<PAGE>   1
                                                                     Exhibit 2.1

            AGREEMENT AND PLAN OF MERGER, DATED JANUARY 25, 1999, BY
             AND BETWEEN BSB BANCORP AND SKANEATELES BANCORP, INC.


















                                       68
<PAGE>   2


                          AGREEMENT AND PLAN OF MERGER

                                 BY AND BETWEEN

                                BSB BANCORP, INC.

                                       AND

                            SKANEATELES BANCORP, INC.

                                   DATED AS OF

                                JANUARY 25, 1999




                                       69
<PAGE>   3


                                        i
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                            Page

<S>                                                                                                        <C>
ARTICLE I THE MERGER                                                                                          1
        1.1 The Merger........................................................................................1
        1.2 Effective Time....................................................................................1
        1.3 Effects of the Merger.............................................................................1
        1.4 Conversion of SKAN Common Stock...................................................................2
        1.5 Options...........................................................................................3
        1.6 Certificate of Incorporation......................................................................3
        1.7 Bylaws............................................................................................3
        1.8 Directors and Officers............................................................................3
        1.9 Tax Consequences..................................................................................3


ARTICLE II EXCHANGE OF SHARES                                                                                 4
        2.1 BSB Bancorp to Make Shares Available..............................................................4
        2.2 Exchange of Shares................................................................................4


ARTICLE III REPRESENTATIONS AND WARRANTIES OF SKAN                                                            5
        3.1 Corporate Organization............................................................................5
        3.2 Capitalization....................................................................................6
        3.3 Authority; No Violation...........................................................................6
        3.4 Consents and Approvals............................................................................7
        3.5 Loan Portfolio; Reports...........................................................................8
        3.6 Financial Statements; Exchange Act Filings; Books and Records.....................................8
        3.7 Broker's Fees.....................................................................................9
        3.8 Absence of Certain Changes or Events..............................................................9
        3.9 Legal Proceedings.................................................................................9
        3.10 Taxes and Tax Returns............................................................................9
        3.11 Employee Plans...................................................................................11
        3.12 Certain Contracts................................................................................12
        3.13 Agreements with Regulatory Agencies..............................................................12
        3.14 State Takeover Laws; Certificate of Incorporation................................................12
        3.15 Environmental Matters............................................................................13
        3.16 Reserves for Losses..............................................................................13
        3.17 Properties and Assets............................................................................14
        3.18 Insurance........................................................................................14
        3.19 Compliance with Applicable Laws..................................................................15
        3.20 Loans............................................................................................15
        3.21 Affiliates.......................................................................................15
        3.22 Ownership of BSB Bancorp Common Stock............................................................16
        3.23 Fairness Opinion.................................................................................16
        3.24 SKAN DRIP and Purchase Plan......................................................................16
        3.25 Accounting Matters...............................................................................16
        3.26 Accuracy of Information..........................................................................16


ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BSB BANCORP                                                      17
        4.1 Corporate Organization............................................................................17
        4.2 Capitalization....................................................................................17
</TABLE>

                                       i
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<TABLE>
<S>     <C>                                                                                                  <C>
        4.3 Authority; No Violation...........................................................................18
        4.4 Regulatory Approvals..............................................................................18
        4.5 Financial Statements; Exchange Act Filings; Books and Records.....................................19
        4.6 Agreements with Regulatory Agencies...............................................................19
        4.7 Legal Proceedings.................................................................................20
        4.8 Compliance with Applicable Laws...................................................................20
        4.9 Accounting Matters................................................................................20
        4.10 Ownership of SKAN Common Stock...................................................................20
        4.11 Insurance of Deposits............................................................................20


ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS                                                           20
        5.1 Covenants of SKAN.................................................................................20
        5.2 Merger Covenants..................................................................................23
        5.3 Compliance with Antitrust Laws....................................................................23
        5.4 Termination of 401(k) Plan and ESOP...............................................................24


ARTICLE VI ADDITIONAL AGREEMENTS                                                                              24
        6.1 Regulatory Matters................................................................................24
        6.2 Access to Information.............................................................................25
        6.3 Shareholder Meeting...............................................................................26
        6.4 Legal Conditions to Merger........................................................................26
        6.5 Stock Exchange Listing............................................................................26
        6.6 Employees and Advisory Directors..................................................................26
        6.7 Indemnification...................................................................................27
        6.8 Subsequent Interim and Annual Financial Statements................................................28
        6.9 Additional Agreements.............................................................................29
        6.10 Advice of Changes................................................................................29
        6.11 Current Information..............................................................................29
        6.12 Execution and Authorization of Bank Merger Agreement.............................................29
        6.13 Change in Structure..............................................................................29
        6.14 Transaction Expenses of SKAN.....................................................................30


ARTICLE VII CONDITIONS PRECEDENT                                                                              30
        7.1 Conditions to Each Party's Obligation To Effect the Merger........................................30
        7.2 Conditions to Obligations of BSB Bancorp..........................................................31
        7.3 Conditions to Obligations of SKAN.................................................................33


ARTICLE VIII TERMINATION AND AMENDMENT                                                                        34
        8.1 Termination.......................................................................................34
        8.2 Effect of Termination.............................................................................36
        8.3 Amendment.........................................................................................36
        8.4 Extension; Waiver.................................................................................37


ARTICLE IX GENERAL PROVISIONS                                                                                 37
        9.1 Closing...........................................................................................37
        9.2 Nonsurvival of Representations, Warranties and Agreements.........................................37
        9.3 Expenses..........................................................................................37
        9.4 Notices...........................................................................................37
        9.5 Interpretation....................................................................................38
</TABLE>
                                       ii
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<TABLE>
<S>     <C>                                                                                                  <C>
        9.6 Counterparts......................................................................................38
        9.7 Entire Agreement..................................................................................39
        9.8 Governing Law.....................................................................................39
        9.9 Enforcement of Agreement..........................................................................39
        9.10 Severability.....................................................................................39
        9.11 Publicity........................................................................................39
        9.12 Assignment; Limitation of Benefits...............................................................39
        9.13 Additional Definitions...........................................................................40
</TABLE>


EXHIBITS
      A  Bank Plan of Merger
      B  Option Agreement
      C  Certificate of Merger
      D  Stockholder Agreement
      E  Index Group

                                      iii
<PAGE>   6




                          AGREEMENT AND PLAN OF MERGER

         This AGREEMENT AND PLAN OF MERGER, dated as of January 25, 1999 (this
"Agreement"), is entered into by and between BSB BANCORP, INC., a Delaware
corporation ("BSB Bancorp"), and SKANEATELES BANCORP, INC., a Delaware
corporation ("SKAN").

         WHEREAS, the Boards of Directors of BSB Bancorp and SKAN have
determined that it is in the best interests of their respective companies and
shareholders to consummate the business combination transaction provided for
herein in which SKAN will, subject to the terms and conditions set forth herein,
merge (the "Merger") with and into BSB Bancorp, with BSB Bancorp being the
Surviving Corporation (as defined below);

         WHEREAS, prior to consummation of the Merger, BSB Bancorp and SKAN will
respectively cause BSB Bank & Trust Company, a New York-chartered commercial
bank and trust company and wholly owned subsidiary of BSB Bancorp ("BSB Bank"),
and Skaneateles Savings Bank, a New York-chartered savings bank and wholly owned
subsidiary of SKAN ("Skaneateles Bank"), to enter into a merger agreement, in
the form attached hereto as Exhibit A (the "Bank Merger Agreement"), providing
for the merger (the "Bank Merger") of Skaneateles Bank with and into BSB Bank,
with BSB Bank being the surviving Bank of the Bank Merger, and it is intended
that the Bank Merger be consummated immediately after consummation of the
Merger;

         WHEREAS, as an inducement to BSB Bancorp to enter into this Agreement,
SKAN has entered into an option agreement, in the form attached hereto as
Exhibit B (the "Option Agreement"), with BSB Bancorp concurrently with the
execution of this Agreement pursuant to which SKAN has granted BSB Bancorp an
option to purchase, under certain circumstances, an aggregate of 290,142 newly
issued shares of common stock, par value $.01 per share, of SKAN ("SKAN Common
Stock") upon the terms and conditions therein contained (which number of shares
is equal to 19.99% of the total number of outstanding shares of SKAN Common
Stock on the date hereof); and

         WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Merger and also to prescribe certain
conditions to the Merger as set forth hereinbelow.

         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:

                                    ARTICLE I
                                   THE MERGER

1.1     The Merger.

         Subject to the terms and conditions of this Agreement, in accordance
with the Delaware General Corporation Law (the "DGCL"), at the Effective Time
(as defined in Section 1.2 hereof), SKAN shall merge with and into BSB Bancorp,
with BSB Bancorp being the surviving corporation (hereinafter sometimes called
the "Surviving Corporation") in the Merger. Upon consummation of the Merger, the
corporate existence of SKAN shall cease and the Surviving Corporation shall
continue to exist as a Delaware corporation.

Effective Time.

         The Merger shall become effective on the Closing Date (as defined in
Section 9.1 hereof), as set forth in the certificate of merger (the "Certificate
of Merger") in the form attached as Exhibit C hereto which shall be filed with
the Secretary of State of the State of Delaware on or before the Closing Date.
The term "Effective Time" shall be the date and time when the Merger becomes
effective on the Closing Date, as set forth in the Certificate of Merger.

1.3     Effects of the Merger.

<PAGE>   7


         At and after the Effective Time, the Merger shall have the effects set
forth in Sections 259 and 261 of the DGCL.

1.4     Conversion of SKAN Common Stock.

        (a) At the Effective Time, subject to Sections 1.4(b), 2.2(e) and 8.1(h)
hereof, each share of SKAN Common Stock issued and outstanding prior to the
Effective Time shall, by virtue of this Agreement and without any action on the
part of the holder thereof, be converted into and exchangeable for .970 shares
of BSB Bancorp common stock, par value $.01 per share ("BSB Bancorp Common
Stock"). The ratio of the number of shares of BSB Bancorp Common Stock to be
exchanged for each share of SKAN Common Stock issued and outstanding is
hereinafter referred to as the "Exchange Ratio." For the purposes of this
Agreement, references to BSB Bancorp Common Stock shall be deemed to include,
where appropriate, references to the right to receive shares of BSB Bancorp's
Series A Junior Participating Preferred Stock pursuant to the Rights Agreement,
dated as of May 22, 1989, as amended, between BSB Bancorp and American Stock
Transfer & Trust Company (the "Rights Agreement").

        (b) All of the shares of SKAN Common Stock converted into BSB Bancorp
Common Stock pursuant to this Article I shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each certificate (each a
"Certificate") previously representing any such shares of SKAN Common Stock
shall thereafter represent the right to receive (i) the number of whole shares
of BSB Bancorp Common Stock and (ii) cash in lieu of fractional shares into
which the shares of SKAN Common Stock represented by such Certificate have been
converted pursuant to Section 1.4(a) and Section 2.2(e) hereof. Certificates
previously representing shares of SKAN Common Stock shall be exchanged for
certificates representing whole shares of BSB Bancorp Common Stock and cash in
lieu of fractional shares issued in consideration therefor upon the surrender of
such Certificates in accordance with Section 2.2 hereof, without any interest
thereon. If prior to the Effective Time BSB Bancorp should split or combine its
common stock, or pay a dividend or other distribution in such common stock, then
the Exchange Ratio shall be appropriately adjusted to reflect such split,
combination, dividend or distribution.

        (c) At the Effective Time, all shares of SKAN Common Stock that are
owned by SKAN as treasury stock and all shares of SKAN Common Stock that are
owned directly or indirectly by BSB Bancorp or SKAN or any of their respective
Subsidiaries (other than shares of SKAN Common Stock held directly or indirectly
in trust accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties (any such
shares, and shares of BSB Bancorp Common Stock which are similarly held, whether
held directly or indirectly by BSB Bancorp or SKAN, as the case may be, being
referred to herein as "Trust Account Shares") and other than any shares of SKAN
Common Stock held by BSB Bancorp or SKAN or any of their respective Subsidiaries
in respect of a debt previously contracted (any such shares of SKAN Common
Stock, and shares of BSB Bancorp Common Stock which are similarly held, whether
held directly or indirectly by BSB Bancorp or SKAN, being referred to herein as
"DPC Shares")) shall be canceled and shall cease to exist and no stock of BSB
Bancorp or other consideration shall be delivered in exchange therefor. All
shares of BSB Bancorp Common Stock that are owned by SKAN or any of its
Subsidiaries (other than Trust Account Shares and DPC Shares) shall become
treasury stock of BSB Bancorp.

        (d) Certificates for fractions of shares of BSB Bancorp Common Stock
will not be issued. In lieu of a fraction of a share of BSB Bancorp Common
Stock, each holder of SKAN Common Stock otherwise entitled to a fraction of a
share of BSB Bancorp Common Stock shall be entitled to receive an amount of cash
equal to (i) the fraction of a share of the BSB Bancorp Common Stock to which
such holder would otherwise be entitled, multiplied by (ii) the actual market
value of the BSB Bancorp Common Stock, which shall be deemed to be the average
of the daily closing prices per share for BSB Bancorp Common Stock for the
twenty consecutive trading days on which shares of BSB Bancorp Common Stock are
actually traded (as reported on the Nasdaq Stock Market National Market System)
ending on the third trading day preceding the Closing Date. Following
consummation of the Merger, no holder of SKAN Common Stock shall be entitled to
dividends or any other rights in respect of any such fraction.

                                       2
<PAGE>   8

Options.

         At the Effective Time, each option or warrant granted by SKAN to
purchase shares of SKAN Common Stock which is outstanding and unexercised
immediately prior thereto shall be converted automatically into an option to
purchase shares of BSB Bancorp Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of the
1995 Non-Employee Directors Warrant Plan and 1998 Non-Employee Directors Warrant
Plan, the 1998 Stock Option Plan, the 1991 Long Term Incentive and Capital
Accumulation Plan and the 1987 Long Term Incentive and Capital Accumulation Plan
(collectively, all such plans are referred to as the "SKAN Stock Plans");

       (1)    The number of shares of BSB Bancorp Common Stock to be subject to
              the option or warrant immediately after the Effective Time shall
              be equal to the product of the number of shares of SKAN Common
              Stock subject to the option or warrant immediately before the
              Effective Time, multiplied by the Exchange Ratio, provided that
              any fractional shares of BSB Bancorp Common Stock resulting from
              such multiplication shall be rounded down to the nearest share;
              and

       (2)    The exercise price per share of BSB Bancorp Common Stock under the
              option or warrant immediately after the Effective Time shall be
              equal to the exercise price per share of SKAN Common Stock under
              the option or warrant immediately before the Effective Time
              divided by the Exchange Ratio, provided that such exercise price
              shall be rounded down to the nearest cent.

The adjustment provided herein shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The duration and other terms of the option or
warrant immediately after the Effective Time shall be the same as the
corresponding terms in effect immediately before the Effective Time, except that
all references to SKAN or Skaneateles Bank in the SKAN Stock Plans (and the
corresponding references in the option or warrant agreement documenting such
option or warrant) shall be deemed to be references to BSB Bancorp. Nothing
herein shall be construed as preventing option or warrant holders from
exercising the same prior to the Effective Time in accordance with the terms
thereof.

1.6     Certificate of Incorporation.

         At the Effective Time, the Certificate of Incorporation of BSB Bancorp,
as in effect at the Effective Time, shall become the Certificate of
Incorporation of the Surviving Corporation.

1.7     Bylaws.

         At the Effective Time, the Bylaws of BSB Bancorp, as in effect
immediately prior to the Effective Time, shall become the Bylaws of the
Surviving Corporation.

Directors and Officers.

         At the Effective Time, the directors and officers of BSB Bancorp
immediately prior to the Effective Time shall become the directors and officers
of the Surviving Corporation. As of the Effective Time, BSB Bancorp shall amend
its Bylaws to increase the size of its Board of Directors by two members, and
promptly thereafter invite two members of the SKAN Board of Directors (as
constituted on the date hereof) to serve as members of the Board of Directors of
BSB Bancorp

1.9     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 the purposes of the Code.

                                       3
<PAGE>   9

                                   ARTICLE II
                               EXCHANGE OF SHARES

2.1     BSB Bancorp to Make Shares Available.

         At or prior to the Effective Time, BSB Bancorp shall deposit, or shall
cause to be deposited, with BSB Bancorp's transfer agent, American Stock
Transfer & Trust Company, or such other bank, trust company or transfer agent as
BSB Bancorp may select (the "Exchange Agent"), for the benefit of the holders of
Certificates, for exchange in accordance with this Article II, certificates
representing the shares of BSB Bancorp Common Stock and the cash in lieu of
fractional shares (such cash and certificates for shares of BSB Bancorp Common
Stock, being hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Section 1.4 and paid pursuant to Section 2.2(a) hereof
(collectively, sometimes referred to herein as the "Shares") in exchange for
outstanding shares of SKAN 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 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 certificates representing the
shares of BSB Bancorp Common Stock and the cash in lieu of fractional shares
into which the shares of SKAN Common Stock represented by such Certificate or
Certificates shall have been converted pursuant to this Agreement. SKAN shall
have the right to review both the letter of transmittal and the instructions
prior to such documents being finalized. 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 promptly in exchange therefor (x) a certificate representing that number
of whole shares of BSB Bancorp Common Stock to which such holder of SKAN Common
Stock shall have become entitled pursuant to the provisions of Article I hereof
and (y) a check representing the amount of cash in lieu of fractional shares, if
any, which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of Article I, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions, if
any, payable to holders of Certificates.

        (b) No dividends or other distributions declared after the Effective
Time with respect to BSB Bancorp 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 payable with respect to shares of BSB Bancorp Common
Stock represented by such Certificate. No holder of an unsurrendered Certificate
shall be entitled, until the surrender of such Certificate, to vote the shares
of BSB Bancorp Common Stock into which his SKAN Common Stock shall have been
converted.

        (c) If any certificate representing shares of BSB Bancorp Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to the
Exchange Agent in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of BSB Bancorp Common Stock in any
name other than that of the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not payable.

        (d) As of the Effective Time, there shall be no transfers on the stock
transfer books of SKAN of the shares of SKAN Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be 

                                       4
<PAGE>   10

canceled and exchanged for certificates representing shares of BSB Bancorp
Common Stock as provided in this Article II.

        (e) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of SKAN for nine months after the Effective Time may be returned to
BSB Bancorp. After such funds have been returned to BSB Bancorp, any
shareholders of SKAN who have not theretofore complied with this Article II
shall thereafter look only to BSB Bancorp for payment of their shares of BSB
Bancorp Common Stock, cash in lieu of fractional shares and unpaid dividends and
distributions on BSB Bancorp Common Stock deliverable in respect of each share
of SKAN Common Stock such shareholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. Notwithstanding the
foregoing, none of BSB Bancorp, SKAN, the Exchange Agent or any other person
shall be liable to any former holder of shares of SKAN Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.

        (f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by BSB
Bancorp, the posting by such person of a bond in such amount as BSB Bancorp may
reasonably direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate the shares of BSB Bancorp Common
Stock and cash in lieu of fractional shares deliverable in respect thereof
pursuant to this Agreement.

                                   ARTICLE III
                     REPRESENTATIONS AND WARRANTIES OF SKAN

         SKAN hereby makes the following representations and warranties to BSB
Bancorp as set forth in this Article III, each of which is being relied upon by
BSB Bancorp as a material inducement to enter into and perform this Agreement.
All of the disclosure schedules of SKAN referenced below and thereby required of
SKAN pursuant to this Agreement, which disclosure schedules shall be
cross-referenced to the specific sections and subsections of this Agreement and
delivered herewith, are referred to herein as the "SKAN Disclosure Schedule."

3.1     Corporate Organization.

        (a) SKAN is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. SKAN has the corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed or qualified to
do business in each jurisdiction in which the nature of any material business
conducted by it or the character or location of any material properties or
assets owned or leased by it makes such licensing or qualification necessary.
SKAN is duly registered as a bank holding company with the Board of Governors of
the Federal Reserve System ("FRB") under the Bank Holding Company Act of 1956,
as amended ("BHCA"). The Certificate of Incorporation and Bylaws of SKAN, copies
of which have previously been delivered to BSB Bancorp, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.
Skaneateles Bank and Skaneateles Preferred Capital Corp., a New York corporation
("SPCC"), are the only Subsidiaries of SKAN.

        (b) Skaneateles Bank is a New York-chartered savings bank duly organized
and validly existing and in good standing under the laws of New York. The
deposit accounts of Skaneateles Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund (the "BIF")
to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid by Skaneateles Bank. Skaneateles
Bank has the corporate power and authority to own or lease all of its properties
and assets and to carry on its business as it is now being conducted and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
any material business conducted by it or the character or the location of any
material properties or assets owned or leased by it makes such licensing or
qualification necessary. The Certificate of Incorporation and Bylaws of
Skaneateles Bank, copies of which have previously been delivered to BSB Bancorp,
are true, correct and complete copies of such documents as in effect as of the
date of this Agreement.

                                       5
<PAGE>   11

        (c) SPCC is a New York corporation duly organized and validly existing
and in good standing under the laws of New York. SPCC is a subsidiary of
Skaneateles Bank. SPCC has the corporate power and authority to own or lease all
of its properties and assets and to carry on its business as it is now being
conducted and is duly licensed or qualified to do business in each jurisdiction
in which the nature of any material business conducted by it or the character or
the location of any material properties or assets owned or leased by it makes
such licensing or qualification necessary. The Certificate of Incorporation and
Bylaws of SPCC, copies of which have previously been delivered to BSB Bancorp,
are true, correct and complete copies of such documents as in effect as of the
date of this Agreement.

3.2 Capitalization.

        (a) The authorized capital stock of SKAN consists of 4,000,000 shares of
SKAN Common Stock and 500,000 shares of serial preferred stock, par value $.01
per share (the "SKAN Preferred Stock"). As of the date hereof, there are (x)
1,450,712 shares of SKAN Common Stock issued and outstanding and no shares of
SKAN Common Stock are held in SKAN's treasury, (y) no shares of SKAN Common
Stock reserved for issuance upon exercise of outstanding stock options or
otherwise, except for (i) 345,163 shares of SKAN Common Stock reserved for
issuance pursuant to the SKAN Stock Plans other than those referred to in clause
(ii) (of which options for 120,350 shares are currently outstanding), (ii)
203,150 shares of SKAN Common Stock reserved for issuance pursuant to the 1998
Directors Stock Purchase Plan and Employee Stock Purchase Plan (collectively,
the "Purchase Plan") and the Skaneateles Bancorp, Inc. Dividend Reinvestment
Plan (the "SKAN DRIP"), and (iii) 290,142 shares of SKAN Common Stock reserved
for issuance upon exercise of the option issued to BSB Bancorp pursuant to the
Option Agreement, and (z) no shares of SKAN Preferred Stock issued or
outstanding, held in SKAN's treasury or reserved for issuance upon exercise of
outstanding stock options or otherwise. All of the issued and outstanding shares
of SKAN Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except for the Option Agreement and the SKAN
Stock Plans, SKAN does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of SKAN Common
Stock or SKAN Preferred Stock or any other equity security of SKAN or any
securities representing the right to purchase or otherwise receive any shares of
SKAN Common Stock or any other equity security of SKAN. The names of the
optionees, the date of each option to purchase SKAN Common Stock granted, the
number of shares subject to each such option, the expiration date of each such
option, and the price at which each such option may be exercised under the SKAN
Stock Plans are set forth in Section 3.2(a)(i) of the SKAN Disclosure Schedule.
Except as set forth at Section 3.2(a)(ii) of the SKAN Disclosure Schedule, since
December 31, 1997 SKAN has not issued any shares of its capital stock or any
securities convertible into or exercisable for any shares of its capital stock.

        (b) Section 3.2(b) of the SKAN Disclosure Schedule sets forth a true,
correct and complete list of all direct or indirect Subsidiaries of SKAN as of
the date of this Agreement. Except as set forth at Section 3.2(b) of the SKAN
Disclosure Schedule, SKAN owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of each of its Subsidiaries, free and clear
of all liens, charges, encumbrances and security interests whatsoever, and all
of such shares are duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No SKAN Subsidiary has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of capital
stock or any other equity security of such Subsidiary or any securities
representing the right to purchase or otherwise receive any shares of capital
stock or any other equity security of such Subsidiary.

3.3     Authority; No Violation.

        (a) SKAN has full corporate power and authority to execute and deliver
this Agreement and the Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Option Agreement and the consummation of the transactions contemplated
hereby and thereby 

                                       6
<PAGE>   12

have been duly and validly approved by the Board of Directors of SKAN. The Board
of Directors of SKAN has directed that this Agreement and the transactions
contemplated hereby be submitted to SKAN's shareholders for approval at a
special meeting of such shareholders and, except for the adoption of this
Agreement by the requisite vote of SKAN's shareholders, no other corporate
proceedings on the part of SKAN (except for matters related to setting the date,
time, place and record date for the special meeting) are necessary to approve
this Agreement or the Option Agreement or to consummate the transactions
contemplated hereby or thereby. This Agreement has been, and the Option
Agreement will be, duly and validly executed and delivered by SKAN and (assuming
due authorization, execution and delivery by BSB Bancorp of this Agreement and
by BSB Bancorp of the Option Agreement) will constitute valid and binding
obligations of SKAN, enforceable against SKAN in accordance with their terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.

        (b) Skaneateles Bank has full corporate power and authority to execute
and deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of Skaneateles Bank and by SKAN as
the sole shareholder of Skaneateles Bank. No other corporate proceedings on the
part of Skaneateles Bank will be necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
Skaneateles Bank, will be duly and validly executed and delivered by Skaneateles
Bank and will (assuming due authorization, execution and delivery by BSB Bank)
constitute a valid and binding obligation of Skaneateles Bank, enforceable
against Skaneateles Bank in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a court of law or
a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.

        (c) Neither the execution and delivery of this Agreement and the Option
Agreement by SKAN or the Bank Merger Agreement by Skaneateles Bank, nor the
consummation by SKAN or Skaneateles Bank, as the case may be, of the
transactions contemplated hereby or thereby, nor compliance by SKAN or
Skaneateles Bank with any of the terms or provisions hereof or thereof, will (i)
violate any provision of the Certificate of Incorporation or Bylaws of SKAN or
the Certificate of Incorporation or Bylaws of Skaneateles Bank, or (ii) assuming
that the consents and approvals referred to in Section 3.4 hereof are duly
obtained, (x) violate any Laws (as defined in Section 9.13) applicable to SKAN
or Skaneateles Bank or any of their respective properties or assets, or (y)
violate, conflict with, result in a breach of any provision of or the loss of
any benefit under, constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the respective properties or assets of
SKAN or Skaneateles Bank under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which SKAN or Skaneateles Bank is a party, or
by which they or any of their respective properties or assets may be bound or
affected.

3.4     Consents and Approvals.

        (a) Except for (i) the filing of applications, notices and waiver
requests, as applicable, as to the Merger and the Bank Merger with the FRB under
the BHCA, the FDIC under the Bank Merger Act and the Superintendent of Banks of
New York State (the "New York Superintendent"), and approval of the foregoing
applications, notices and waiver requests, (ii) the filing of any required
applications or notices with the FDIC and the New York Superintendent as to the
subsidiary activities of Skaneateles Bank which become subsidiaries of BSB Bank
and approval of such applications and notices, (iii) the filing with the
Securities and Exchange Commission ("SEC") of a registration statement on Form
S-4 to register the shares of BSB Bancorp Common Stock to be issued in
connection with the Merger (including the shares of BSB Bancorp Common Stock
that may be issued upon the exercise of the options referred to in Section 1.5
hereof), which will include the proxy statement/prospectus to be used in
soliciting the approval of SKAN's shareholders at a special meeting to be held
in connection with this Agreement and the transactions contemplated hereby (the
"Proxy Statement/Prospectus"), (iv) the approval of this Agreement by the
requisite vote of the shareholders of SKAN, (v) the filing of the Certificate of
Merger with the Secretary of State of

                                       7
<PAGE>   13


Delaware pursuant to the DGCL, (vi) the filings required by the Bank Merger
Agreement, and (vii) such filings, authorizations or approvals as may be set
forth in Section 3.4 of the SKAN Disclosure Schedule, no consents or approvals
of or filings or registrations with any court, administrative agency or
commission or other governmental authority or instrumentality (each a
"Governmental Entity"), or with any third party are necessary in connection with
(1) the execution and delivery by SKAN of this Agreement and the Option
Agreement, (2) the consummation by SKAN of the Merger and the other transactions
contemplated hereby, (3) the execution and delivery by Skaneateles Bank of the
Bank Merger Agreement, (4) the consummation by SKAN of the Option Agreement; and
(5) the consummation by Skaneateles Bank of the Bank Merger and the transactions
contemplated thereby, except, in each case, for such consents, approvals or
filings, the failure of which to obtain will not have a material adverse effect
on the ability of BSB Bancorp to consummate the transactions contemplated
hereby.

        (b) SKAN hereby represents to BSB Bancorp that it has no knowledge of
any reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 3.4(a) cannot be obtained or granted on a timely
basis.

3.5 Loan Portfolio; Reports.

        (a) Except as set forth at Section 3.5(a) of the SKAN Disclosure
Schedule, as of December 31, 1998 and thereafter through and including the date
of this Agreement, neither SKAN nor Skaneateles Bank is a party to any written
or oral loan agreement, note or borrowing arrangement (including, without
limitation, leases, credit enhancements, commitments, guarantees and
interest-bearing assets) (collectively, "Loans"), with any Affiliated Person (as
defined in Section 9.13).

        (b) SKAN and Skaneateles Bank have timely filed all reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that they were required to file since December 31, 1993
with (i) the FRB, (ii) the FDIC, (iii) the New York Superintendent and any other
state banking commissions or any other state regulatory authority (each a "State
Regulator"), (iv) the SEC and (v) any other self-regulatory organization ("SRO")
(collectively "Regulatory Agencies"). Except for normal examinations conducted
by a Regulatory Agency in the regular course of the business of SKAN and its
Subsidiaries, no Governmental Entity is conducting, or has conducted, any
proceeding or investigation into the business or operations of SKAN or
Skaneateles Bank since December 31, 1993, other than as set forth at Section
3.5(b) of the SKAN Disclosure Schedule.

3.6     Financial Statements; Exchange Act Filings; Books and Records.

        SKAN has previously delivered to BSB Bancorp true, correct and complete
copies of the consolidated balance sheets of SKAN and its Subsidiaries as of
December 31 for the fiscal years 1996 and 1997 and the related consolidated
statements of earnings, shareholders' equity and cash flows for the fiscal years
1995 through 1997, inclusive, as reported in SKAN's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 filed with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in each case
accompanied by the audit report of KPMG LLP, independent auditors, and the
interim financial statements of SKAN as of and for the nine months ended
September 30, 1997 and 1998, as included in the SKAN quarterly report on Form
10-Q for the period ended September 30, 1998 as filed with the SEC. The
financial statements referred to in this Section 3.6 (including the related
notes, where applicable) fairly present, and the financial statements referred
to in Section 6.8 hereof will fairly present (subject, in the case of the
unaudited statements, to recurring audit adjustments normal in nature and
amount), the results of the consolidated operations and consolidated financial
condition of SKAN and its Subsidiaries for the respective fiscal periods or as
of the respective dates therein set forth; each of such statements (including
the related notes, where applicable) comply, and the financial statements
referred to in Section 6.8 hereof will comply, with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section 6.8
hereof will be prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except in
each case as indicated in such statements or in the notes thereto or, in the
case of unaudited statements, as permitted

                                       8
<PAGE>   14

by Form 10-Q. SKAN's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and all reports filed under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act since December 31, 1995 comply in all material respects with
the appropriate requirements for such reports under the Exchange Act, and SKAN
has previously delivered or made available to BSB Bancorp true, correct and
complete copies of such reports. SKAN has made all filings required of it under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The books and records of
SKAN and Skaneateles Bank have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements.

3.7     Broker's Fees.

         Neither SKAN nor any SKAN Subsidiary nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement, except that SKAN has engaged, and will pay a
fee or commission to McConnell, Budd & Downes, Inc. ("MBD") in accordance with
the terms of a letter agreement between MBD and SKAN, dated December 17, 1998, a
true, complete and correct copy of which is attached at Section 3.7 of the SKAN
Disclosure Schedule.

3.8 Absence of Certain Changes or Events.

        (a) Except as set forth at Section 3.8 of the SKAN Disclosure Schedule,
or as disclosed in SKAN's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, since December 31, 1997 (i) neither SKAN nor any of its
Subsidiaries has incurred any material liability, except as contemplated by the
Agreement or in the ordinary course of their business consistent with their past
practices, and (ii) no event has occurred which has had, or is likely to have,
individually or in the aggregate, a Material Adverse Effect (as defined in
Section 9.13) on SKAN

        (b) Except for (i) the organization of SPCC, and (ii) the transactions
contemplated by this Agreement, since December 31, 1997 SKAN and its
Subsidiaries have carried on their respective businesses in the ordinary and
usual course consistent with their past practices.

3.9     Legal Proceedings.

        (a) Except as set forth at Section 3.9 of the SKAN Disclosure Schedule,
neither SKAN nor any of its Subsidiaries is a party to any, and there are no
pending or to the knowledge of SKAN, threatened, legal, administrative,
arbitration or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against SKAN or any of its Subsidiaries in which,
to the knowledge of SKAN, there is a reasonable probability of any material
recovery against or other material effect upon SKAN or any of its Subsidiaries
or which challenge the validity or propriety of the transactions contemplated by
this Agreement, the Bank Merger Agreement or the Option Agreement as to which
there is a reasonable probability of success.

        (b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than regulations of general application) imposed upon SKAN,
any of its Subsidiaries or the assets of SKAN or any of its Subsidiaries.

3.10    Taxes and Tax Returns.

        (a) Each of SKAN and its Subsidiaries has duly filed all Tax Returns
required to be filed by it on or prior to the date hereof (all such returns
being accurate and complete in all material respects) and has duly paid or made
provision on the financial statements referred to in Sections 3.6 and 6.8 hereof
in accordance with GAAP for the payment of all material Taxes which have been
incurred or are due or claimed to be due from it by Taxing Authorities on or
prior to the date hereof other than Taxes (a) which (x) are not yet delinquent
or (y) are being contested in good faith and set forth in Section 3.10 of the
SKAN Disclosure Schedule and (b) which have not been finally determined. All
liability with respect to the Tax Returns of SKAN and its Subsidiaries has been
satisfied for all years to and including 1997. The Internal Revenue Service
("IRS") has not notified SKAN of, or otherwise 

                                       9
<PAGE>   15


asserted, that there are any material deficiencies with respect to the federal
income Tax Returns of SKAN subsequent to 1993. There are no material disputes
pending, or claims asserted for, Taxes or assessments upon SKAN or any of its
Subsidiaries, nor has SKAN or any of its Subsidiaries been requested to give any
currently effective waivers extending the statutory period of limitation
applicable to any federal or state income Tax Return for any period. In
addition, Tax Returns which are accurate and complete in all material respects
have been filed by SKAN and its Subsidiaries for all periods for which returns
were due with respect to income tax withholding, Social Security and
unemployment taxes and the amounts shown on such Tax Returns to be due and
payable have been paid in full or adequate provision therefor in accordance with
GAAP has been included by SKAN in the financial statements referred to in
Sections 3.6 and 6.8 hereto. All SKAN Tax Returns relating to federal income
taxes have been examined by the relevant Taxing Authorities, or closed without
audit by applicable statutes of limitations, and all deficiencies proposed as a
result of such examinations have been paid or settled, for all periods before
and including the taxable year ended 1992. Neither SKAN nor any of its
Subsidiaries has consented to any waiver or extension of any statute of
limitations with respect to any Tax. Neither SKAN nor any SKAN Subsidiary has
made an election under Section 341(f) of the IRC. SKAN has provided or made
available to BSB Bancorp complete and correct copies of its Tax Returns and all
material correspondence and documents, if any, relating directly or indirectly
to taxes for each taxable year or other relevant period as to which the
applicable statute of limitations has not run on the date hereof. For this
purpose, "correspondence and documents" include, without limitation, amended Tax
Returns, claims for refunds, notices from Taxing Authorities of proposed changes
or adjustments to Taxes or Tax Returns, consents to assessment or collection of
Taxes, acceptances of proposed adjustments, closing agreements, rulings and
determination letters and requests therefor, and all other written
communications to or from Taxing Authorities relating to any material Tax
liability of SKAN or any SKAN Subsidiary. SKAN will not be a "foreign person" as
that term is used in ss. 1.1445-2 of the Treasury Regulations promulgated under
the IRC. Skaneateles Bank is not a "United States real property holding
corporation" within meaning of ss. 897 of the IRC and was not a "United States
real property holding corporation" on any "determination date" (as defined in
ss. 1.897-2(c) of such Regulations) that occurred during any relevant period.

        (b) For all taxable years commencing with December 31, 1998, SPCC has
been subject to taxation as a real estate investment trust within the meaning of
Section 856 of the Code ("REIT") and has satisfied all requirements to qualify
as a REIT for such years, (B) has operated, and intends to continue to operate,
in such a manner as to qualify as a REIT for the tax year ending December 31,
1999, and (C) has not taken or omitted to take any action which would reasonably
be expected to result in a challenge to its status as a REIT, and to SKAN's
knowledge, no such challenge is pending or threatened. SPCC does not hold any
asset (x) the disposition of which would be subject to rules similar to Section
1374 of the Code as a result of an election under IRS Notice 88-19 or (y) that
is subject to a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder.

        (c)    For purposes of this Agreement:

"Tax" means any tax (including any income tax, capital gains tax, value-added
tax, sales tax, property tax, gift tax, or estate tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any Taxing
Authority or payable pursuant to any tax-sharing agreement or any other contract
relating to the sharing or payment of any such tax, levy, assessment, tariff,
duty, deficiency, or fee. "Tax Return" means any return (including any
information return), report, statement, schedule, notice, form, or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any Taxing Authority in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any law,
regulation or other legal requirement relating to any Tax. "Taxing Authority"
means any:

                  (i) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;

                  (ii) federal, state, local, municipal, foreign, or other
government;

                                       10
<PAGE>   16

                  (iii) governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);

                  (iv) multi-national organization or body; or

                  (v) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.

3.11 Employee Plans.

        (a) Section 3.11(a) of the SKAN Disclosure Schedule sets forth a true
and complete list of each employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), arrangement or agreement that is maintained or contributed to as of
the date of this Agreement, or that has within the last six years been
maintained or contributed to, by SKAN or any of its Subsidiaries or any other
entity which together with SKAN would be deemed a "single employer" within the
meaning of Section 4001 of ERISA or Code Sections 414(b), (c) or (m) or under
which SKAN or any such Subsidiary has any liability (collectively, the "Plans").

        (b) SKAN has heretofore delivered or made available to BSB Bancorp true,
correct and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial report for such Plan (if
applicable) for each of the last five years, (ii) the most recent determination
letter from the IRS (if applicable) for such Plan, (iii) the current summary
plan description and any summaries of material modification, (iv) all annual
reports (Form 5500 series) for each Plan filed for the preceding five plan
years, (v) all agreements with fiduciaries and service providers relating to the
Plan, and (vi) all substantive correspondence relating to any such Plan
addressed to or received from the Internal Revenue Service, the Department of
Labor, the Pension Benefit Guaranty Corporation or any other governmental
agency.

        (c) Except as set forth at Section 3.11(c) of the SKAN Disclosure
Schedule, (i) Each of the Plans has been operated and administered in all
material respects in compliance with applicable Laws, including but not limited
to ERISA and the Code, (ii) each of the Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified, (iii) with respect to
each Plan which is subject to Title IV of ERISA, the present value of accrued
benefits under such Plan, based upon the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits, (iv) no Plan provides benefits, including, without limitation, death
or medical benefits (whether or not insured), with respect to current or former
employees of SKAN or any SKAN Subsidiary beyond their retirement or other
termination of service, other than (w) coverage mandated by applicable Law, (x)
death benefits or retirement benefits under a Plan that is an "employee pension
plan," as that term is defined in Section 3(2) of ERISA, (y) deferred
compensation benefits under a Plan that are accrued as liabilities on the books
of SKAN or any SKAN Subsidiary, or (z) benefits the full cost of which is borne
by the current or former employee (or his beneficiary), (v) no liability under
Title IV of ERISA has been incurred by SKAN or any SKAN Subsidiary that has not
been satisfied in full, and no condition exists that presents a material risk of
SKAN or any SKAN Subsidiary incurring a material liability thereunder, (vi) no
Plan is a "multi employer pension plan," as such term is defined in Section
3(37) of ERISA, (vii) all contributions or other amounts payable by SKAN or any
SKAN Subsidiary as of the Effective Time with respect to each Plan and all other
liabilities of each such entity with respect to each Plan, in respect of current
or prior plan years have been paid or accrued in accordance with generally
accepted accounting practices and Section 412 of the Code, (viii) neither SKAN
nor any SKAN Subsidiary has engaged in a transaction in connection with which
SKAN or any SKAN Subsidiary could be subject to either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975 or 4976 of the Code, (ix) to the knowledge of SKAN, there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the plans or any trusts related thereto, and (x) all
Plans (other than Plans providing for the payment of benefits from the general
assets of SKAN or any SKAN Subsidiary) could be terminated as of the Effective
Time without material liability; (xi) no Plan, program, agreement or other
arrangement, either individually or collectively, provides for any payment by
SKAN or any SKAN Subsidiary that would not be deductible under Code Sections
162(a)(1), 162(m) or 404 or that would constitute a "parachute payment" within
the meaning of Code Section 280G; (xii) no "accumulated funding 

                                       11
<PAGE>   17

deficiency" as defined in Section 302(a)(2) of ERISA or Section 412 of the Code,
whether or not waived, and no "unfunded current liability" as determined under
Section 412(l) of the Code exists with respect to any Plan; and (xiii) no Plan
has experienced a "reportable event" (as such term is defined in Section 4043(b)
of ERISA) that is not subject to an administrative or statutory waiver from the
reporting requirement.

3.12    Certain Contracts.

        (a) Except as set forth at Section 3.12 of the SKAN Disclosure Schedule,
neither SKAN nor any of its Subsidiaries is a party to or bound by any contract,
arrangement or commitment (i) with respect to the employment of any directors,
officers, employees or consultants, (ii) which, upon the consummation of the
transactions contemplated by this Agreement or the Bank Merger Agreement will
(either alone or upon the occurrence of any additional acts or events) result in
any payment (whether of severance pay or otherwise) becoming due from BSB
Bancorp, SKAN, Skaneateles Bank, BSB Bank or any of their respective
Subsidiaries to any director, officer or employee thereof, (iii) which
materially restricts the conduct of any line of business by SKAN or Skaneateles
Bank, (iv) with or to a labor union or guild (including any collective
bargaining agreement) or (v) except as set forth on Section 3.12(a)(v) of the
SKAN Disclosure Schedule, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated by the occurrence of any of
the transactions contemplated by this Agreement or the Bank Merger Agreement, or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement or the Bank Merger Agreement
(including as to this clause (v), any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan). Except as set forth
at Section 3.12 of the SKAN Disclosure Schedule, there are no employment,
consulting and deferred compensation agreements to which SKAN or any of its
Subsidiaries is a party. Section 3.12(a) of the SKAN Disclosure Schedule sets
forth a list of all material contracts (as defined in Item 601(b)(10) of
Regulation S-K) of SKAN and its Subsidiaries. Each contract, arrangement or
commitment of the type described in this Section 3.12(a), whether or not set
forth in Section 3.12(a) of the SKAN Disclosure Schedule, is referred to herein
as a "SKAN Contract," and neither SKAN nor any of its Subsidiaries has received
notice of, nor do any executive officers of such entities know of, any violation
of any SKAN Contract.

        (b) (i) Each SKAN Contract is valid and binding and in full force and
effect, (ii) SKAN and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each SKAN
Contract, and (iii) no event or condition exists which constitutes or, after
notice or lapse of time or both, would constitute, a material default on the
part of SKAN or any of its Subsidiaries under any such SKAN Contract.

3.13    Agreements with Regulatory Agencies.

         Neither SKAN nor Skaneateles Bank is subject to any cease-and-desist or
other order issued by, or is a party to any written agreement, consent agreement
or memorandum of understanding with, or has adopted any board resolutions at the
request of (each, whether or not set forth on Section 3.13 of the SKAN
Disclosure Schedule, a "Regulatory Agreement") any Governmental Entity that
restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
SKAN or Skaneateles Bank been advised by any Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.

3.14 State Takeover Laws; Certificate of Incorporation.

         The Board of Directors of SKAN has approved the offer of BSB Bancorp to
enter into this Agreement, the Bank Merger Agreement and the Option Agreement,
and has authorized and approved this Agreement, the Bank Merger Agreement and
the Option Agreement, and the consummation of the transactions contemplated
hereby and thereby, such that under applicable law and SKAN's Certificate of
Incorporation the only vote of SKAN shareholders necessary to consummate the
transactions contemplated hereby (including the Bank Merger and issuance under
the Option Agreement) is the approval of two-thirds of the outstanding shares of
SKAN Common Stock. Assuming that the consents and approvals referred to in
Section 3.4 hereof are obtained, the Board of Directors of SKAN has conclusively
determined that the provisions of Articles 10 and 12 of the Certificate of
Incorporation of SKAN

                                       12
<PAGE>   18

does not apply to this Agreement, the Bank Merger Agreement or the Option
Agreement, or any of the transactions contemplated hereby or thereby.

3.15    Environmental Matters.

        (a) Each of SKAN and the SKAN Subsidiaries is in compliance in all
material respects with all applicable federal and state laws and regulations
relating to pollution or protection of the environment (including without
limitation, laws and regulations relating to emissions, discharges, releases and
threatened releases of Hazardous Materials (as hereinafter defined), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials;

        (b) There is no suit, claim, action, proceeding, investigation or notice
pending or, to the knowledge of SKAN, threatened (or, to the knowledge of SKAN,
past or present actions or events that could form the basis of any such suit,
claim, action, proceeding, investigation or notice), in which SKAN or any SKAN
Subsidiary has been or, with respect to threatened suits, claims, actions,
proceedings, investigations or notices may be, named as a defendant (i) for
alleged material noncompliance (including by any predecessor), with any
environmental law, rule or regulation or (ii) relating to any material release
or threatened release into the environment of any Hazardous Material, occurring
at or on a site owned, leased or operated by SKAN or any SKAN Subsidiary, or to
the knowledge of SKAN, relating to any material release or threatened release
into the environment of any Hazardous Material, occurring at or on a site not
owned, leased or operated by SKAN or any SKAN Subsidiary;

        (c) During the period of SKAN's or any SKAN Subsidiary's ownership or
operation of any of its properties, there has not been any material release of
Hazardous Materials in, on, under or affecting any such property.

        (d) To the knowledge of SKAN, neither SKAN nor any SKAN Subsidiary has
made or participated in any loan to any person who is subject to any suit,
claim, action, proceeding, investigation or notice, pending or threatened, with
respect to (i) any alleged material noncompliance as to any property securing
such loan with any environmental law, rule or regulation, or (ii) the release or
the threatened release into the environment of any Hazardous Material at a site
owned, leased or operated by such person on any property securing such loan.

        (e) For purposes of this section 3.15, the term "Hazardous Material"
means any hazardous waste, petroleum product, polychlorinated biphenyl,
chemical, pollutant, contaminant, pesticide, radioactive substance, or other
toxic material, or other material or substance (in each such case, other than
small quantities of such substances in retail containers) regulated under any
applicable environmental or public health statute, law, ordinance, rule or
regulation.

3.16    Reserves for Losses.

         All reserves or other allowances for possible losses reflected in
SKAN's most recent financial statements referred to in Section 3.6 complied with
all Laws and are adequate under GAAP. Neither SKAN nor Skaneateles Bank has been
notified by the FRB, the FDIC, the New York Superintendent or SKAN's independent
auditor, in writing or otherwise, that such reserves are inadequate or that the
practices and policies of SKAN or Skaneateles Bank in establishing such reserves
and in accounting for delinquent and classified assets generally fail to comply
with applicable accounting or regulatory requirements, or that the FRB, the
FDIC, the New York Superintendent or SKAN's independent auditor believes such
reserves to be inadequate or inconsistent with the historical loss experience of
SKAN or Skaneateles Bank. SKAN has previously furnished BSB Bancorp with a
complete list of all extensions of credit and other real estate owned ("OREO")
that have been classified by any bank or trust examiner (regulatory or internal)
as other loans specially mentioned, special mention, substandard, doubtful,
loss, classified or criticized, credit risk assets, concerned loans or words of
similar import. SKAN agrees to update such list no less frequently than monthly
after the date of this Agreement until the earlier of the Closing Date or the
date that this Agreement is 

                                       13
<PAGE>   19

terminated in accordance with Section 8.1. All OREO held by SKAN or Skaneateles
Bank is being carried net of reserves at the lower of cost or net realizable
value.

3.17 Properties and Assets.

         Section 3.17 of the SKAN Disclosure Schedule lists (i) all real
property owned by SKAN and each SKAN Subsidiary; (ii) each real property lease,
sublease or installment purchase arrangement to which SKAN or any SKAN
Subsidiary is a party; (iii) a description of each contract for the purchase,
sale, or development of real estate to which SKAN or any SKAN Subsidiary is a
party; and (iv) all items of SKAN's or any SKAN Subsidiary's tangible personal
property and equipment with a book value of $10,000 or more or having any annual
lease payment of $10,000 or more. Except for (a) items reflected in SKAN's
consolidated financial statements as of December 31, 1997 referred to in Section
3.6 hereof, (b) exceptions to title that do not interfere materially with SKAN's
or any SKAN Subsidiary's use and enjoyment of owned or leased real property
(other than OREO), (c) liens for current real estate taxes not yet delinquent,
or being contested in good faith, properly reserved against (and reflected on
the financial statements referred to in Section 3.6 above), (d) properties and
assets sold or transferred in the ordinary course of business consistent with
past practices since December 31, 1997, and (e) items listed in Section 3.17 of
the SKAN Disclosure Schedule, SKAN and each SKAN Subsidiary have good and, as to
owned real property, marketable and insurable title to all their properties and
assets, free and clear of all liens, claims, charges and other encumbrances.
SKAN and each SKAN Subsidiary, as lessees, have the right under valid and
subsisting leases to occupy, use and possess all property leased by them, and
neither SKAN nor any SKAN Subsidiary has experienced any material uninsured
damage or destruction with respect to such properties since December 31, 1997.
All properties and assets used by SKAN and each SKAN Subsidiary are in good
operating condition and repair suitable for the purposes for which they are
currently utilized and comply in all material respects with all Laws relating
thereto now in effect or scheduled to come into effect. SKAN and each SKAN
Subsidiary enjoy peaceful and undisturbed possession under all leases for the
use of all property under which they are the lessees, and all leases to which
SKAN or any SKAN Subsidiary is a party are valid and binding obligations in
accordance with the terms thereof. Neither SKAN nor any SKAN Subsidiary is in
material default with respect to any such lease, and there has occurred no
default by SKAN or any SKAN Subsidiary or event which with the lapse of time or
the giving of notice, or both, would constitute a material default under any
such lease. There are no Laws, conditions of record, or other known impediments
which interfere with the intended use by SKAN or any SKAN Subsidiary of any of
the property owned, leased, or occupied by them.

3.18    Insurance.

         Section 3.18 of the SKAN Disclosure Schedule contains a true, correct
and complete list of all insurance policies and bonds maintained by SKAN and any
SKAN Subsidiary, including the name of the insurer, the policy number, the type
of policy and any applicable deductibles, and all such insurance policies and
bonds (or other insurance policies and bonds that have, from time to time, in
respect of the nature of the risks insured against and amount of coverage
provided, been substantially similar in kind and amount to that customarily
carried by parties similarly situated who own properties and engage in
businesses substantially similar to that of SKAN and any SKAN Subsidiary) are in
full force and effect and have been in full force and effect. As of the date
hereof, neither SKAN nor any SKAN Subsidiary has received any notice of
cancellation or amendment of any such policy or bond or is in default under any
such policy or bond, no coverage thereunder is being disputed and all material
claims thereunder have been filed in a timely fashion. The existing insurance
carried by SKAN and SKAN Subsidiaries is and will continue to be, in respect of
the nature of the risks insured against and the amount of coverage provided,
substantially similar in kind and amount to that customarily carried by parties
similarly situated who own properties and engage in businesses substantially
similar to that of SKAN and the SKAN Subsidiaries, and is sufficient for
compliance by SKAN and the SKAN Subsidiaries with all requirements of Law and
agreements to which SKAN or any of the SKAN Subsidiaries is subject or is a
party. True, correct and complete copies of all such policies and bonds
reflected at Section 3.18 of the SKAN Disclosure Schedule, as in effect on the
date hereof, have been delivered to BSB Bancorp.

                                       14
<PAGE>   20

3.19    Compliance with Applicable Laws.

         Each of SKAN and any SKAN Subsidiary has complied in all material
respects with all Laws applicable to it or to the operation of its business.
Neither SKAN nor any SKAN Subsidiary has received any notice of any material
alleged or threatened claim, violation, or liability under any such Laws that
has not heretofore been cured and for which there is no remaining liability.

3.20    Loans.


         As of the date hereof:

        (a) All loans owned by SKAN or any SKAN Subsidiary, or in which SKAN or
any SKAN Subsidiary has an interest, comply in all material respects with all
Laws, including, but not limited to, applicable usury statutes, underwriting and
recordkeeping requirements and the Truth in Lending Act, the Equal Credit
Opportunity Act, and the Real Estate Procedures Act, and other applicable
consumer protection statutes and the regulations thereunder.

        (b) All loans owned by SKAN or any SKAN Subsidiary, or in which SKAN or
any SKAN Subsidiary has an interest, have been made or acquired by SKAN in
accordance with board of director-approved loan policies. Each of SKAN and each
SKAN Subsidiary holds mortgages contained in its loan portfolio for its own
benefit to the extent of its interest shown therein; such mortgages evidence
liens having the priority indicated by their terms, subject, as of the date of
recordation or filing of applicable security instruments, only to such
exceptions as are discussed in attorneys' opinions regarding title or in title
insurance policies in the mortgage files relating to the loans secured by real
property or are not material as to the collectability of such loans; and all
loans owned by SKAN and each SKAN Subsidiary are with full recourse to the
borrowers (except as set forth at Section 3.20(b) of the SKAN Disclosure
Schedule), and each of SKAN and any SKAN Subsidiary has taken no action which
would result in a waiver or negation of any rights or remedies available against
the borrower or guarantor, if any, on any loan. All applicable remedies against
all borrowers and guarantors are enforceable except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting creditors'
rights and except as may be limited by the exercise of judicial discretion in
applying principles of equity. Except as set forth at Section 3.20(b) of the
SKAN Disclosure Schedule, all loans purchased or originated by SKAN or any SKAN
Subsidiary and subsequently sold by SKAN or any SKAN Subsidiary have been sold
without recourse to SKAN or any SKAN Subsidiary and without any liability under
any yield maintenance or similar obligation. True, correct and complete copies
of loan delinquency reports as of December 31, 1998 prepared by SKAN and each
SKAN Subsidiary, which reports include all loans delinquent or otherwise in
default, have been furnished to BSB Bancorp. True, correct and complete copies
of the currently effective lending policies and practices of SKAN and each SKAN
Subsidiary also have been furnished to BSB Bancorp.

        (c) Except as set forth at Section 3.20(c) of the Disclosure Schedule
each outstanding loan participation sold by SKAN or any SKAN Subsidiary was sold
with the risk of non-payment of all or any portion of that underlying loan to be
shared by each participant (including SKAN or any SKAN Subsidiary)
proportionately to the share of such loan represented by such participation
without any recourse of such other lender or participant to SKAN or any SKAN
Subsidiary for payment or repurchase of the amount of such loan represented by
the participation or liability under any yield maintenance or similar
obligation. SKAN and any SKAN Subsidiary have properly fulfilled in all material
respects its contractual responsibilities and duties in any loan in which it
acts as the lead lender or servicer and has complied in all material respects
with its duties as required under applicable regulatory requirements.

        (d) SKAN and each SKAN Subsidiary have properly perfected or caused to
be properly perfected all security interests, liens, or other interests in any
collateral securing any loans made by it.

3.21    Affiliates.


                                       15
<PAGE>   21

         Each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act of 1933, as amended (the
"Securities Act"), and for purposes of qualifying the Merger for
"pooling-of-interests" accounting treatment) of SKAN is listed at Section 3.21
of the SKAN Disclosure Schedule, and except as indicated thereon each such
person has delivered to BSB Bancorp, concurrently with the execution of this
Agreement, a stockholder agreement in the form of Exhibit D hereto (the "SKAN
Stockholder Agreement"). The SKAN Stockholder Agreement has been duly and
validly executed and delivered by each person that is a party thereto and,
assuming due authorization, execution and delivery by BSB Bancorp, constitutes
the valid and binding obligation of such person, enforceable against such person
in accordance with their terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally.

3.22    Ownership of BSB Bancorp Common Stock.


         Except as set forth at Section 3.23 of the SKAN Disclosure Schedule,
neither SKAN nor, to its knowledge, any of its directors, officers or affiliates
(as used above in Section 3.21) (i) beneficially own, directly or indirectly, or
(ii) is a party to any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of, in each case, any shares of
outstanding capital stock of BSB Bancorp (other than those agreements,
arrangements or understandings specifically contemplated hereby).

3.23    Fairness Opinion.


         SKAN has received an oral opinion from MBD to the effect that, in its
opinion as of the date hereof, the Exchange Ratio is fair to SKAN's shareholders
from a financial point of view (the "MBD Fairness Opinion"). MBD has agreed to
furnish a written opinion to such effect (the "MBD Fairness Opinion") for
inclusion, and has consented to such inclusion, in the Registration Statement
(as hereinafter defined).

3.24    SKAN DRIP and Purchase Plan.


         Except as disclosed in Section 3.24 of the SKAN Disclosure Schedule,
SKAN has taken such action as is necessary to terminate the SKAN DRIP and the
Purchase Plan such that from the date hereof, no issuances or purchases of SKAN
Common Stock under the SKAN DRIP or the Purchase Plan shall be permitted, nor
shall any other obligations thereunder accrue.

3.25    Accounting Matters.


         Neither SKAN nor, to its knowledge, any of its affiliates (as such term
is defined in Rule 145 under the Securities Act), has through the date of this
Agreement taken or agreed to take any action that would prevent SKAN from
accounting for the business combination contemplated by this Agreement as a
"pooling of interests".

3.26    Accuracy of Information.


         No representation or warranty by SKAN in this Agreement or any exhibit,
schedule or certificate delivered or to be delivered by SKAN to BSB Bancorp
pursuant hereto contains, or when so delivered will contain, any untrue
statement of a material fact, or omits, or when so delivered will omit, a
material fact necessary in order to make the statement(s) of facts contained
herein or therein (in light of the circumstances under which they were made) not
misleading.

                                       16
<PAGE>   22

                                   ARTICLE IV
                  REPRESENTATIONS AND WARRANTIES OF BSB BANCORP


         BSB Bancorp, on behalf of itself and its wholly owned subsidiary, BSB
Bank hereby makes the following representations and warranties to SKAN as set
forth in this Article IV, each of which is being relied upon by SKAN as a
material inducement to enter into and perform this Agreement.

4.1     Corporate Organization.


        (a) BSB Bancorp is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. BSB Bancorp has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
BSB Bancorp is duly registered as a bank holding company with the FRB under the
BHCA. The Certificate of Incorporation and Bylaws of BSB Bancorp, copies of
which have previously been made available to SKAN, are true, correct and
complete copies of such documents as in effect as of the date of this Agreement.

        (b) BSB Bank is a New York-chartered commercial duly organized and
validly existing and in good standing under the laws of New York. The deposit
accounts of BSB Bank are insured by the FDIC through the BIF to the fullest
extent permitted by law, and all premiums and assessments required in connection
therewith have been paid by BSB Bank. BSB Bank has the corporate power and
authority to own or lease all of its properties and assets and to carry on
business as is now being conducted, and is duly licensed or qualified to do
business in each jurisdiction in which the nature of the business conducted by
it or the character or location of the properties and assets owned or leased by
it makes such licensing or qualification necessary. The Charter and Bylaws of
BSB Bank, copies of which have previously been made available to SKAN, are true,
correct and complete copies of such documents as in effect as of the date of
this Agreement.

4.2     Capitalization.


        (a) The authorized capital stock of BSB Bancorp consists of (i)
30,000,000 shares of BSB Bancorp Common Stock, of which 8,646,977 shares were
outstanding (net of 2,604,180 treasury shares) at January 8, 1999 and (ii)
2,500,000 shares of serial preferred stock, par value $.01 per share ("BSB
Bancorp Preferred Stock"), none of which were outstanding at January 8, 1999. At
such date, there were 697,351 shares of BSB Bancorp Common Stock reserved for
issuance pursuant to options. All of the issued and outstanding shares of BSB
Bancorp Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof, and upon issuance in accordance with the
terms hereof, the Shares will be duly authorized and validly issued, and fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as set forth above, BSB Bancorp does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of BSB Bancorp Common Stock or BSB Bancorp Preferred Stock or any other equity
securities of BSB Bancorp or any securities presenting the right to purchase or
otherwise receive any shares of BSB Bancorp Common Stock or BSB Bancorp
Preferred Stock, other than pursuant to the Rights Agreement.

        (b) All of the outstanding shares of common stock of BSB Bank are owned
by BSB Bancorp free and clear of all liens, charges, encumbrances and security
interests whatsoever, and all of such shares are duly authorized and validly
issued and fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to ownership thereof.

                                       17
<PAGE>   23

4.3     Authority; No Violation.


        (a) BSB Bancorp has full corporate power and authority to execute and
deliver this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the Board of
Directors of BSB Bancorp. No other corporate proceedings on the part of BSB
Bancorp are necessary to approve this Agreement or the Option Agreement or to
consummate the transactions contemplated hereby or thereby. This Agreement has
been, and the Option Agreement will be, duly and validly executed and delivered
by BSB Bancorp and (assuming due authorization, execution and delivery by SKAN)
will constitute valid and binding obligations of BSB Bancorp, enforceable
against BSB Bancorp in accordance with their terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar law affecting
creditors' rights and remedies generally.

        (b) BSB Bank has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of BSB Bank and by BSB Bancorp as the
sole shareholder of BSB Bank. All corporate proceedings on the part of BSB Bank
necessary to consummate the transactions contemplated thereby have been taken.
The Bank Merger Agreement, upon execution and delivery by BSB Bank, will be duly
and validly executed and delivered by BSB Bank and will (assuming due
authorization, execution and delivery by Skaneateles Bank) constitute a valid
and binding obligation of BSB Bank, enforceable against BSB Bank in accordance
with its terms, except as enforcement may be limited by general principles of
equity whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar laws affecting creditors' rights and remedies generally.

        (c) Neither the execution and delivery of this Agreement or the Option
Agreement by BSB Bancorp or the Bank Merger Agreement by BSB Bank, nor the
consummation by BSB Bancorp or BSB Bank, as the case may be, of the transactions
contemplated hereby or thereby, nor compliance by BSB Bancorp or BSB Bank with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws of BSB Bancorp or the Charter or
Bylaws of BSB Bank, as the case may be, or (ii) assuming that the consents and
approvals referred to in Section 4.4 are duly obtained, (x) violate any Laws
applicable to BSB Bancorp, BSB Bank or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any lien, pledge,
security interest, charge or other encumbrance upon any of the respective
properties or assets of BSB Bancorp or BSB Bank under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which BSB Bancorp
or BSB Bank is a party, or by which they or any of their respective properties
or assets may be bound or affected.

4.4     Regulatory Approvals.


        (a) Except for (i) the filing of applications, notices and waiver
requests, as applicable, as to the Merger and the Bank Merger with the FRB and
the New York Superintendent and approval of such applications, notices and
waiver requests, (ii) the filing of any required applications or notices with
the FDIC and the New York Superintendent as to the subsidiary activities of
Skaneateles Bank which become service corporation or operating subsidiaries of
BSB Bank and approval of such applications and notices, (iii) the filing with
the SEC of a registration statement on Form S-4 to register the shares of BSB
Bancorp Common Stock to be issued in connection with the Merger (including the
shares of BSB Bancorp Common Stock that may be issued upon the exercise of the
options referred to in Section 1.5 hereof), which will include the Proxy
Statement/Prospectus, (iv) the approval of this Agreement by the requisite vote
of the shareholders of SKAN, (v) the filing of the Certificate of Merger with
the Secretary of State of Delaware pursuant to the DGCL, (vi) the filings
required by the Bank Merger Agreement, and 

                                       18
<PAGE>   24

(vii) such filings and approvals as are required to be made or obtained under
the securities or "Blue Sky" laws of various states or with Nasdaq (or such
other exchange as may be applicable) in connection with the issuance of the
shares of BSB Bancorp Common Stock pursuant to this Agreement, no consents or
approvals of or filings or registrations with any Governmental Entity or with
any third party are necessary in connection with (1) the execution and delivery
by BSB Bancorp of this Agreement and the Option Agreement, (2) the consummation
by BSB Bancorp of the Merger and the other transactions contemplated hereby, (3)
the execution and delivery by BSB Bank of the Bank Merger Agreement, and (4) the
consummation by BSB Bank of the transactions contemplated by the Bank Merger
Agreement except for such consents, approvals or filings the failure of which to
obtain will not have a material adverse effect on the ability of SKAN to
consummate the transactions contemplated thereby.

        (b) BSB Bancorp hereby represents to SKAN that it has no knowledge of
any reason why approval or effectiveness of any of the applications, notices or
filings referred to in Section 4.4(a) cannot be obtained or granted on a timely
basis.

4.5     Financial Statements; Exchange Act Filings; Books and Records.

        (a) BSB Bancorp's consolidated balance sheets as of December 31, 1996
and 1997 and the related consolidated statements of income, changes in
shareholders' equity and cash flows are as reported in BSB Bancorp's Annual
Report on Form 10-K for the fiscal year ended December 31, 1997 filed with the
SEC under the Exchange Act, in each case accompanied by the audit report of BSB
Bancorp's independent auditors, and the interim financial statements of BSB
Bancorp as of and for the nine months ended September 30, 1997 and 1998, are as
included in BSB Bancorp's quarterly report on Form 10-Q for the period ended
September 30, 1998, as filed with the SEC. The financial statements referred to
in this Section 4.5 (including the related notes, where applicable) fairly
present, and the financial statements referred to in Section 6.8 hereof will
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount), the results of the consolidated
operations and consolidated financial condition of BSB Bancorp and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth; each of such statements (including the related notes, where
applicable) comply, and the financial statements referred to in Section 6.8
hereof will comply, with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such statements (including the related notes, where applicable) has been, and
the financial statements referred to in Section 6.8 hereof will be, prepared in
accordance with GAAP consistently applied during the periods involved, except as
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q. BSB Bancorp's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 and all subsequently filed reports under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act comply in all material respects
with the appropriate requirements for such reports under the Exchange Act, and
BSB Bancorp has previously delivered to SKAN true, correct and complete copies
of such reports. BSB Bancorp has made all filings required of it under Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act. The books and records of BSB
Bancorp and BSB Bank have been, and are being, maintained in all material
respects in accordance with GAAP and any other applicable legal and accounting
requirements and reflect only actual transactions.

        (b)    Neither BSB Bancorp nor any of its Subsidiaries is an "affiliate"
(as such term is defined in DGCLss.203(c) (1)) or an "associate" (as such term
is defined in DGCLss.203(c) (2)) of SKAN.

4.6     Agreements with Regulatory Agencies.


         Neither BSB Bancorp nor any of its affiliates is subject to any
cease-and-desist or other order issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or has adopted
any board resolutions at the request of any Governmental Entity that restricts
the conduct of its business or that in any manner relates to its capital
adequacy, its credit policies, its management or its business, nor has BSB
Bancorp, nor BSB Bank been advised by any Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement.

                                       19
<PAGE>   25

4.7     Legal Proceedings.


        (a) Neither BSB Bancorp nor any of its Subsidiaries is a party to any,
and there are no pending or, to BSB Bancorp's knowledge, threatened, legal,
administrative, arbitration or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against BSB Bancorp or
any of its Subsidiaries in which, to BSB Bancorp's knowledge, there is a
reasonable probability of any material recovery against or other material effect
upon BSB Bancorp or any of its Subsidiaries or which challenge the validity or
propriety of the transactions contemplated by this Agreement, the Bank Merger
Agreement or the Option Agreement as to which there is a reasonable probability
of success.

        (b) There is no injunction, order, judgment, decree, or regulatory
restriction (other than regulations of general application) imposed upon BSB
Bancorp, any of its Subsidiaries or the assets of BSB Bancorp or any of its
Subsidiaries.

4.8     Compliance with Applicable Laws.


         Each of BSB Bancorp and any BSB Bancorp Subsidiary has complied in all
material respects with all Laws applicable to it or to the operation of its
business. Neither BSB Bancorp nor any BSB Bancorp Subsidiary has received any
notice of any material alleged or threatened claim, violation, or liability
under any such Laws that has not heretofore been cured and for which there is no
remaining liability.

4.9     Accounting Matters.


         Neither BSB Bancorp nor, to its knowledge, any of its affiliates (as
such term is defined in Rule 145 under the Securities Act), has through the date
of this Agreement taken or agreed to take any action that would prevent BSB
Bancorp from accounting for the business combination contemplated by this
Agreement as a "pooling of interests".

4.10    Ownership of SKAN Common Stock.


         Except for BSB Bancorp's right to acquire share of SKAN Common Stock
pursuant to the Option Agreement, neither BSB Bancorp nor any of its affiliates
or associates beneficially owns, directly or indirectly, more than 5% of the
outstanding shares of SKAN Common Stock.

4.11    Insurance of Deposits.


         Deposit accounts in BSB Bank are insured by the Federal Deposit
Insurance Corporation in accordance with the Federal Deposit Insurance Act
("FDIA"). BSB Bank has paid all assessments and filed all reports required under
the FDIA and is in compliance with all regulatory requirements imposed in
connection with the insurance of its deposits.

                                    ARTICLE V
                    COVENANTS RELATING TO CONDUCT OF BUSINESS

5.1     Covenants of SKAN

                                       20
<PAGE>   26

         During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement, the Bank Merger Agreement or the Option Agreement or with the prior
written consent of BSB Bancorp, SKAN and each SKAN Subsidiary shall carry on
their respective businesses in the ordinary course consistent with past
practices and consistent with prudent banking practices. SKAN will use its
reasonable efforts to (x) preserve its business organization and that of each
SKAN Subsidiary intact, (y) keep available to itself and BSB Bancorp the present
services of the employees of SKAN and each SKAN Subsidiary and (z) preserve for
itself and BSB Bancorp the goodwill of the customers of SKAN and each SKAN
Subsidiary and others with whom business relationships exist. Without limiting
the generality of the foregoing, and except as set forth in Section 5.1 of the
SKAN Disclosure Schedule or as otherwise contemplated by this Agreement or
consented to by BSB Bancorp in writing, SKAN shall not, and shall not permit any
SKAN Subsidiary to:

        (a) declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock (except for the payment of regular
quarterly cash dividends by SKAN not to exceed $.07 per share on the SKAN Common
Stock with declaration, record and payment dates corresponding to the quarterly
dividends paid by SKAN during its fiscal year ended December 31, 1998 and except
that any SKAN Subsidiary may declare and pay dividends and distributions to
SKAN; provided, however, that SPCC may make any required distributions to
holders of its capital stock within 30 days after the end of calendar year 1998
pursuant to a distribution declared and payable to holders of record prior to
the end of calendar year 1998; provided further, however, that under no
circumstances shall SKAN declare, set aside or pay any dividends if it would
result in the holders of SKAN Common Stock receiving more than four cash
dividend payments in fiscal 1998, when considered with anticipated BSB Bancorp
dividends based on past practice, nor shall SKAN be prohibited from declaring,
setting aside or paying dividends consistent herewith if the Closing Date is
such that holders of SKAN Common Stock would receive fewer than four cash
dividends in 1999, when considered with anticipated BSB Bancorp dividends based
on past practice, it being understood that the parties hereto intend for SKAN to
pay its regular quarterly cash dividends to shareholders as to any completed
fiscal quarter prior to the Effective Time;

        (b) (i) split, combine or reclassify any shares of its capital stock or
issue, authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock except upon the
exercise or fulfillment of rights or options issued or existing pursuant to the
SKAN Stock Plans in accordance with their present terms, all to the extent
outstanding and in existence on the date of this Agreement, and except pursuant
to the Option Agreement, or (ii) repurchase, redeem or otherwise acquire (except
for the acquisition of Trust Account Shares and DPC Shares, as such terms are
defined in Section 1.4(c) hereof), any shares of the capital stock of SKAN or
any SKAN Subsidiary, or any securities convertible into or exercisable for any
shares of the capital stock of SKAN or any SKAN Subsidiary;

        (c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of SKAN Common Stock pursuant to stock
options or similar rights to acquire SKAN Common Stock granted pursuant to the
SKAN Stock Plans and outstanding prior to the date of this Agreement, in each
case in accordance with their present terms, (ii) pursuant to the Option
Agreement and (iii) the issuance of 10% Cumulative Preferred Stock in accordance
with the subscriptions therefor accepted by SPCC through January 7, 1999;

        (d) amend its Certificate of Incorporation, Bylaws or other similar 
governing documents;

        (e) authorize or permit any of its officers, directors, employees or
agents to, directly or indirectly, (i) solicit, initiate or encourage any
inquiries relating to, or the making of any proposal from, (ii) engage in
discussions or negotiations with or (iii) provide any information to, any
person, entity or group (other than BSB Bancorp) concerning any Acquisition
Transaction (as defined below). Notwithstanding the foregoing, SKAN may enter
into discussions or negotiations or provide information in connection with a
possible Acquisition Transaction if the Board of Directors of SKAN, based upon a
written opinion of counsel, reasonably determines in the exercise of its
fiduciary duty that such discussions or negotiations must be commenced or such
information must be furnished. SKAN shall promptly communicate to BSB Bancorp
the material terms of any proposal, whether written or oral, which it may

                                       21
<PAGE>   27

receive in respect of any such Acquisition Transaction and whether it is having
discussions or negotiations with a third party about an Acquisition Transaction
with, or providing information in connection with, or which may lead to, an
Acquisition Transaction with a third party. SKAN will promptly cease and cause
to be terminated any existing activities, discussions or negotiations previously
conducted with any parties other than BSB Bancorp with respect to any of the
foregoing. As used in this Agreement, Acquisition Transaction shall mean any
offer, proposal or expression of interest relating to (I) any tender or exchange
offer, (II) merger, consolidation or other business combination involving SKAN
or any SKAN Subsidiary, or (III) the acquisition in any manner of a substantial
equity interest in, or a substantial portion of the assets out of the ordinary
course of business of, SKAN or Skaneateles Bank other than the transactions
contemplated or permitted by this Agreement, the Bank Merger Agreement and the
Option Agreement;

        (f) make capital expenditures aggregating in excess of $10,000;

        (g) enter into any new line of business;

        (h) acquire or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in or the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire any assets, other than in
connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructurings, or in the ordinary course of business consistent
with prudent banking practices;

        (i) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this Agreement
being or becoming untrue or in any of the conditions to the Merger set forth in
Article VII not being satisfied, or in a violation of any provision of this
Agreement or the Bank Merger Agreement, except, in every case, as may be
required by applicable law;

        (j) change its methods of  accounting in effect at December 31, 1997 
except as required by changes in GAAP or regulatory accounting principles as
concurred to by BSB Bancorp's independent auditors;

        (k) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between SKAN or any SKAN Subsidiary
and one or more of its current or former directors or officers, (ii) increase in
any manner the compensation of any employee or director or pay any benefit not
required by any plan or agreement as in effect as of the date hereof (including,
without limitation, the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares), (iii)
enter into, modify or renew any contract, agreement, commitment or arrangement
providing for the payment to any director, officer or employee of compensation
or benefits, (iv) hire any new employee at an annual compensation in excess of
$20,000, (v) pay expenses of any employees or directors for attending
conventions or similar meetings which conventions or meetings are held after the
date hereof, (vi) promote to a rank of vice president or more senior any
employee, or (vii) pay any retention or other bonuses to any employees;

        (l) except for short-term borrowings with a maturity of one year or less
in the ordinary course of business consistent with past practices, incur any
indebtedness for borrowed money, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other individual,
corporation or other entity;

        (m) sell, purchase, enter into a lease, relocate, open or close any
banking or other office, or file an application pertaining to such action with
any Governmental Entity;

        (n) make any equity investment or commitment to make such an investment
in real estate or in any real estate development project, other than in
connection with foreclosure, settlements in lieu of foreclosure, or troubled
loan or debt restructuring, in the ordinary course of business consistent with
past banking practices;

                                       22
<PAGE>   28

        (o) make any new loans to, modify the terms of any existing loan to, or
engage in any other transactions (other than routine banking transactions) with,
any Affiliated Person of SKAN or any SKAN Subsidiary other than transfers of
loans to SPCC;

        (p) make any investment, or incur deposit liabilities, other than in the
ordinary course of business consistent with past practices, including deposit
pricing, and which would not change the risk profile of Skaneateles Bank based
on its existing deposit and lending policies or make any equity investments;

        (q) purchase any loans or sell, purchase or lease any real property,
except for the sale of real estate that is the subject of a casualty loss or
condemnation or the sale of OREO on a basis consistent with past practices;

        (r) originate (i) any loans except in accordance with existing
Skaneateles Bank lending policies, (ii) conforming residential mortgage loans in
excess of $200,000, (iii) unsecured consumer loans in excess of $25,000, (iv)
commercial business loans in excess of $100,000 as to any loan or $100,000 in
the aggregate as to related loans, or loans to related persons, (v) commercial
real estate first mortgage loans in excess of $100,000 as to any loan or
$100,000 in the aggregate as to related loans, or loans to related persons, or
(vi) land acquisition loans to borrowers who intend to construct a residence on
such land in excess of the lesser of 75% of the appraised value of such land or
$25,000, except in each case for loans for which written applications have been
received by Skaneateles Bank as of the date hereof (each of which is set forth
at Section 5.1(r) of the SKAN Disclosure Schedule);

        (s) make any investments in any equity or derivative securities, or any
debt securities issued or guaranteed by any municipality or otherwise exempt to
any extent from federal, state or local taxation, or engage in any forward
commitment, futures transaction, financial options transaction, hedging or
arbitrage transaction or covered asset trading activities or make any
investments in any investment security with a maturity of greater than one year;

        (t) sell or purchase any mortgage loan servicing rights other than
selling servicing rights associated with FHA loans; or

        (u) agree or commit to do any of the actions set forth in (a) - (t) 
above.

The consent of BSB Bancorp to any action by SKAN or any SKAN Subsidiary that is
not permitted by any of the preceding paragraphs shall be evidenced by a writing
signed by the Chairman, President or any Senior Vice President of BSB Bancorp.

5.2     Merger Covenants.

         Notwithstanding that SKAN believes that it has established all reserves
and taken all provisions for possible loan losses required by GAAP and
applicable laws, rules and regulations, SKAN recognizes that BSB Bancorp may
have adopted different loan, accrual and reserve policies (including loan
classifications and levels of reserves for possible loan losses). In that
regard, and in general, from and after the date of this Agreement to the
Effective Time, SKAN and BSB Bancorp shall consult and cooperate with each other
in order to formulate the plan of integration for the Merger, including, among
other things, with respect to conforming, based upon such consultation, SKAN's
loan, accrual and reserve policies to those policies of BSB Bancorp to the
extent appropriate.

5.3     Compliance with Antitrust Laws.


         Each of BSB Bancorp and SKAN shall use its reasonable best efforts to
resolve objections, if any, which may be asserted with respect to the Merger
under antitrust laws, including, without limitation, the Hart-Scott-Rodino Act.
In the event a suit is threatened or instituted challenging the Merger as
violative of antitrust laws, each of BSB Bancorp and SKAN shall use its
reasonable best efforts to avoid the filing of, or resist or resolve

                                       23
<PAGE>   29

such suit. BSB Bancorp and SKAN shall use their reasonable best efforts to take
such action as may be required: (a) by the Antitrust Division of the Department
of Justice or the Federal Trade Commission in order to resolve such objections
as either of them may have to the Merger under antitrust laws, or (b) by any
federal or state court of the United States, in any suit brought by a private
party or governmental entity challenging the Merger as violative of antitrust
laws, in order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order, or other order which has the effect of
preventing the consummation of the Merger. Reasonable best efforts shall not
include, among other things and to the extent BSB Bancorp so desires, the
willingness of BSB Bancorp to accept an order agreeing to the divestiture, or
the holding separate, of any assets of BSB Bancorp or SKAN.

5.4     Termination of 401(k) Plan and ESOP.

         As soon as practicable after the date of this Agreement, but in no
event less than 24 hours prior to the Effective Time, SKAN and each SKAN
Subsidiary shall adopt all corporate resolutions necessary to: (i) freeze
participation and benefit accruals under all Plans that are intended to the
"qualified" under Code section 401 (the "Qualified Plans"), effective no later
than 24 hours prior to the Effective Time; and (ii) terminate such Qualified
Plans, effective no later than 24 hours prior to the Effective Time. As soon as
practicable after the date of this Agreement, but in no event less than 24 hours
prior to the Effective Time, SKAN and each SKAN Subsidiary shall contribute to
each Qualified Plan all contributions, including but not limited to employee
deferrals and related matching contributions, required or necessary under the
terms of such Qualified Plan covering the benefits that have accrued as of the
Effective Time.

                                   ARTICLE VI
                              ADDITIONAL AGREEMENTS

6.1     Regulatory Matters.

        (a) Upon the execution and delivery of this Agreement, BSB Bancorp and
SKAN (as to information to be included therein pertaining to SKAN) shall
promptly cause to be prepared and filed with the SEC a registration statement of
BSB Bancorp on Form S-4, including the Proxy Statement/Prospectus (the
"Registration Statement") for the purpose of registering the BSB Bancorp Common
Stock to be issued in the Merger, and for soliciting the approval of this
Agreement and the Merger by the shareholders of SKAN. BSB Bancorp and SKAN shall
use their reasonable best efforts to have the Registration Statement declared
effective by the SEC as soon as possible after the filing. The parties shall
cooperate in responding to and considering any questions or comments from the
SEC staff regarding the information contained in the Registration Statement. If
at any time after the Registration Statement is filed with the SEC, and prior to
the Closing Date, any event relating to SKAN is discovered by SKAN which should
be set forth in an amendment of, or a supplement to, the Registration Statement,
including the Prospectus/Proxy Statement, SKAN shall promptly inform BSB
Bancorp, and shall furnish BSB Bancorp with all necessary information relating
to such event whereupon BSB Bancorp shall promptly cause an appropriate
amendment to the Registration Statement to be filed with the SEC. Upon the
effectiveness of such amendment, each of BSB Bancorp and SKAN (if prior to the
meeting of shareholders pursuant to Section 6.3 hereof) will take all necessary
action as promptly as practicable to permit an appropriate amendment or
supplement to be transmitted to its shareholders entitled to vote at such
meeting. If at any time after the Registration Statement is filed with the SEC,
and prior to the Closing Date, any event relating to BSB Bancorp is discovered
by BSB Bancorp which should be set forth in an amendment of, or a supplement to,
the Registration Statement, including the Prospectus/Proxy Statement, BSB
Bancorp shall promptly inform SKAN, and BSB Bancorp shall promptly cause an
appropriate amendment to the Registration Statement to be filed with the SEC.
Upon the effectiveness of such amendment, each of BSB Bancorp and SKAN (if prior
to the meeting of shareholders pursuant to Section 6.3 hereof) will take all
necessary action as promptly as practicable to permit an appropriate amendment
or supplement to be transmitted to its shareholders entitled to vote at such
meeting. BSB Bancorp shall also use reasonable efforts to obtain all necessary
state securities law or "Blue Sky" permits and approvals required to carry out
the transactions contemplated by this Agreement and the Bank Merger Agreement
and SKAN shall furnish 

                                       24
<PAGE>   30

all information concerning SKAN and the holders of SKAN Common Stock as may be
reasonably requested in connection with any such action.

        (b) The parties hereto shall cooperate with each other and use their
best efforts to promptly prepare and file all necessary documentation, to effect
all applications, notices, petitions and filings, and to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger and the Bank Merger). SKAN and BSB Bancorp shall have the right to
review in advance, and to the extent practicable each will consult the other on,
in each case subject to applicable laws relating to the exchange of information,
all the information relating to SKAN or BSB Bancorp, as the case may be, which
appears in any filing made with, or written materials submitted to, any third
party or any Governmental Entity in connection with the transactions
contemplated by this Agreement; provided, however, that nothing contained herein
shall be deemed to provide either party with a right to review any information
provided to any Governmental Entity on a confidential basis in connection with
the transactions contemplated hereby. In exercising the foregoing right, each of
the parties hereto shall act reasonably and as promptly as practicable. The
parties hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
apprised of the status of matters relating to contemplation of the transactions
contemplated herein.

        (c) SKAN shall, upon request, furnish BSB Bancorp with all information
concerning SKAN and its directors, officers and shareholders and such other
matters as may be reasonably necessary or advisable in connection with the
Registration Statement or any other statement, filing, notice or application
made by or on behalf of BSB Bancorp to any Governmental Entity in connection
with the Merger or the other transactions contemplated by this Agreement.

        (d) SKAN shall provide all information relating to SKAN and its
Subsidiaries necessary for inclusion in the Registration Statement, and such
information shall not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading. Each of SKAN and BSB
Bancorp shall cause the portions of the Registration Statement relating to it or
any of its Subsidiaries to comply in all material respects with the provisions
of the Securities Act, Exchange Act and the rules and regulations thereunder.

        (e) BSB Bancorp and SKAN shall promptly advise each other upon receiving
any communication from any Governmental Entity whose consent or approval is
required for consummation of the transactions contemplated by this Agreement
which causes such party to believe that there is a reasonable likelihood that
any Requisite Regulatory Approval (defined in Section 7.1(c) hereof) will not be
obtained or that the receipt of any such approval will be materially delayed.

6.2     Access to Information.


        (a) Upon reasonable notice and subject to applicable Laws relating to
the exchange of information, SKAN shall accord to the officers, employees,
accountants, counsel and other representatives of BSB Bancorp, access, during
normal business hours during the period prior to the Effective Time, to all its
and its Subsidiaries' properties, books, contracts, commitments and records and,
during such period, SKAN shall make available to BSB Bancorp (i) a copy of each
report, schedule, registration statement and other document filed or received by
it (including Skaneateles Bank) during such period pursuant to the requirements
of federal securities laws or federal or state banking laws and (ii) all other
information concerning its (including Skaneateles Bank) business, properties and
personnel as BSB Bancorp may reasonably request. BSB Bancorp shall receive
notice of all meetings of the SKAN and Skaneateles Bank Board of Directors and
any committees thereof, and of any management committees (in all cases, at least
as timely as all SKAN and Skaneateles Bank, as the case may be, representatives
to such meetings are required to be provided notice). Up to two representatives
of BSB Bancorp shall be permitted to attend all meetings


                                       25
<PAGE>   31

of the Board of Directors (except for the portion of such meetings which relate
to the Merger or an Acquisition Transaction or such other matters deemed
confidential ("Confidential Matters") of SKAN or Skaneateles Bank, as the case
may be) and such meetings of committees of the Board of Directors and management
of SKAN and Skaneateles Bank which BSB Bancorp desires. BSB Bancorp will hold
all such information in confidence to the extent required by, and in accordance
with, the provisions of that certain confidentiality agreement between BSB
Bancorp and SKAN dated January 15, 1999 (the "Confidentiality Agreement").

        (b) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.

        (c) SKAN shall provide BSB Bancorp with true, correct and complete
copies of all financial and other information provided to directors of SKAN and
Skaneateles Bank in connection with meetings of their Boards of Directors or
committees thereof.

6.3     Shareholder Meeting.


        SKAN shall take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders within 35 days after the
Registration Statement becomes effective for the purpose of voting upon the
approval of this Agreement and the Merger (the "Special Meeting"). Management
and the Board of Directors of SKAN shall recommend to SKAN's shareholders
approval of this Agreement, including the Merger, and the transactions
contemplated hereby, together with any matters incident thereto, and shall
oppose any third party proposal or other action that is inconsistent with this
Agreement or the consummation of the transactions contemplated hereby, unless
the Board of Directors of SKAN reasonably determines, based upon the written
advice of SKAN's legal counsel, that such recommendation or opposition, as the
case may be, would constitute a breach of the exercise of its fiduciary duty.
SKAN and BSB Bancorp shall coordinate and cooperate with respect to the
foregoing matters.

6.4     Legal Conditions to Merger.


         Each of BSB Bancorp and SKAN shall use their reasonable best efforts
(a) to take, or cause to be taken, all actions necessary, proper or advisable to
comply promptly with all legal requirements which may be imposed on such party
with respect to the Merger and, subject to the conditions set forth in Article
VII hereof, to consummate the transactions contemplated by this Agreement and
(b) to obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party which is required to be obtained by SKAN or BSB
Bancorp in connection with the Merger and the other transactions contemplated by
this Agreement.

6.5     Stock Exchange Listing.


         BSB Bancorp shall cause the shares of BSB Bancorp Common Stock to be
issued in the Merger and pursuant to options referred to herein to be approved
for quotation on the Nasdaq Stock Market National Market System (or such other
exchange on which the BSB Bancorp Common Stock has become listed, or approved
for listing) prior to or at the Effective Time.

6.6     Employees and Advisory Directors.


        (a) To the extent permissible under the applicable provisions of the
Code and ERISA, for purposes of crediting periods of service for eligibility to
participate under employee pension benefit plans (within the meaning of 

                                       26
<PAGE>   32

ERISA Section 3(2)) maintained by BSB Bancorp or BSB Bank, as applicable, and in
the case of BSB Bank's 401(k) Plan, for purposes of vesting, individuals who are
employees of SKAN or any SKAN Subsidiary at the Effective Time will be credited
with periods of service with SKAN or any SKAN Subsidiary before the Effective
Time as if such service had been with BSB Bancorp or BSB Bank, as applicable;
provided, however, that no such service credit shall be given for purposes of
benefit accrual and (except in the case of BSB Bank' s 401(k) Plan) vesting.
Similar service credit shall also be given by BSB Bancorp or BSB Bank in
determining eligibility to participate in other retirement, vacation and similar
benefits provided to such employees of SKAN or Skaneateles Bank after the
Merger.

        (b) After the Effective Time, employees of SKAN or its Subsidiaries who
continue to be employed by BSB Bancorp or any of its Subsidiaries, will be
eligible for benefits that BSB Bancorp or such Subsidiary, as the case may be,
provides to its employees generally and on substantially the same basis to such
employees. BSB Bancorp will cause BSB Bank to use its reasonable best efforts to
offer a position of at-will employment to each of the non-officer and
non-managerial branch office personnel of SKAN or its Subsidiaries who is in
good standing as of the Effective Time (a "SKAN Employee") at or within 25 miles
of his or her place of employment as of the Effective Time. In addition, BSB
Bancorp will cause BSB Bank to use its reasonable best efforts in connection
with reviewing applicants for employment positions to give SKAN Employees who
are not offered positions at the Effective Time the same consideration as is
afforded BSB Bancorp or BSB Bank employees for such position in accordance with
its policies in effect at such time. BSB Bancorp or BSB Bank will use their
reasonable best efforts to provide reasonable and appropriate on-the-job
training to SKAN Employees whose positions are eliminated as a result of the
Merger or the Bank Merger. For purposes of the severance policies of BSB Bank
(as now in effect or hereafter amended), employees of SKAN and its Subsidiaries
who become employees of BSB Bancorp or BSB Bank as a result of the Merger or the
Bank Merger (other than any such employee who is a party to a written agreement
with BSB Bancorp or BSB Bank relating to employment or severance, including any
such agreement with SKAN or any Subsidiary that is assumed as a result of the
Merger or the Bank Merger) shall be credited with periods of service with SKAN
and such Subsidiaries as if such service had been with BSB Bancorp or BSB Bank,
as appropriate. BSB Bancorp will or will cause BSB Bank to (i) give credit to
employees of SKAN and its Subsidiaries, with respect to the satisfaction of the
limitations as to pre-existing condition exclusions and waiting periods for
participation and coverage which are applicable under the welfare benefit plans
of BSB Bancorp or BSB Bank, equal to the credit that any such employee had
received as of the Effective Time towards the satisfaction of any such
limitations and waiting periods under the comparable welfare benefit plans of
SKAN or its Subsidiaries.

        (c) Following the Merger, BSB Bancorp agrees that it shall honor the
existing written deferred compensation, employment, change of control and
severance contracts with directors and employees of SKAN and its Subsidiaries
that are specifically listed at Section 3.12(a) of the SKAN Disclosure Schedule;
provided, however, that in making the foregoing agreement, except as otherwise
required by law, BSB Bancorp will honor such contracts only to the extent that,
as represented at Section 3.11 hereof, none of such deferred compensation,
employment, change of control and severance contracts, nor any other Plan,
program, agreement or other arrangement, either individually or collectively,
provides for any payment by SKAN or any Subsidiary that would not be deductible
under Code Sections 162(a)(1), 162(m) or 404 or that would constitute a
"parachute payment" within the meaning of Code Section 280G.

        (d) Following the Merger, BSB Bancorp shall offer to any Skaneateles
Bank employee who, as of the Bank Merger, has a title at BSB Bank of
Administrative Vice President or higher, a Change of Control Severance Agreement
in the form offered to other such senior officers of BSB Bank.

        (e) The non-employee directors of Skaneateles Bank serving immediately
prior to the Effective Time will be invited to serve on an advisory board to BSB
Bank after the Bank Merger for a period of at least 12 months. Such advisory
directors each will be paid an annual retainer for such service of $2,000.

6.7     Indemnification.

        (a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative, in which
any person who is now, or has been at any time prior to the date of this

                                       27
<PAGE>   33

Agreement, or who becomes prior to the Effective Time, a director or officer or
employee of SKAN (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer or employee of
SKAN or any of their respective predecessors or (ii) this Agreement or any of
the transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
defend against and respond thereto to the extent permitted by applicable law and
the Certificate of Incorporation and Bylaws of SKAN. It is understood and agreed
that after the Effective Time, BSB Bancorp shall indemnify and hold harmless, as
and to the fullest extent permitted by applicable law and the Certificate of
Incorporation and Bylaws of BSB Bancorp as in effect on the date hereof (subject
to change as required by law), each such Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including reasonable attorney's
fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection with any such
threatened or actual claim, action, suit, proceeding or investigation, and in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably satisfactory to BSB
Bancorp; provided, however, that (1) BSB Bancorp shall have the right to assume
the defense thereof and upon such assumption BSB Bancorp shall not be liable to
any Indemnified Party for any legal expenses of other counsel or any other
expenses subsequently incurred by any Indemnified Party in connection with the
defense thereof, except that if BSB Bancorp elects not to assume such defense or
counsel for the Indemnified Parties reasonably advises the Indemnified Parties
that there are issues which raise conflicts of interest between BSB Bancorp and
the Indemnified Parties, the Indemnified Parties may retain counsel reasonably
satisfactory to BSB Bancorp, and BSB Bancorp shall pay the reasonable fees and
expenses of such counsel for the Indemnified Parties, (2) BSB Bancorp shall be
obligated pursuant to this paragraph to pay for only one firm of counsel for
each Indemnified Party, (3) BSB Bancorp shall not be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld or delayed), and (4) BSB Bancorp shall not be obligated
pursuant to this paragraph to the extent that a final judgment determines that
any such losses, claims, damages, liabilities, costs, expenses, judgments, fines
and amounts paid in settlement are as a result of the gross negligence, willful
misconduct or malfeasance of the Indemnified Party. BSB Bancorp shall have no
obligation to advance expenses incurred in connection with a threatened or
pending action, suit or preceding in advance of final disposition of such
action, suit or proceeding, unless (i) BSB Bancorp would be permitted to advance
such expenses pursuant to the DGCL and BSB Bancorp's Certificate of
Incorporation or Bylaws, and (ii) BSB Bancorp receives an undertaking by the
Indemnified Party to repay such amount if it is determined that such party is
not entitled to be indemnified by BSB Bancorp pursuant to the DGCL and BSB
Bancorp's Certificate of Incorporation or Bylaws. Any Indemnified Party wishing
to claim indemnification under this Section 6.7, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify BSB Bancorp
thereof; provided, however, that the failure to so notify shall not affect the
obligations of BSB Bancorp under this Section 6.7 except to the extent such
failure to notify materially prejudices BSB Bancorp. BSB Bancorp's obligations
under this Section 6.7 continue in full force and effect for a period of three
years from the Effective Time; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.

        (b) BSB Bancorp shall use commercially reasonable efforts to cause the
persons serving as officers and directors of SKAN immediately prior to the
Effective Time to be covered by a directors' and officers' liability insurance
policy ("Tail Insurance") of substantially the same coverage and amounts
containing terms and conditions which are generally not less advantageous than
SKAN's current policy with respect to acts or omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such for an aggregate premium cost for the Tail Insurance reasonably
consistent with the aggregate premium cost for SKAN's current policy and for a
period not less than one year.

6.8     Subsequent Interim and Annual Financial Statements.

         As soon as reasonably available, but in no event more than 45 days
after the end of each fiscal quarter (other than the fourth fiscal quarter, as
to which the time period shall be 90 days), BSB Bancorp will deliver to SKAN and

                                       28
<PAGE>   34

SKAN will deliver to BSB Bancorp their respective Quarterly Reports on Form 10-Q
and Annual Reports on Form 10-K, as filed with the SEC under the Exchange Act.
Each party shall deliver to the other any Current Reports on Form 8-K promptly
after filing such reports with the SEC.

6.9     Additional Agreements.


         In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, or to vest
the Surviving Corporation or the Surviving Bank with full title to all
properties, assets, rights, approvals, immunities and franchises of any of the
parties to the Merger, or the constituent banks to the Bank Merger, as the case
may be, the proper officers and directors of each party to this Agreement and
BSB Bancorp's and SKAN's Subsidiaries shall take all such necessary action as
may be reasonably requested by BSB Bancorp.

6.10    Advice of Changes.


         BSB Bancorp and SKAN shall promptly advise the other party of any
change or event that, individually or in the aggregate, has or would be
reasonably likely to have a Material Adverse Effect on it or to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein. From time to time prior to the Effective Time, each
party will promptly supplement or amend its disclosure schedule delivered in
connection with the execution of this Agreement to reflect any matter which, if
existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in such disclosure schedule or which is
necessary to correct any information in such disclosure schedule which has been
rendered inaccurate thereby. No supplement or amendment to such disclosure
schedule shall have any effect for the purpose of determining satisfaction of
the conditions set forth in Sections 7.2(a) or 7.3(a) hereof, as the case may
be, or the compliance by SKAN with the covenants set forth in Section 5.1
hereof.

6.11    Current Information.


         During the period from the date of this Agreement to the Effective
Time, SKAN will cause one or more of its designated representatives to confer on
a regular and frequent basis (not less than monthly) with representatives of BSB
Bancorp and to report the general status of the ongoing operations of SKAN. SKAN
will promptly notify BSB Bancorp of any material change in the normal course of
business or in the operation of the properties of SKAN and of any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of litigation
involving SKAN, and will keep BSB Bancorp fully informed of such events.

6.12    Execution and Authorization of Bank Merger Agreement.


         Prior to the Effective Time, (a) BSB Bancorp and SKAN each shall
execute and deliver the Certificate of Merger substantially in the form at
Exhibit C, and (b) BSB Bancorp and SKAN each shall cause BSB Bank and
Skaneateles Bank, respectively, to execute and deliver the Bank Merger
Agreement, in substantially the form at Exhibit A.

6.13    Change in Structure.


         BSB Bancorp may elect to modify the structure of the transactions
contemplated by this Agreement as noted herein so long as (i) there are no
material adverse federal income tax consequences to the SKAN shareholders as a

                                       29
<PAGE>   35

result of such modification, (ii) the consideration to be paid to the SKAN
shareholders under this Agreement is not thereby changed or reduced in kind or
amount, and (iii) such modification will not be reasonably likely to delay
materially or jeopardize receipt of any required regulatory approvals. In the
event that BSB Bancorp elects to change the structure of the Merger, the Bank
Merger or any other transactions contemplated hereby, the parties agree to
modify this Agreement and the various exhibits hereto, or enter into any other
agreements, to reflect such revised structure. In such event, BSB Bancorp shall
prepare appropriate amendments to this Agreement and the exhibits hereto, or
other documents, for execution by the parties hereto. BSB Bancorp and SKAN agree
to cooperate fully with each other to effect such amendments or other documents.

6.14    Transaction Expenses of SKAN.


                  (a) For planning purposes, SKAN shall, within 15 days from the
date hereof, provide BSB Bancorp with its estimated budget of
transaction-related expenses reasonably anticipated to be payable by SKAN in
connection with this transaction, including the fees and expenses of counsel,
accountants, investment bankers and other professionals. SKAN shall promptly
notify BSB Bancorp if or when it determines that it will expect to exceed its
budget.

                  (b) Promptly after the execution of this Agreement, SKAN shall
ask all of its attorneys and other professionals to render current and correct
invoices for all unbilled time and disbursements. SKAN shall accrue and/or pay
all of such amounts which are actually due and owing as soon as possible.

                  (c) SKAN shall advise BSB Bancorp monthly of all out-of-pocket
expenses which SKAN has incurred in connection with this transaction.

                  (d) BSB Bancorp, in reasonable consultation with SKAN, shall
make all arrangements with respect to the printing and mailing of the Proxy
Statement/Prospectus. SKAN shall, if BSB Bancorp reasonably deems necessary,
also engage a proxy solicitation firm to assist in the solicitation of proxies
for their respective the Special Meeting. SKAN agrees to cooperate as to such
matters.

                                   ARTICLE VII
                              CONDITIONS PRECEDENT

7.1     Conditions to Each Party's Obligation To Effect the Merger.


         The respective  obligation of each party to effect the Merger shall 
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:

        (a)    Shareholder Approval.

        This Agreement, including the Certificate of Merger, and the Merger
shall have been approved and adopted by the affirmative vote of the holders of a
two-thirds of the outstanding shares of SKAN Common Stock entitled to vote
thereon.

                                       30
<PAGE>   36

        (b)    Stock Exchange Listing.

        The shares of BSB Bancorp Common Stock which shall be issued in the
Merger (including the BSB Bancorp Common Stock that may be issued upon exercise
of the options referred to in Section 1.5 hereof) upon consummation of the
Merger shall have been authorized for quotation on the Nasdaq Stock Market
National Market System (or such other exchange on which the BSB Bancorp Common
Stock may become listed).

        (c)    Other Approvals.

        All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect and all statutory waiting periods in respect thereof shall have expired
(all such approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals"). No Requisite
Regulatory Approval shall contain a non-customary condition that BSB Bancorp
reasonably determines to be burdensome or otherwise alter the benefits for which
it bargained in this Agreement.

        (d)    Registration Statement.

        The Registration Statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC.

        (e)    No Injunctions or Restraints; Illegality.

        No order, injunction or decree issued by any court or agency of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the other transactions (an "Injunction")
contemplated by this Agreement or the Certificate of Merger shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Merger.

        (f)    Federal Tax Opinion.

        BSB Bancorp and SKAN shall have received from [Hogan & Hartson L.L.P.,
counsel to BSB Bancorp], an opinion in form and substance reasonably
satisfactory to BSB Bancorp, substantially to the effect that on the basis of
facts, representations, and assumptions set forth in such opinion which are
consistent with the state of facts existing at the time of such opinion, the
Merger will be treated for federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion,
such counsel may require and, to the extent such counsel deems necessary or
appropriate, may rely upon representations made in certificates of officers of
SKAN, BSB Bancorp, their respective affiliates and others.

        (g)    Pooling of Interests.

        BSB Bancorp shall have received (i) advice of PricewaterhouseCoopers LLP
and KPMG LLP, independent accountants, within two weeks of the date hereof, to
the effect that the Merger will be accounted for as a pooling of interests, and
(ii) as of the Effective Time, a written opinion of each of
PricewaterhouseCoopers LLP and KPMG LLP to the effect that the Merger will be
accounted for as a pooling-of-interests.

7.2     Conditions to Obligations of BSB Bancorp.


        The obligation of BSB Bancorp to effect the Merger is also subject to 
the satisfaction or waiver by BSB Bancorp at or prior to the Effective Time of
the following conditions:

                                       31
<PAGE>   37

        (a)    Representations and Warranties.

        The representations and warranties of SKAN set forth in this Agreement
shall be true and correct as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on SKAN.
Such determination of aggregate Material Adverse Effect shall be made as if
there were no materiality qualifications in such representations and warranties.
BSB Bancorp shall have received a certificate signed on behalf of SKAN by each
of the President and Chief Executive Officer and the Chief Financial Officer of
SKAN to the foregoing effect.

        (b)    Performance of Covenants and Agreements of SKAN

        SKAN shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement at or prior to
the Closing Date. BSB Bancorp shall have received a certificate signed on behalf
of SKAN by each of the President and Chief Executive Officer and the Chief
Financial Officer of SKAN to such effect.

        (c)    Consents under Agreements.

        (i) The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(c) hereof) whose consent or
approval shall be required in order to permit the succession by the Surviving
Corporation pursuant to the Merger to any obligation, right or interest of SKAN
under any loan or credit agreement, note, mortgage, indenture, lease, license or
other agreement or instrument shall have been obtained except for those, the
failure of which to obtain, will not result in a Material Adverse Effect on the
Surviving Corporation.

        (ii) The consent, approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(c) hereof) whose consent or
approval shall be required in order to permit the succession by the Surviving
Bank pursuant to the Bank Merger to any obligation, right or interest of
Skaneateles Bank under any loan or credit agreement, note, mortgage, indenture,
lease, license or other agreement or instrument shall have been obtained except
for those, the failure of which to obtain, will not result in a Material Adverse
Effect on the Surviving Bank.

        (d)    No Pending Governmental Actions.

        No proceeding initiated by any Governmental Entity seeking an Injunction
shall be pending.

        (e)    No Material Adverse Change.

        There shall have been no changes, other than changes contemplated by
this Agreement, in the business, operations, condition (financial or otherwise),
assets or liabilities of SKAN or any SKAN Subsidiary (regardless of whether or
not such events or changes are inconsistent with the representations and
warranties given herein) that individually or in the aggregate has had or would
have a Material Adverse Effect on SKAN.

                                       32
<PAGE>   38

        (f)    Legal Opinion.

        BSB Bancorp shall have received the opinion of Harter, Secrest & Emery
LLP, counsel to SKAN, dated the Closing Date, as to such matters as BSB Bancorp
may reasonably request. As to any matter in such opinion which involves matters
of fact, such counsel may rely upon the certificates of officers and directors
of SKAN and of public officials, reasonably acceptable to BSB Bancorp.

        (g)    Accountant's Comfort Letter.

        SKAN shall have caused to be delivered on the respective dates thereof
to BSB Bancorp "comfort letters" from KPMG LLP, SKAN's independent auditors,
dated the date on which the Registration Statement or last amendment thereto
shall become effective, and dated the date of the Closing (defined in Section
9.1 hereof), and addressed to BSB Bancorp and SKAN, with respect to SKAN's
financial data presented in the Proxy Statement/Prospectus, which letters shall
be based upon Statements on Auditing Standards Nos. 72 and 76.

7.3     Conditions to Obligations of SKAN.


         The obligation of SKAN to effect the Merger is also subject to the  
satisfaction or waiver by SKAN at or prior to the Effective Time of the
following conditions:

        (a)    Representations and Warranties.

        The representations and warranties of BSB Bancorp set forth in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of this paragraph, such representations and
warranties shall be deemed to be true and correct, unless the failure or
failures of such representations and warranties to be so true and correct,
individually or in the aggregate, would have a Material Adverse Effect on BSB
Bancorp. Such determination of aggregate Material Adverse Effect shall be made
as if there were no materiality qualifications in such representations and
warranties. SKAN shall have received a certificate signed on behalf of BSB
Bancorp by each of the President and the Chief Financial Officer of BSB Bancorp
to the foregoing effect.

        (b)    Performance of Covenants and Agreements of BSB Bancorp.

        BSB Bancorp shall have performed in all material respects all covenants
and agreements required to be performed by it under this Agreement at or prior
to the Closing Date. SKAN shall have received a certificate signed on behalf of
BSB Bancorp by each of the President and the Chief Financial Officer of BSB
Bancorp to such effect.

        (c)    Consents under Agreements.

        The consent or approval or waiver of each person (other than the
Governmental Entities referred to in Section 7.1(c)) whose consent or approval
shall be required in connection with the transactions contemplated hereby under
any loan or credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument to which BSB Bancorp is a party or is otherwise bound
shall have been obtained.

        (d)    No Pending Governmental Actions.

        No proceeding initiated by any Governmental Entity seeking an Injunction
shall be pending.

                                       33
<PAGE>   39

        (e)    Legal Opinion.

        SKAN shall have received the opinion of Hogan & Hartson L.L.P., counsel
to BSB Bancorp, as to the authorization, validity and non-assessibility of the
BSB Bancorp Common Stock to be issued pursuant to this Agreement. As to any
matter in such opinion which involves matters of fact, such counsel may rely
upon the certificates of officers and directors of BSB Bancorp and of public
officials and opinions of local counsel, reasonably acceptable to SKAN

        (f)    No Material Adverse Change.

        There shall have been no changes, other than changes contemplated by
this Agreement, in the business, operations, condition (financial or otherwise),
assets or liabilities of BSB Bancorp or any BSB Bancorp Subsidiary (regardless
of whether or not such events or changes are inconsistent with the
representations and warranties given herein) that individually or in the
aggregate has had or would have a Material Adverse Effect on BSB Bancorp.

                                  ARTICLE VIII
                            TERMINATION AND AMENDMENT

8.1     Termination.


         This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of SKAN:

        (a) by mutual  consent of BSB Bancorp and SKAN in a written instrument,
if the Board of Directors of each so determines by a vote of a majority of the
members of its entire Board;

        (b) by either BSB Bancorp or SKAN upon written notice to the other party
(i) 30 days after the date on which any request or application for a Regulatory
Approval shall have been denied or withdrawn at the request or recommendation of
the Governmental Entity which must grant such Regulatory Approval, unless within
the 30-day period following such denial or withdrawal the parties agree to file,
and have filed with the applicable Governmental Entity, a petition for rehearing
or an amended application, provided, however, that no party shall have the right
to terminate this Agreement pursuant to this Section 8.1(b), if such denial or
request or recommendation for withdrawal shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein;

        (c) by either BSB Bancorp or SKAN if the Merger shall not have been
consummated on or before December 31, 1999, unless the failure of the Closing to
occur by such date shall be due to the failure of the party seeking to terminate
this Agreement to perform or observe the covenants and agreements of such party
set forth herein;

        (d) by either BSB Bancorp or SKAN (provided that SKAN is not in breach
of its obligations under Section 6.3 hereof) if the approval of the shareholders
of SKAN required for the consummation of the Merger shall not have been obtained
by reason of the failure to obtain the required vote at a duly held meeting of
shareholders or at any adjournment or postponement thereof;

        (e) by either BSB Bancorp or SKAN (provided that the terminating party
is not then in breach of any representation, warranty, covenant or other
agreement contained herein that, individually or in the aggregate, would give
the other party the right to terminate this Agreement) if there shall have been
a breach of any of the representations or warranties set forth in this Agreement
on the part of the other party, if such breach, individually or in the
aggregate, has had or is likely to have a Material Adverse Effect on the
breaching party, and such breach shall

                                       34
<PAGE>   40

not have been cured within 30 days following receipt by the breaching party of
written notice of such breach from the other party hereto or such breach, by its
nature, cannot be cured prior to the Closing;

        (f) by either BSB Bancorp or SKAN (provided that the terminating party
is not then in breach of any representation, warranty, covenant or other
agreement contained herein that, individually or in the aggregate, would give
the other party the right to terminate this Agreement) if there shall have been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party, and such breach shall not have been
cured within 30 days following receipt by the breaching party of written notice
of such breach from the other party hereto or such breach, by its nature, cannot
be cured prior to the Closing;

        (g) by BSB Bancorp, if the management of SKAN or its Board of Directors,
for any reason, (i) fails to call and hold within 35 days of the effectiveness
of the Registration Statement a special meeting of SKAN's shareholders to
consider and approve this Agreement and the transactions contemplated hereby,
(ii) fails to recommend to shareholders the approval of this Agreement and the
transactions contemplated hereby, (iii) fails to oppose any third party proposal
that is inconsistent with the transactions contemplated by this Agreement or
(iv) violates Section 5.1(e) of this Agreement;

        (h)

               (1) by SKAN, if (either before or after its approval by the
shareholders of SKAN) both (A) its Board of Directors so determines by a vote of
at least two-thirds of the members of its entire Board, at any time during the
ten-day period commencing with the Determination Date, and (B) the BSB Bancorp
Common Stock Average Price on the Determination Date shall be less than the
lesser of $23.00, or $25.30 multiplied by the Index Ratio.

               (2) Notwithstanding the foregoing, if SKAN elects to exercise its
termination right pursuant to subsection (h)(1), it shall give prompt written
notice to BSB Bancorp (provided that such notice of election to terminate may be
withdrawn at any time within the aforementioned ten-day period). During the
seven-day period commencing with its receipt of such notice, BSB Bancorp shall
have the option of increasing the consideration to be received by the holders of
SKAN Common Stock hereunder by increasing the Exchange Ratio to equal the lesser
of (A) a number (rounded to four decimals) equal to a quotient, the numerator of
which is $28.75 multiplied by the Exchange Ratio (as then in effect) and the
denominator of which is the BSB Bancorp Common Stock Average Price (defined
below), and (B) a number equal to a quotient, the numerator of which is the
Index Ratio multiplied by $28.75, and then multiplied by the Exchange Ratio (as
then in effect) and the denominator of which is the BSB Bancorp Common Stock
Average Price (defined below). If BSB Bancorp makes an election contemplated by
the preceding sentence, within such seven-day period, it shall give prompt
written notice to SKAN of such election and the revised Exchange Ratio,
whereupon no termination shall have occurred pursuant to subsection (h)(1) and
this Agreement shall remain in effect in accordance with its terms (except as
the Exchange Ratio shall have been so modified), and any references in this
Agreement to "Exchange Ratio" shall thereafter be deemed to refer to the
Exchange Ratio as adjusted pursuant to this subsection (h)(2).

        For purposes of this subsection (h), the following terms shall have the
meanings indicated:

        "BSB Bancorp Common Stock Average Price" means the average of the daily
closing sales prices of BSB Bancorp Common Stock as reported on the Nasdaq Stock
Market's National Market Tier for the 20 consecutive full trading days in which
such shares are reported on the Nasdaq Stock Market ending at the close of
trading on the Determination Date.

        "BSB Bancorp Ratio" means the number obtained by dividing the BSB 
Bancorp Common Stock Average Price on the Determination Date by the closing
price on the Starting Date.

                                       35
<PAGE>   41

        "Determination Date" means the date on which the approval of the FDIC
required for consummation of the Merger shall be received or, if no FDIC
approval is required, then the date of the last federal or state bank regulatory
approval required of BSB Bancorp is received.

        "Index Price" on a given date means the sum of the average closing sale
prices of the companies comprising the Index Group (as defined below) for the 15
trading days ending on such date, in each case, multiplied by the weighting
assigned to such company (weighted in accordance with the factors listed below).
If any company belonging to the Index Group or BSB Bancorp declares or effects a
stock dividend, reclassification, recapitalization, split-up, combination,
exchange of share or similar transaction between the Starting Date and the
Determination Date, the prices for the common stock of such company or BSB
Bancorp will be appropriately adjusted for use in the Index.

        "Starting Date" means the first Nasdaq Stock Market trading day
preceding the date of this Agreement.

        "Index Ratio" means the number obtained by dividing the Index Price at
the close of business on the Determination Date by the Index Price at close of
business on the Starting Date.

        "Index Group" means the 18 bank holding companies listed at Exhibit F
hereto, the common stock of all of which will be publicly traded and as to which
there will not have been, since the Starting Date and before the Determination
Date, any public announcement of a proposal for such company to be acquired or
for such company to acquire another company or companies in transactions with a
value exceeding 25% of the acquirors market capitalization as of the Starting
Date. In the event that the common stock of any such company ceases to be
publicly traded or such an announcement is made, such company will be removed
from the Index Group, and the weights (which were determined based on the number
of outstanding shares of common stock) redistributed proportionately for the
purposes of determining the Index Price. The 18 holding companies and the
weights attributed to them are as set forth at Exhibit F.

        (i) by BSB Bancorp if SKAN has complied with Section 5.1(e) above, and
has given written notice to BSB Bancorp that SKAN has agreed to enter into an
Acquisition Transaction other than as contemplated hereby; provided, however,
that such termination under this Section 8.1(i) shall not be effective unless
and until SKAN shall have complied with the expense provisions of Section 9.3
below, and shall have acknowledged in the written notice to be provided in
accordance herewith that the Option granted pursuant to the Option Agreement
shall then be exercisable in accordance with terms thereof.

8.2     Effect of Termination.


         In the event of termination of this Agreement by either BSB Bancorp or
SKAN as provided in Section 8.1 hereof, this Agreement shall forthwith become
void and have no effect except (i) the last sentences of Sections 6.2(a) and
6.2(b) and Sections 8.2, 9.2 and 9.3 hereof shall survive any termination of
this Agreement, and (ii) notwithstanding anything to the contrary contained in
this Agreement, no party shall be relieved or released from any liabilities or
damages arising out of its willful or intentional breach of any provision of
this Agreement.

8.3     Amendment.

         Subject to compliance with applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Board of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the shareholders of SKAN; provided,
however, that after any approval of the transactions contemplated by this
Agreement by SKAN's shareholders, there may not be, without further approval of
such shareholders, any amendment of this Agreement which reduces the amount or
changes the form of the consideration to be delivered to SKAN shareholders
hereunder other than as contemplated by this Agreement. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.

                                       36
<PAGE>   42

8.4     Extension; Waiver.

         At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party, but such extension or waiver
or failure to insist on strict compliance with an obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.

                                   ARTICLE IX
                               GENERAL PROVISIONS

9.1     Closing.

         Subject to the terms and conditions of this Agreement, the closing of
the Merger (the "Closing") will take place at 10:00 a.m. at the main offices of
BSB Bancorp on (i) the fifth day after the last Requisite Regulatory Approval
and shareholder approvals are received and all applicable waiting periods have
expired, or (ii) such other date, place and time as the parties may agree (the
"Closing Date").

9.2     Nonsurvival of Representations, Warranties and Agreements.

         None of the representations, warranties, covenants and agreements in
this Agreement or in any instrument delivered pursuant to this Agreement (other
than pursuant to the Option Agreement, which shall terminate in accordance with
its terms) shall survive the Effective Time, except for those covenants and
agreements contained herein and therein which by their terms apply in whole or
in part after the Effective Time.

9.3     Expenses.

         All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense, except that all filing and other fees paid to the SEC and the New York
Superintendent in connection with this Agreement shall be borne by BSB Bancorp.
Except as set forth in the next sentence, in the event that this Agreement is
terminated by either BSB Bancorp or SKAN by reason of a material breach pursuant
to Sections 8.1(e) or (f) hereof or by BSB Bancorp or SKAN pursuant to Section
8.1(g) hereof, the other party shall pay all documented, reasonable costs and
expenses up to $250,000 incurred by the terminating party in connection with
this Agreement and the transactions contemplated hereby. In the event that this
Agreement is terminated by BSB Bancorp under Section 8.1(d) by reason of SKAN
shareholders not having given any required approval, or in the event this
Agreement is terminated by BSB Bancorp by reason of a willful material breach
pursuant to Sections 8.1(e) or (f) hereof, SKAN shall pay all documented,
reasonable costs and expenses up to $250,000 incurred by BSB Bancorp in
connection with this Agreement and the transactions contemplated hereby. In the
event that this Agreement is terminated by BSB Bancorp under Section 8.1(i) by
reason of SKAN having agreed to enter into an Acquisition Transaction other than
as contemplated hereby, SKAN shall pay all documented, reasonable costs and
expenses up to $250,000 incurred by BSB Bancorp in connection with this
Agreement and the transactions contemplated hereby.

9.4     Notices.
                                       37
<PAGE>   43


         All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, mailed by registered or certified
mail (return receipt requested) or delivered by an express courier (with
confirmation) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):

        (a)    if to BSB Bancorp, to:


                           BSB Bancorp, Inc.
                           58-68 Exchange Street
                           Binghamton, NY 13902
                           Attn.:  President and Chief Executive Officer

                           with a copy (which shall not constitute notice) to:

                           Hogan & Hartson L.L.P.
                           Columbia Square
                           555 Thirteenth Street, N.W.
                           Washington, DC  20004-1109
                           Attn.:  Stuart G. Stein, Esq.

                                    and

        (b)    if to SKAN, to:

                           Skaneateles Bancorp, Inc.
                           33 East Genesee Street
                           P.O. Box 460
                           Skaneateles, NY 13152-0460
                           Attn.:  President and Chief Executive Officer

                           with a copy (which shall not constitute notice) to:

                           Harter, Secrest & Emery LLP
                           700 Midtown Tower
                           Rochester, NY  14604
                           Attn.:  Gary L. Karl, Esq.

9.5     Interpretation.


         When a reference is made in this Agreement to Sections, Exhibits or
Schedules, such reference shall be to a Section of or an Exhibit or Schedule to
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation".

9.6     Counterparts.


         This Agreement may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.

                                       38
<PAGE>   44

9.7     Entire Agreement.


         This Agreement (including the disclosure schedules, documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, the Certificate of Merger, the Option Agreement and
the Stockholder Agreement.

9.8     Governing Law.


This Agreement shall be governed and construed in accordance with the laws of
the State of Delaware, without regard to any applicable conflicts of law rules.

9.9     Enforcement of Agreement.


         The parties hereto agree that irreparable damage would occur in the
event that the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
thereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.

9.10    Severability.


         Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.

9.11    Publicity.


         Except as otherwise required by law or the rules of the Nasdaq Stock
Market National Market System (or such other exchange on which the SKAN Common
Stock or BSB Bancorp Common Stock is or may become listed), so long as this
Agreement is in effect, neither BSB Bancorp nor SKAN shall, or shall permit any
of BSB Bancorp's or SKAN's Subsidiaries to, issue or cause the publication of
any press release or other public announcement with respect to, or otherwise
make any public statement concerning, the transactions contemplated by this
Agreement, the Certificate of Merger, the Option Agreement or the Stockholder
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld.

9.12    Assignment; Limitation of Benefits.


         Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns. Except as otherwise specifically provided in Section 6.7 hereof,
this Agreement (including the documents and instruments referred to herein) is
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder, and the covenants, undertakings and 

                                       39
<PAGE>   45


agreements set out herein shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto and their permitted assigns.

9.13    Additional Definitions.


         In addition to any other definitions contained in this Agreement, the
following words, terms and phrases shall have the following meanings when used
in this Agreement.

         "AFFILIATED PERSON": any director, officer or 5% or greater
shareholder, spouse or other person living in the same household of such
director, officer or shareholder, or any company, partnership or trust in which
any of the foregoing persons is an officer, 5% or greater shareholder, general
partner or 5% or greater trust beneficiary.

         "KNOWLEDGE": with respect to SKAN, refers to the knowledge of both of
SKAN's and Skaneateles Bank's directors and officers in the ordinary course of
their duties in such positions.

         "LAWS": any and all statutes, laws, ordinances, rules, regulations,
orders, permits, judgments, injunctions, decrees, case law and other rules of
law enacted, promulgated or issued by any Governmental Entity.

         "MATERIAL ADVERSE EFFECT": with respect to BSB Bancorp or SKAN, as the
case may be, means a condition, event, change or occurrence that is reasonably
likely to have a material adverse effect upon (A) the financial condition,
results of operations, business or properties of BSB Bancorp or SKAN (other than
as a result of changes in laws or regulations or accounting rules of general
applicability or interpretations thereof), or (B) the ability of BSB Bancorp or
SKAN to perform its obligations under, and to consummate the transactions
contemplated by, this Agreement, the Certificate of Merger and, in the case of
SKAN, the Option Agreement.

         "SUBSIDIARY": 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.

                            [SIGNATURES PAGE FOLLOWS]


                                       40
<PAGE>   46





         IN WITNESS WHEREOF, BSB Bancorp and SKAN have caused this Agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.

<TABLE>
<CAPTION>
                                                 BSB BANCORP, INC.
<S>                                              <C>
ATTEST:

By:    /s/ Larry G. Denniston                    By:   /s/ Alex S. DePersis
       -------------------------------------           --------------------
       Name:    Larry G. Denniston                     Name:    Alex S. DePersis
       Title:   Senior Vice President and              Title:   President and Chief Executive
                  Corporate Secretary                             Officer




                                                 SKANEATELES BANCORP, INC.

ATTEST:

By:    /s/ J. David Hammond                      By:   /s/ John P. Driscoll
       -------------------------------------           --------------------
       Name:    J. David Hammond                       Name:    John P. Driscoll
       Title:   Executive Vice President               Title:   Chairman of the Board, President
                  and Secretary                                   and Chief Executive Officer
</TABLE>






<PAGE>   47




Proposed Peer Group Index
=========================================================================


<TABLE>
<CAPTION>

                                                                 Current
Institution                                Ticker               Weighing
-----------                                ------               --------
<S>                                       <C>                   <C>
Arrow Financial Corporation                 AROW                   2.52%

BT Financial Corporation                    BTFC                   5.25%

Chittenden Corporation                       CHZ                  11.39%

CNB Financial Corp                          CNBF                   3.06%

Community Bank Systems, Inc.                 CBU                   2.95%

First Commonwealth Financial Corporation     FCF                  12.48%

Iroquois Bancorp, Inc.                      IROQ                   0.97%

NBT Bancorp, Inc.                           NBTB                   5.05%

Premier National Bancorp                     PNB                   6.33%

S&T Bancorp, Inc.                           STBA                  11.17%

State Bancorp, Inc.                         STBC                   2.63%

Suffolk Bancorp                             SUBK                   2.46%

Tompkins County Trustco, Inc.                TMP                   1.96%

TrustCo Bank Corp NY                        TRST                  10.82%

U.S.B. Holding Company, Incorporated         UBH                   6.40%

USBANCORP, Inc.                             UBAN                   5.51%

Vermont Financial Services Corp.            VFSC                   5.19%

York Financial Corp.                        YFED                   3.86%
</TABLE>