

disregard immaterial defects in Forms of Election. The good faith decision of

Buyer (or the Exchange Agent) in such matters shall be conclusive and binding,

provided that Buyer (and the Exchange Agent) do not act unreasonably. Neither

Buyer nor the Exchange Agent will be under any obligation to, but Buyer and the

Exchange Agent may (if they choose to do so), notify any person of any defect in

a Form of Election submitted to the Exchange Agent. The Exchange Agent shall

also make all computations contemplated by this Section 1.5 and all such

computations shall be conclusive and binding on the holders of Company Common

Stock, provided that the Exchange Agent does not act unreasonably.





                                      -6-

<PAGE>



            (h) Failure of Holder to Elect. For the purpose hereof, a holder of

Company Common Stock who does not submit a Form of Election which is received by

the Exchange Agent prior to the Election Deadline (as hereinafter defined) shall

be deemed to have made a Non-Election. If Buyer or the Exchange Agent shall

determine that any purported Cash Election or Stock Election was not properly

made, such purported Cash Election or Stock Election shall, unless cured prior

to the Election Deadline (as hereafter defined), be deemed to be of no force and

effect and the shareholder or Representative making such purported Cash Election

or Stock Election shall, for purposes hereof, be deemed to have made a

Non-Election.



            (i) Mailing of Election Forms to Holders and Election Deadline.

Buyer and the Company shall each use its best efforts to mail the Form of

Election to all persons who are holders of record of Company Common Stock on the

record date for the Company Shareholders' Meeting (as defined in Section 6.3)

and who become holders of Company Common Stock during the period between the

record date for the Company Shareholders' Meeting and 10:00 a.m. New York time,

on at least the date fifteen calendar days prior to the anticipated Effective

Time and to make the Form of Election available to all persons who become

holders of Company Common Stock subsequent to such day and no later than the

close of business on the Election Deadline. A Form of Election must be received

by the Exchange Agent by the close of business on the third Business Day (as

hereinafter defined) prior to the Closing (the "Election Deadline") in order to

be effective. All elections will be irrevocable. The term "Business Day" shall

mean Monday, Tuesday, Wednesday, Thursday and Friday, other than any such day on

which Buyer Subsidiary Bank is not open for business.



            (j) Increase in Stock Election Number Due to Tax Opinion. If the Tax

opinion referred to in Section 7.1(d) and to be delivered at the Closing (the

"Tax Opinion") cannot be rendered (as reasonably determined by Lowenstein

Sandler PC and as reasonably concurred in by McCarter & English) as a result of

the Merger's potentially failing to satisfy continuity of interest requirements

under applicable federal income Tax principles relating to reorganizations under

Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),

then the Stock Percentage shall be automatically increased and the Cash

Percentage shall be automatically decreased to the minimum extent necessary to

enable the Tax Opinion to be rendered.





                                      -7-

<PAGE>



            (k) Exchange Agent Procedures. The random selection process to be

used by the Exchange Agent pursuant to subparagraph (f) of Section 1.5 will

consist of drawing by lot or such other process (other than pro rata selection)

as the Exchange Agent deems equitable and necessary to effect the allocations

described in such subparagraph. The pro rata selection process to be used by the

Exchange Agent pursuant to subparagraphs (d) and (e) of Section 1.5 shall

consist of such equitable pro ration processes as shall be mutually determined

by the Company and Parent. A selection will be disregarded if, as a consequence,

the Stock Election Number or the Cash Election Number would be exceeded by more

than 1,000 shares.



      1.6 Stock Options. All options which may be exercised for issuance of

Company Common Stock (each, a "Stock Option" and collectively the "Stock

Options") are described in Section 1.6 of the Company Disclosure Schedule and

are issued and outstanding pursuant to the Company's 1999 Incentive Stock Option

Plan and the Company's 2004 Incentive Stock Option Plan (the "Company Stock

Option Plans") and the agreements pursuant to which such Stock Options were

granted (each, an "Option Grant Agreement"). True and complete copies of the

Company's Stock Option Plans and all Option Grant Agreements relating to

outstanding Stock Options have been delivered to Buyer. At the Effective Time,

each Stock Option which is outstanding and unexercised immediately prior

thereto, whether or not then vested or exercisable, shall automatically be

converted into an option to purchase Buyer Common Stock (a "New Option") as

follows: (i) the number of shares of Buyer Common Stock covered by each New

Option shall equal the number of shares of Company Common Stock covered by the

corresponding Stock Option immediately prior to the Effective Time multiplied by

the Exchange Ratio and (ii) the exercise price for each New Option shall equal

the exercise price of the corresponding Stock Option immediately prior to the

Effective Time divided by the Exchange Ratio. In substantially all respects, the

terms of each New Option shall otherwise be identical to the terms of the

corresponding Stock Option in effect immediately prior to the consummation of

the Merger, subject to any provisions in the Company Stock Option Plans which

require acceleration of vesting as a result of the consummation of the Merger.

In effecting such conversion, the aggregate number of shares of Buyer Common

Stock to be subject to each New Option will be rounded up or down, if necessary,

to the nearest whole share (with one-half being rounded up) and the aggregate

exercise price shall be rounded up or down, if necessary, to the nearest whole

cent (with one-half being rounded up). At the Effective Time, the Company Stock

Option Plans shall be terminated. The adjustments provided herein with respect

to any Stock Options that are "incentive stock options" (as defined in Section

422 of the Code) shall be effected in such manner as shall not cause a

modification, extension or renewal of the Stock Options, within the meaning of

Section 424(a) of the Code. Prior to the Effective Time, the Company shall take

or cause to be taken all actions required under the Company Stock Option Plans

to provide for the foregoing. At the request of any holder of New Options, Buyer

shall assist such holder in effecting cashless exercises of such New Options

with third-party brokers in the same manner that Buyer assists holders of stock

options granted by Buyer under its stock options plans to effect cashless

exercises of such options with third-party brokers.





                                      -8-

<PAGE>



      1.7 Buyer Common Stock. Except for shares of Buyer Common Stock owned by

the Company or any of its Subsidiaries (other than Trust Account Shares and DPC

Shares), which shall be converted into treasury stock of Buyer as contemplated

by Section 1.4, the shares of Buyer Common Stock and shares of capital stock of

Buyer Subsidiary Bank issued and outstanding immediately prior to the Effective

Time shall be unaffected by the Merger and such shares shall remain issued and

outstanding.



      1.8 Shares of Dissenting Shareholders. Notwithstanding anything in this

Agreement to the contrary, any shares of Company Common Stock that are issued

and outstanding as of the Effective Time and that are held by a shareholder who

has properly exercised his appraisal rights (the "Dissenting Shares") under the

National Bank Act, 12 U.S.C. Section 215a, shall not be converted into the right

to receive the Merger Consideration unless and until the holder shall have

failed to perfect, or shall have effectively withdrawn or lost, his, her or its

right to dissent from the Merger under National Bank Act, 12 U.S.C. Section

215a, and to receive such consideration as may be determined to be due with

respect to such Dissenting Shares pursuant to and subject to the requirements of

National Bank Act, 12 U.S.C. Section 215a. If any such holder shall have failed

to perfect or shall have effectively withdrawn or lost such right, each share of

such holder's Company Common Stock shall thereupon be deemed to have been

converted into and to have become, as of the Effective Time, the right to

receive, without any interest thereon, the Per Share Cash Consideration upon

surrender of the Certificate or Certificates representing such Dissenting

Shares. The Company shall give Buyer (i) prompt notice of any notice or demands

for appraisal or payment for shares of Company Common Stock received by the

Company and (ii) the opportunity to participate in and direct all negotiations

and proceedings with respect to any such demands or notices. The Company shall

not, without the prior written consent of Buyer, make any payment with respect

to, or settle, offer to settle or otherwise negotiate, any such demands. For

purposes of determining how all shares other than Dissenting Shares are to be

treated under Section 1.5, Dissenting Shares shall be deemed to be Cash Election

Shares, provided that no Dissenting Shares shall be treated as Stock Designated

Shares hereunder.



      1.9 Articles of Association At the Effective Time, the Articles of

Association of Buyer Subsidiary Bank as they exist immediately prior to the

Effective Time shall continue as the Articles of Association of the Surviving

Corporation, as set forth in Exhibit A annexed hereto, until otherwise amended

as provided by law; provided however, that Buyer Subsidiary Bank shall have the

right, between the date hereof and the Closing, to amend its Articles of

Association in a manner that will not adversely affect the shareholders of the

Company and upon the acceptance of such amendment by the OCC, the Articles of

Association of Buyer Subsidiary Bank as so amended shall be substituted for

Exhibit A.





                                      -9-

<PAGE>



      1.10 By-Laws. At the Effective Time, the By-Laws of Buyer Subsidiary Bank,

as in effect immediately prior to the Effective Time, shall be the By-Laws of

the Surviving Corporation until thereafter amended in accordance with applicable

law.



      1.11 Directors and Officers. The directors and officers of Buyer

Subsidiary Bank immediately prior to the Effective Time shall be the directors

and officers of the Surviving Corporation, each to hold office in accordance

with the Articles of Association and By-Laws of the Surviving Corporation until

their respective successors are duly elected or appointed and qualified.



      1.12 Tax Consequences. It is intended that the Merger shall constitute a

reorganization within the meaning of Section 368(a) of the Code and that this

Agreement shall constitute a "plan of reorganization" for purposes of Section

368 of the Code.



      1.13 Withholding Rights. Buyer shall be entitled to deduct and withhold,

or cause the Exchange Agent to deduct and withhold, from funds provided by the

holder or from the consideration otherwise payable pursuant to this Agreement to

any holder of Company Common Stock, the minimum amounts (if any) that Buyer is

required to deduct and withhold with respect to the making of such payment under

the Code, or any provision of state, local or foreign Tax law. To the extent

that amounts are so withheld by Buyer, such withheld amounts shall be treated

for all purposes of this Agreement as having been paid to the holder of Company

Common Stock in respect of which such deduction and withholding was made by

Buyer.



      1.14 Changes in Structure. As executed by the parties, this Agreement

contemplates the merger of the Company into Buyer Subsidiary Bank. In the event

that (a) prior to the date on which the Proxy Statement (as defined in Section

3.4 hereof) is mailed to the Company's shareholders, Buyer proposes an

alternative structure for the transactions contemplated hereby, and (b) such

alternate structure does not adversely affect the Company's shareholders in any

material respect, then the Company shall negotiate in good faith with Buyer and

shall use commercially reasonable efforts to restructure the transactions

contemplated hereby in accordance with such proposal.



      1.15 Capital Stock. As of September 30, 2004, Buyer Subsidiary Bank had

capital of $2,000,000, divided into 400,000 shares of common stock, each without

par value, $22,287,000 of surplus, and undivided profits of $45,925,000. As of

September 30, 2004, the Company had capital of $9,898,000, divided into

2,078,727 shares of common stock, each of $5.00 par value, $5,977,000 of

surplus, and $(4,157,000) of undivided profits. At the Effective Time, the

amount of capital stock of the Surviving Corporation shall be $11,898,000,

divided into 400,000 shares of common stock, each of no par value, and the

Surviving Corporation shall have a surplus of $28,264,000 and undivided profits,

including capital reserves, which when combined with the capital and surplus

will be equal to the combined capital structures of Buyer Subsidiary Bank and

the Company as stated in the preceding two sentences, adjusted however, for

earnings and expenses and dividends declared and paid by Buyer Subsidiary Bank

and the Company between September 30, 2004 and the Effective Time.





                                      -10-

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                                   ARTICLE II



                               EXCHANGE OF SHARES



      2.1 Buyer to Make Shares Available. The Company and Buyer hereby appoint

Registrar and Transfer Company (or such other transfer agent as Buyer shall

designate in good faith) as the exchange agent (the "Exchange Agent") for

purposes of effecting the conversion of Company Common Stock hereunder. At or

prior to the Effective Time, Buyer shall deposit, or shall cause to be

deposited, with the Exchange Agent, for the benefit of the holders of

Certificates, for exchange in accordance with this Article II, certificates

representing shares of Buyer Common Stock and cash in an amount sufficient to

cover the Aggregate Merger Consideration (such cash and certificates for shares

of Buyer Common Stock, together with any dividends or distributions with respect

thereto, being hereinafter referred to as the "Exchange Fund") to be issued

pursuant to Section 1.4 and paid pursuant to Section 2.2(a) in exchange for

outstanding shares of Company Common Stock.



      2.2 Exchange of Shares.



            (a) As soon as practicable after the Effective Time, the Exchange

Agent shall mail to each holder of record of a Certificate or Certificates who

has not previously surrendered such Certificate or Certificates with a Form of

Election a form letter of transmittal (which shall specify that delivery shall

be effected, and risk of loss and title to the Certificates shall pass, only

upon delivery of the Certificates to the Exchange Agent) and instructions for

use in effecting the surrender of the Certificates in exchange for the Merger

Consideration into which the shares of Company Common Stock represented by such

Certificate or Certificates shall have been converted pursuant to this

Agreement. The Company shall have the right to review both the letter of

transmittal and the instructions prior to the Effective Time and provide

reasonable comments thereon. After the Effective Time, upon surrender of a

Certificate for exchange and cancellation to the Exchange Agent, together with

such letter of transmittal, duly executed, the holder of such Certificate shall

be entitled to receive in exchange therefor the Merger Consideration to which

such holder of Company Common Stock shall have become entitled pursuant to the

provisions of Article I, and the Certificate so surrendered shall forthwith be

canceled. No interest will be paid or accrued on any cash constituting Merger

Consideration (including cash to be paid in lieu of fractional shares) or on any

unpaid dividends or distributions, if any, payable to holders of Certificates.



            (b) No dividends or other distributions declared after the Effective

Time with respect to Buyer Common Stock and payable to the holders of record

thereof shall be paid to the holder of any unsurrendered Certificate until the

holder thereof shall surrender such Certificate in accordance with this Article

II. After the surrender of a Certificate in accordance with this Article II, the

record holder thereof shall be entitled to receive any such dividends or other

distributions, without any interest thereon, which theretofore had become

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