AGREEMENT AND PLAN OF MERGER

      THIS AGREEMENT AND PLAN OF MERGER, dated as of January 27, 1998
("Agreement"), is among Interchange Financial Services Corporation, a
corporation chartered under the laws of the State of New Jersey ("Interchange"),
Interchange State Bank, a commercial bank chartered under the laws of the State
of New Jersey and subsidiary of Interchange ("Bank"), and The Jersey Bank For
Savings, a savings bank chartered under the laws of the State of New Jersey
("Jersey").

      WHEREAS, Interchange and Bank desire to acquire Jersey and Jersey's Board
of Directors has determined, based upon the terms and conditions hereinafter set
forth, that the acquisition is in the best interests of Jersey and its
stockholders, each of the Board of Directors of Jersey, Interchange and Bank
have duly adopted and approved this Agreement and the Board of Directors of
Jersey has directed that it be submitted to its shareholders for approval;

      WHEREAS, the acquisition will be accomplished by merging Jersey into Bank
with Bank as the surviving bank, and Jersey shareholders receiving the
consideration hereinafter set forth; and

      WHEREAS, simultaneously with the execution of this Agreement, Jersey is
issuing an option to Interchange to purchase 126,950 shares of the authorized
and unissued Jersey Common Stock (as hereafter defined) at an option price of
$18.75 per share, subject to the terms and conditions set forth in the Stock
Option Agreement (the "Interchange Stock Option").

      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound, the parties
hereto agree as follows:

                                   ARTICLE 1

                                   THE MERGER

ARTICLE 1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.6), Jersey shall be merged with
and into Bank under the charter of Bank (the "Merger") in accordance with the
New Jersey Banking Act of 1948, as amended (the "Act"), and Bank shall be the
surviving bank (the "Surviving Bank"). Attached hereto as Exhibit A is a list of
the addresses of the principal office and branch office of Jersey. Attached
hereto as Exhibit B is a list of the addresses of the principal office and
branch offices of each of Bank and the Surviving Bank and the names of the
officers and directors of the Surviving Bank.

ARTICLE 1.2 Effect of the Merger. At the Effective Time, the Surviving Bank
shall be considered the same business and corporate entity as each of Jersey and
Bank and thereupon and thereafter, all the property, rights, powers and
franchises of each of Jersey and Bank shall vest in the Surviving Bank and the
Surviving Bank shall be subject to and be deemed to have assumed all of the
debts, liabilities, obligations and duties of each of Jersey and Bank and shall
have succeeded to all of each of their relationships, fiduciary or otherwise, as
fully and to the same extent as if such property rights, privileges, powers,
franchises, debts, obligations, duties and relationships had been originally
acquired, incurred or entered into by the Surviving Bank.

ARTICLE 1.3 Certificate of Incorporation. The Certificate of Incorporation of
Bank as it exists immediately prior to the Effective Time shall continue as the
Certificate of Incorporation of the Surviving Bank, as set forth in Schedule
1.3, until otherwise amended as provided by law.

ARTICLE 1.4 Bylaws. The Bylaws of Bank as they exist immediately prior to the
Effective Time shall continue as the Bylaws of the Surviving Bank until
otherwise amended as provided by law.

<PAGE>

ARTICLE 1.5 Directors and Officers. The directors and officers of Bank as of the
Effective Time shall continue as the directors and officers of the Surviving
Bank. Subject to all applicable regulatory approvals, Richard A. Gilsenan
("Gilsenan") and Arthur R. Odabash ("Odabash") (if Gilsenan and/or Odabash dies
prior to the Closing, the Board of Directors of Jersey, subject to the
concurrence of Interchange and subject to all applicable regulatory approvals,
may appoint a person to replace the dead person) shall each be designated a
director of the Surviving Bank to hold office until the next annual meeting and,
at such meeting, Gilsenan and Odabash shall each be nominated for an additional
one-year term, and at the first annual meeting following the next annual
meeting, Odabash shall be nominated to an additional one-year term. Further,
subject to all applicable regulatory approvals, Gilsenan and Odabash shall each
be designated a director of Interchange to hold office until the next annual
meeting, and at such meeting, Gilsenan shall be nominated for an additional
one-year term and Odabash shall be nominated for an additional two-year term.

ARTICLE 1.6 Effective Time and Closing.  The Merger shall become  effective (and
be  consummated)  upon approval by the  Commissioner of Banking and Insurance of
the State of New Jersey (the  "Commissioner")  and the Board of Governors of the
Federal Reserve System ("FRB").  Each application for approval shall be filed by
Bank with the  approval  of Jersey,  which  approval  shall not be  unreasonably
withheld or delayed. The first calendar month end after such approvals have been
completed shall be the "Effective  Time". A closing (the  "Closing")  shall take
place prior to the Effective Time at 10:00 a.m., on a day mutually  agreed to by
Interchange  and Jersey  within  thirty (30) days  following  the receipt of all
necessary regulatory and governmental  approvals and consents and the expiration
of all statutory  waiting  periods in respect  thereof and the  satisfaction  or
waiver of the conditions to the  consummation of the Merger specified in Article
ARTICLE 6 hereof  (other than the delivery of  certificates,  opinions and other
instruments  and documents to be delivered at the  Closing),  but not later than
the last day of the calendar  month in which the last  received of the foregoing
is received,  at the principal  office of  Interchange,  or at such other place,
time or date as Bank and Jersey may mutually agree upon.

ARTICLE 1.7 Capital Stock. As of September 30, 1997, Jersey had capital of
$6,051,567, divided into 436,435 shares of common stock, each of $5.00 par
value, 75,525 shares of preferred stock, each of $5.00 par value, $2,550,152 of
surplus, and undivided profits of $941,615. As of September 30, 1997, Bank had
capital of $45,954,001, divided into 1,151,400 shares of common stock, each of
$2.50 par value, $15,658,890 of surplus, and $26,950,761 of undivided profits.
At the Effective Time, the amount of capital stock of Bank shall be $52,005,568,
divided into 1,151,400 shares of common stock, each of $2.50 par value, and Bank
shall have a surplus of $18,209,042 and undivided profits, including capital
reserves, which when combined with the capital and surplus will be equal to the
combined capital structures of Bank and Jersey as stated in the preceding two
sentences, adjusted however, for earnings and expenses and dividends declared
and paid by Jersey between September 30, 1997 and the Effective Time.

ARTICLE 1.8 Jersey's Employees. Any employee of Jersey who becomes an employee
of the Surviving Bank as a result of the Merger shall be entitled to participate
in the compensation and benefit plans of the Surviving Bank on the same basis as
persons (not employed by the Surviving Bank) of comparable experience who are
hired by the Surviving Bank. This Section 1.8 shall not provide any employee of
Jersey any right of employment with the Surviving Bank or any right to any
particular seniority or position.

                                   ARTICLE 2

                           CONVERSION OF JERSEY SHARES

ARTICLE 2.1 Conversion of Jersey Preferred Stock. Within 60 days after the
execution of this Agreement by the parties, each holder of preferred stock, par
value $5.00 per share, of Jersey ("Jersey Preferred Stock"), shall enter into a
written agreement with Jersey, in the form attached hereto as Exhibit C (the
"Conversion Agreement"), providing that such holder of Jersey Preferred Stock
shall convert each of its shares of Jersey Preferred Stock into .8695 shares of
Jersey Common Stock (hereinafter defined), effective immediately prior to the
conversion of Jersey Common Stock pursuant to Section 2.2 (so that the number of
shares of Jersey Common Stock eligible for conversion pursuant to Section 2.2
shall include the

<PAGE>

Jersey Common Stock arising from the conversion of the Jersey Preferred Stock),
in accordance with the Jersey's Certificate of Amendment to its Certificate of
Incorporation filed with the New Jersey Department of Banking on May 14, 1993,
which authorized the issuance of the Jersey Preferred Stock and set forth its
terms. Attached hereto as Exhibit D is a true and complete list of the holders
of record of Jersey Preferred Stock as of the date hereof, in each case
specifying the number of shares of Jersey Preferred Stock held by such holder
and the record address of such holder.

ARTICLE 2.2 Conversion of Jersey Common Stock. Each share of common stock, par
value $5.00 per share, of Jersey ("Jersey Common Stock"), issued and outstanding
immediately prior to the Effective Time (other than shares of Jersey Common
Stock retired pursuant to Section 2.6 and Dissenting Shares as defined in
Section 2.4) shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted as follows:

(a) Exchange Ratio. Subject to the provisions of this Section 2.2, each share of
Jersey Common Stock issued and outstanding immediately prior to the Effective
Time (excluding shares of Jersey Common Stock retired pursuant to Section 2.6
and Dissenting Shares) shall be converted at the Effective Time into the right
to receive one (1) share (the "Exchange Ratio") of common stock, no par value,
of Interchange ("Interchange Common Stock").

(b) Fractional Shares; Average Closing Price. No fractional shares of
Interchange Common Stock shall be issued, and, in lieu thereof, a cash payment
shall be made based on the Average Closing Price. The Average Closing Price of
Interchange Common Stock shall mean the Average Price (as hereinafter defined)
calculated based upon the Closing Price (as hereinafter defined) of Interchange
Common Stock during the first 20 of the 25 consecutive trading days immediately
preceding the date of the Closing. The Closing Price shall mean the closing
price of Interchange Common Stock as supplied by the American Stock Exchange
("AMEX") and published in The Wall Street Journal during the first 20 of the 25
consecutive trading days immediately preceding the date of the Closing. The
Average Price shall be determined by taking the average of Closing Prices in the
20 day period. A trading day shall mean a day for which a Closing Price is so
supplied and published.

(c) Capital Changes. If between the date of this Agreement and the Effective
Time the outstanding shares of Interchange Common Stock shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, stock split, reclassification, recapitalization, combination or
exchange of shares, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, stock split, reclassification, recapitalization,
combination or exchange of shares.

(d) Cancellation of Jersey Certificates. After the Effective Time, each such
share of Jersey Common Stock shall no longer be outstanding and shall
automatically be cancelled and each of the certificates (the "Certificates")
previously evidencing any such shares of Jersey Common Stock outstanding
immediately prior to the Effective Time (other than shares of Jersey Common
Stock retired pursuant to Section 2.6 and Dissenting Shares) shall thereafter
represent the right to receive the consideration pursuant to Section (a) and (b)
hereof. The holders of the Certificates shall cease to have any rights with
respect to such shares of Jersey Common Stock except as otherwise provided
herein or by law. The Certificates shall be exchanged for certificates
evidencing shares of Interchange Common Stock issued pursuant to this Article
ARTICLE 2, upon the surrender of such Certificates in accordance with this
Article ARTICLE 2.

(e) Jersey Stock Options.  At the Effective  Time,  each  outstanding  option to
purchase Jersey Common Stock (a "Jersey  Option") granted under the stock option
plan for  certain  executives  of Jersey (the  "Jersey  Option  Plan")  shall be
converted  into the right to  receive  immediately  after the  Effective  Time a
number  of whole  shares  of  Interchange  Common  Stock  which is the  quotient
obtained by dividing:  the excess of (x) the product obtained by multiplying (i)
the number of shares of Jersey Common Stock covered by the Jersey Option,  times
(ii) the Exchange  Ratio (as adjusted),  times (iii) the Average  Closing Price,
less (y) the  aggregate  exercise  price for the Jersey  Option;  by the Average
Closing Price. No fractional shares of Interchange  Common Stock shall be issued
pursuant to this Section  2.2(e)(ii),  and in lieu  thereof,  each  optionee who
would otherwise be entitled to a fractional interest

<PAGE>

will receive an amount in cash determined by multiplying such fractional
interest by the Average Closing Price.

ARTICLE 2.3 Exchange of Shares.

(a) Jersey and Interchange hereby appoint Continental Stock Transfer or such
other institution as Interchange shall designate (the "Exchange Agent") as the
Exchange Agent for purposes of effecting the conversion of Jersey Common Stock
and Jersey Options. All fees and expenses of the Exchange Agent shall be paid by
Interchange. As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record (a "Record Holder") of a Certificate or
Certificates, a mutually agreed upon 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 Interchange Common Stock (and cash in lieu of fractional shares). Upon
surrender of a Certificate for exchange and cancellation to the Exchange Agent,
together with such letter of transmittal, duly executed, the Record Holder shall
be entitled to promptly receive in exchange for such Certificate the
consideration as provided in Section 2.2 hereof and the Certificates so
surrendered shall be cancelled. The Exchange Agent shall not be obligated to
deliver or cause to be delivered to any Record Holder the consideration to which
such Record Holder would otherwise be entitled until such Record Holder
surrenders the Certificate for exchange or, in default thereof, an appropriate
Affidavit of Loss and Indemnity Agreement and/or a bond as may be reasonably
required in each case by Interchange. Notwithstanding the time of surrender of
the Certificates, Record Holders (other than holders of Dissenting Shares) shall
be deemed shareholders of Interchange for all purposes from the Effective Time,
except that Interchange shall withhold the payment of dividends from any Record
Holder until such Record Holder effects the exchange of Certificates for
Interchange Common Stock. (Such Record Holder shall receive such withheld
dividends, without interest, upon effecting the share exchange.) With respect to
each outstanding Jersey Option, Clyde C. Britt ("Britt") and William C.
Ledgerwood ("Ledgerwood") shall receive the number of shares of Interchange
Common Stock determined pursuant to Section 2.2(e).

(b) After the Effective Time,  there shall be no transfers on the stock transfer
books of Jersey of the shares of Jersey  Common  Stock  which  were  outstanding
immediately  prior to the Effective Time and, if any  Certificates  representing
such shares are presented  for  transfer,  they shall be cancelled and exchanged
for the consideration pursuant to Section 2.2 hereof.

(c) If payment of the consideration pursuant to Section 2.2 hereof is to be made
in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such payment 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 payment shall pay to the Exchange Agent in
advance any transfer or other taxes required by reason of the payment to a
person other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.

(d) No certificates or scrip evidencing fractional shares of Interchange Common
Stock shall be issued upon the surrender for exchange of Certificates and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of Interchange. Cash shall be paid in lieu of fractional
shares of Interchange Common Stock, based upon the Average Closing Price of
Interchange Common Stock.

ARTICLE 2.4 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, (i) any holder of Jersey Common Stock and (ii) any holder of Jersey
Preferred Stock who has timely executed and delivered to Interchange, the
Conversion Agreement, shall have the right to dissent to the extent offered to a
merging capital savings bank under the Act, and if all necessary requirements of
the Act are met, such shares shall be entitled to payment in cash from Bank of
the fair value of such shares as determined in accordance with the Act;
provided, however, that each holder of Jersey Preferred Stock entitled to
dissenters' rights hereunder shall be treated as though all his, her or its
shares of Jersey

<PAGE>

Preferred Stock have been converted into Jersey Common Stock (in accordance with
the Conversion Agreement), solely for the purpose of ascertaining the extent of
such Jersey Preferred Stockholder's dissenters' rights hereunder. All shares of
Jersey Common Stock, including all shares of Jersey Common Stock which have been
deemed, pursuant to this Section 2.4, to be issued to the holders of Jersey
Preferred Stock who have dissenters' rights as a result of their respective
timely execution and delivery of the Conversion Agreement, as to which the
holder properly exercises dissenters' rights in accordance with the Act shall
constitute "Dissenting Shares" unless and until such rights are waived by the
party initially seeking to exercise such rights.

ARTICLE 2.5 Bank Common Stock. The shares of common stock of Bank outstanding
immediately prior to the Effective Time shall not be affected by the Merger but
shall be the same number of shares of the Surviving Bank.

ARTICLE 2.6 Certain Jersey Shares Returned. Each share of Jersey Common Stock
that is either (a) owned by Interchange or any direct or indirect wholly-owned
subsidiary of Interchange (other than shares held in trust accounts, managed
accounts or in any similar manner as trustee or in a fiduciary capacity and
shares held as collateral or in lieu of a debt previously contracted) or (b)
held in the treasury of Jersey shall be cancelled and retired and no capital
stock of Interchange, cash or other consideration shall be paid or delivered in
exchange therefor.

                                   ARTICLE 3

                    REPRESENTATIONS AND WARRANTIES OF JERSEY

      References herein to "Jersey Disclosure Schedule" shall mean all of the
disclosure schedules required by this Article 3, dated as of the date hereof and
referenced to the specific sections and subsections of Article ARTICLE 3 of this
Agreement. Jersey hereby represents and warrants to Interchange and Bank as
follows:

ARTICLE 3.1 Organization.

      (a) Jersey is a New Jersey savings bank whose deposits are insured by the
Bank Insurance Fund of the Federal Deposit Insurance Corporation ("FDIC") to the
fullest extent permitted by law. Jersey is duly organized, validly existing and
in good standing under the laws of the State of New Jersey. Jersey 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 and is in good standing 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, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Jersey.

      (b) The Jersey Disclosure Schedule sets forth true and complete copies of
the Certificate of Incorporation and Bylaws of Jersey as in effect on the date
hereof. Except as set forth in the Jersey Disclosure Schedule, Jersey does not
own or control, directly or indirectly, any equity interest in any corporation,
company, association, partnership, joint venture or other entity and owns no
real estate, except real estate used for its banking premises.

ARTICLE 3.2  Capitalization.  The authorized capital stock of Jersey consists of
2,000,000  shares of Jersey Common Stock and 300,000 shares of Jersey  Preferred
Stock.  As of September 30, 1997,  (i) 436,435 shares of Jersey Common Stock and
75,525 shares of Jersey Preferred Stock were issued and outstanding, (ii) 16,600
shares of Jersey  Common  Stock were  issuable  upon  exercise of current  stock
options granted pursuant to the Jersey Stock Option Plan, (iii) 65,669 shares of
Jersey Common Stock were issuable  upon the  conversion of the Jersey  Preferred
Stock and (iv) no shares  are held in the  treasury  of  Jersey.  All issued and
outstanding  shares of Jersey Common Stock and Jersey  Preferred Stock have been
duly authorized and validly issued,  are fully paid,  nonassessable  and free of
preemptive  rights.  Since September 30, 1997, to and including the date of this
Agreement no

<PAGE>

additional shares of Jersey Common Stock or Jersey Preferred Stock have been
issued except in connection with the exercise of options issued under the Jersey
Option Plan, the conversion of Jersey Preferred Stock into Jersey Common Stock
or shares issued under Jersey's Dividend Reinvestment and Stock Purchase Plan
(the "Jersey DRIP"). The authorized but unissued shares of the capital stock of
Jersey are not subject to pre-emptive rights. Except for: the options granted
under the Jersey Option Plan prior to September 30, 1997; the Interchange Stock
Option; the Jersey Preferred Stock; and the Jersey DRIP, Jersey does not have
and is not bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the transfer, purchase or
issuance of any shares of capital stock of Jersey or any securities representing
the right to purchase or otherwise receive any shares of such capital stock or
any securities convertible into or representing the right to subscribe for any
such shares, and there are no agreements or understandings with respect to
voting of any such shares.

ARTICLE 3.3 Authority; No Violation.

      (a) Subject to the approval of this Agreement and the transactions
contemplated hereby by the stockholders of Jersey, and subject to the parties
obtaining all necessary regulatory approvals, Jersey has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby in accordance with the terms hereof. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Jersey. Except for the approvals described in paragraph
(b) below, no other corporate proceedings on the part of Jersey are necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Jersey and constitutes the valid and
binding obligation of Jersey, enforceable against Jersey in accordance with its
terms.

(b) Neither the execution and delivery of this Agreement by Jersey, nor the
consummation by Jersey of the transactions contemplated hereby in accordance
with the terms hereof, or compliance by Jersey with any of the terms or
provisions hereof, will (i) violate any provision of Jersey's Certificate of
Incorporation or other governing instrument or Bylaws, (ii) assuming that the
consents and approvals set forth below are duly obtained, violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Jersey or any of its properties or assets, or (iii) except as set
forth in the Jersey Disclosure Schedule, violate, conflict with, result in a
breach of any provisions of, 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, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any of
the properties or assets of Jersey 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 Jersey is a party,
or by which it or any of its properties or assets may be bound or affected
except, with respect to (ii) and (iii) above, such as individually and in the
aggregate will not have a material adverse effect on the business, operations,
assets or financial condition of Jersey, or the ability of Jersey to consummate
the transactions contemplated hereby. Except for consents and approvals of or
filings or registrations with or notices to the third parties listed in the
Jersey Disclosure Schedule, the Commissioner, the Securities and Exchange
Commission (the "SEC"), and the stockholders of Jersey, no consents or approvals
of or filings or registrations with or notices to any third party or any public
body or authority are necessary on behalf of Jersey in connection with (x) the
execution and delivery by Jersey of this Agreement and (y) the consummation by
Jersey of transactions contemplated hereby.

ARTICLE 3.4 Financial Statements.

      (a) The Jersey Disclosure Schedule sets forth copies of the statements of
condition of Jersey as of December 31, 1994, 1995 and 1996, and the related
statements of income, stockholders' equity and cash flows for the periods ended
December 31 in each of the three years 1994 through 1996, in each case
accompanied by the audit report of Arthur Anderson, LLP, independent public
accountants with respect to Jersey, Jersey's unaudited comparative statements of
condition and related comparative statements of operations for the periods ended
March 31, June 30, and September 30, 1997, as provided to the shareholders of
Jersey and Jersey's call reports for the periods ended March 31, June 30, and

<PAGE>

September 30, 1997, as filed with the FDIC (collectively, the "Jersey Financial
Statements"). The Jersey Financial Statements (including the related notes) have
been prepared in accordance with generally accepted accounting principles
consistently applied during the periods involved (except as approved by such
independent public accountants and disclosed therein), and fairly present the
financial condition of Jersey as of the respective dates set forth therein, and
the related statements of income, stockholders' equity and cash flows fairly
present the results of the operations, stockholders' equity and cash flows of
Jersey for the respective periods set forth therein, except for any year-end
adjustment(s) which, alone or in the aggregate, do not materially impair the
fair presentation of the financial condition of Jersey as of the respective
dates of such prior Jersey Financial Statements as are affected by any such
adjustment, and which, alone or in the aggregate, do not result in the
presentation of a material adverse financial condition of Jersey as of the
respective dates of such prior Jersey Financial Statements.

      (b) The books and records of Jersey have been and are being maintained in
material compliance with applicable legal and accounting requirements, and
reflect only actual transactions.

      (c) Except as and to the extent  reflected,  disclosed or reserved against
in  the  Jersey  Financial  Statements  (including  the  notes  thereto),  as of
September  30, 1997  Jersey did not have and does not have,  as the case may be,
any liabilities,  whether absolute,  accrued, contingent or otherwise, which are
material to the business,  operations,  assets or financial condition of Jersey.
Since  September  30, 1997 and to the date  hereof,  Jersey has not incurred any
liabilities  except in the  ordinary  course of  business  and  consistent  with
prudent  banking  practice,  and  except as  specifically  contemplated  by this
Agreement or relating to other matters disclosed in this Agreement.

      (d) As of September 30, 1997, Jersey had stockholder's equity of
$6,051,567, consisting of 436,435 shares of common stock, each of $5.00 par
value, 75,525 shares of preferred stock, each of $5.00 par value, $2,550,152 of
surplus, and undivided profits of $941,615. Without limiting or qualifying the
materiality of any other representation, warranty or covenant in this Agreement,
the representations contained in this paragraph 3.4(d) were a material
inducement to Interchange in determining the Exchange Ratio and if these numbers
were inaccurate when made and such inaccuracy is material, Interchange shall
have the right to terminate this Agreement due to material breach of a
representation by Jersey.

ARTICLE 3.5  Financial  Advisor;  Broker's  and Other Fees.  Jersey has retained
Capital  Consultants  of  Princeton,  Inc.  ("Financial  Advisor")  to  render a
fairness  opinion.  Neither  Jersey nor any of its  directors  or  officers  has
employed  any broker or finder or incurred  any  liability  for any  broker's or
finder's  fees  or  commissions  in  connection  with  any of  the  transactions
contemplated  by this  Agreement.  Except as set forth in the Jersey  Disclosure
Schedule,  there  are no fees  (other  than  time  charges  billed  at usual and
customary rates) payable to any consultants,  including lawyers and accountants,
in connection

<PAGE>

with this transaction or which would be triggered by consummation of this
transaction or the termination of the services of such consultants by Jersey.

ARTICLE 3.6 Absence of Certain Changes or Events.

      (a) Except as set forth in the Jersey Disclosure Schedule, there has not
been any material adverse change in the business, operations, assets or
financial condition of Jersey since September 30, 1997, and to the best of
Jersey's knowledge, no facts or conditions exist which Jersey believes will
cause or is likely to cause such a material adverse change in the future.

      (b) Except as set forth in the Jersey Disclosure Schedule, Jersey has not
taken or permitted any of the actions set forth in Section 5.2 hereof between
September 30, 1997 and the date hereof and Jersey has conducted its business
only in the ordinary course, consistent with past practice.

ARTICLE 3.7 Legal  Proceedings.  Except as  disclosed  in the Jersey  Disclosure
Schedule, Jersey is not a party to any, and Jersey has received no notice of any
pending  or, to the best of  Jersey's  knowledge,  threatened,  material  legal,
administrative,  arbitral or other proceedings,  claims, actions or governmental
investigations  of any nature  against  Jersey or against  any present or former
Jersey  officer or director in their  capacity as a Jersey  officer or director.
Except as disclosed in the Jersey Disclosure Schedule,  Jersey is not a party to
any material order,  judgment or decree entered against Jersey in any lawsuit or
proceeding.

ARTICLE 3.8 Taxes and Tax Returns.

      (a) Jersey has duly filed (and until the Effective Time will so file) all
returns, declarations, reports, information returns and statements ("Returns")
required to be filed by it in respect of any federal, state and local taxes
(including withholding taxes, penalties or other payments required) and has duly
paid (and until the Effective Time will so pay) all such taxes due and payable,
other than taxes or other charges which are being contested in good faith.
Jersey has established (and until the Effective Time will establish) on its
books and records reserves that it reasonably believes are adequate for the
payment of all federal, state and local taxes not yet due and payable, but are
anticipated to be incurred in respect of Jersey through the Effective Time.
Except as set forth in the Jersey Disclosure Schedule, the federal income tax
returns of Jersey have been examined by the Internal Revenue Service (the "IRS")
(or are closed to examination due to the expiration of the applicable statute of
limitations) and no deficiencies were asserted as a result of such examinations
which have not been resolved and paid in full. Except as set forth in the Jersey
Disclosure Schedule, the applicable state income tax returns of Jersey have been
examined by the applicable authorities (or are closed to examination due to the
expiration of the statute of limitations) and no deficiencies were asserted as a
result of such examinations which have not been resolved and paid in full. To
the best knowledge of Jersey, there are no audits or other administrative or
court proceedings presently pending, or claims asserted, for taxes or
assessments upon Jersey nor has Jersey given any currently outstanding waivers
or comparable consents regarding the application of the statute of limitations
with respect to any taxes or tax Returns.

      (b) Except as set forth in the Jersey Disclosure Schedule, Jersey has not
requested any extension of time within which to file any tax Return which Return
has not since been filed, is not a party to any agreement providing for the
allocation or sharing of taxes, is not required to include in income any
adjustment pursuant to Section 481(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), by reason of a voluntary change in accounting method
initiated by Jersey (nor does Jersey have any knowledge that the IRS has
proposed any such adjustment or change of accounting method) and has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.

ARTICLE 3.9 Employee Benefit Plans.

<PAGE>

(a) Except as set forth in the Jersey Disclosure Schedule, Jersey does not
maintain or contribute to any "employee pension benefit plan", within the
meaning of Section 3(2)(A) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), "employee welfare benefit plan", within the meaning
of Section 3(1) of ERISA, stock option plan, stock purchase plan, deferred
compensation plan, severance plan, bonus plan, employment agreement or other
similar plan, program or arrangement. Jersey has not, since September 2, 1974,
contributed to any "Multiemployer Plan", within the meaning of Sections 3(37)
and 4001(a)(3) of ERISA.

(b) Except with respect to customary health and disability benefits, there are
no unfunded benefits obligations which are not accounted for by reserves shown
on the Jersey Financial Statements and established under generally accepted
accounting principles, or otherwise noted on such Jersey Financial Statements.

(c) Except as agreed to by Interchange in writing or set forth in the Jersey
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee of Jersey to
severance pay or any similar payment or (ii) accelerate the time of payment,
vesting, or increase the amount, of any compensation due to any current or
former employee of Jersey under any Jersey benefit plan.

(d) No officer, director, employee or agent (or former officer, director,
employee or agent) of Jersey is entitled now, or will be entitled as a
consequence of this Agreement or the Merger, to any payment or benefit from
Jersey, Interchange or Bank which if paid or provided would constitute an
"excess parachute payment", as defined in Section 280G of the Code or
regulations promulgated thereunder.

ARTICLE 3.10 Reports.

(a) Each communication mailed by Jersey to all of its stockholders since January
1, 1994, and each annual, quarterly or special report, and proxy statement, as
of its date, complied in all material respects with all applicable statutes,
rules and regulations enforced or promulgated by the applicable regulatory
agency and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading; provided that disclosures as of a later date shall be
deemed to modify disclosures as of an earlier date.

(b) Jersey has, since January 1, 1994, duly filed with the FDIC in correct form
the quarterly and annual reports required to be filed under applicable laws and
regulations, and Jersey promptly will deliver or make available to Interchange
accurate and complete copies of such reports. The Jersey Disclosure Schedule
lists all examinations of Jersey conducted by either the FDIC or the New Jersey
Department of Banking since January 1, 1994 and the dates of any responses
thereto submitted by Jersey.

ARTICLE 3.11 Jersey Information. The information relating to Jersey to be
contained in the Proxy Statement/Prospectus (as defined in Section (a) hereof)
to be delivered to stockholders of Jersey, including all holders of the Jersey
Preferred Stock who have timely executed and delivered the Conversion Agreement,
in connection with the solicitation of their approval of this Agreement and the
transactions contemplated hereby, as of the date the Proxy Statement/Prospectus
is mailed to stockholders of Jersey, and up to and including the date of the
meeting of stockholders to which such Proxy Statement/Prospectus relates, will
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
under which they were made, not misleading. The information relating to Jersey
in the Registration Statement (as defined in Section (a) hereof), as of the date
of the filing thereof, will 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 under which they were made, not misleading.

<PAGE>

ARTICLE 3.12 Compliance with Applicable Law.

(a) General. Except as set forth in the Jersey Disclosure Schedule, to the best
of Jersey's knowledge, Jersey holds all material licenses, franchises, permits
and authorizations necessary for the lawful conduct of its businesses under and
pursuant to each, and has complied with and is not in default in any material
respect under any, applicable law, statute, order, rule, regulation, policy
and/or guideline of any federal, state or local governmental authority relating
to Jersey (other than where such defaults or non-compliances will not, alone or
in the aggregate, result in a material adverse effect on the business,
operations, assets or financial condition of Jersey). Further, except as set
forth in the Jersey Disclosure Schedule, Jersey has not received notice of
violation of, nor does it know of any violations (other than violations which
will not, alone or in the aggregate, result in a material adverse effect on the
business, operations, assets or financial condition of Jersey) of, any of he
above.

(b) CRA. Without limiting the foregoing, except as set forth in the Jersey
Disclosure Schedule, to the best of Jersey's knowledge, Jersey has complied in
all respects with the Community Reinvestment Act ("CRA"). Further, without
limiting the foregoing, except as set forth in the Jersey Disclosure Schedule,
Jersey has received a CRA rating of "satisfactory" as of its last examination
and Jersey has not received any written notice from any persons asserting that
such person would object to the consummation of this Merger due to the CRA
performance of or rating of Jersey.

(c) BSA. Without limiting the foregoing, except as set forth in the Jersey
Disclosure Schedule, to the best of Jersey's knowledge, Jersey has complied in
all material respects with the Bank Secrecy Act ("BSA"), including all
regulations and filing requirements related thereto, and Jersey has implemented
appropriate procedures to maintain compliance with the BSA.

ARTICLE 3.13 Certain Contracts.

(a) Except as disclosed in the Jersey Disclosure Schedule, Jersey is not a party
to and is not bound by any contract or understanding (whether written or, to the
best of its knowledge, oral) with respect to the employment or termination of
any present or former officers, employees, directors or consultants. The Jersey
Disclosure Schedule sets forth true and correct copies of all written employment
agreements or termination agreements with officers, employees, directors, or
consultants to which Jersey is a party.

(b) Except as disclosed in the Jersey Disclosure Schedule and except for loan
documents relating to existing loans (other than loans which impose a material
burden on Jersey which is not usual and customary) where the loan evidenced by
such documents is not in default, (i) as of the date of this Agreement, Jersey
is not a party to and is not bound by any commitment, agreement or other
instrument which is material to the business operations, assets or financial
condition of Jersey, (ii) no commitment, agreement or other instrument to which
Jersey is a party or by which it is bound limits the freedom of Jersey to
compete in any line of business or with any person, and (iii) Jersey is not a
party to any collective bargaining agreement.

(c) Except as disclosed in the Jersey Disclosure Schedule, to the best of
Jersey's knowledge, neither Jersey, nor any other party thereto, is in default
in any material respect under any material lease, contract, mortgage, promissory
note, deed of trust, loan agreement or other commitment or arrangement.

<PAGE>

ARTICLE 3.14 Properties and Insurance.

(a) Jersey has good and, as to owned real property, if any, marketable title to
all material assets and properties, whether real or personal, tangible or
intangible, reflected in Jersey's balance sheet as of December 31, 1996, or
owned and acquired subsequent thereto (except to the extent that such assets and
properties have been disposed of for fair value in the ordinary course of
business since December 31, 1996), subject to no encumbrances, liens, mortgages,
security interests or pledges, except (i) those items that secure liabilities
that are reflected in such balance sheet or the notes thereto or incurred in the
ordinary course of business after the date of such balance sheet, (ii) statutory
liens for amounts not yet delinquent or which are being contested in good faith,
(iii) such encumbrances, liens, mortgages, security interests, pledges and title
imperfections that are not in the aggregate material to the business,
operations, assets, and financial condition of Jersey taken as a whole and (iv)
with respect to owned real property, if any, title imperfections noted in title
reports delivered to Interchange prior to the date hereof. Jersey, as lessee,
has the right under valid and subsisting leases to occupy, use, possess and
control, in all material respects, all real property leased by it, as presently
occupied, used, possessed and controlled by it. The Jersey Disclosure Schedule
sets forth true and correct copies of all written leases of real property used
by Jersey to conduct its businesses.

(b) The Jersey Disclosure Schedule lists all policies of insurance and bonds
covering business operations and insurable properties and assets of Jersey, all
risks insured against, and the amount thereof and deductibles relating thereto.
Except as set forth in the Jersey Disclosure Schedule, as of the date hereof,
Jersey has not received any notice of cancellation or notice of a material
amendment of any such insurance policy or bond and neither of them is in default
in any material respect under such policy or bond, and, to the best of Jersey's
knowledge, no coverage thereunder is being disputed and all material claims
thereunder have been filed in a timely fashion.

ARTICLE 3.15 Minute Books. The minute book of Jersey contains accurate records
of all meetings held by and other corporate action taken by its stockholders and
Board of Directors (including committees of its Board of Directors).

ARTICLE 3.16 Environmental Matters. Except as disclosed in the Jersey Disclosure
Schedule, Jersey has not received any written notice, citation, claim,
assessment, proposed assessment or demand for abatement alleging that Jersey
(either directly or as a successor-in-interest in connection with the
enforcement of remedies to realize the value of properties serving as collateral
for outstanding loans) is responsible for the correction or clean-up of any
condition material to the business, operations, assets or financial condition of
Jersey. Except as disclosed in the Jersey Disclosure Schedule, Jersey has no
knowledge that any toxic or hazardous substances or materials have been emitted,
generated, disposed of or stored on any property owned or leased by Jersey in
any manner that violates or, after the lapse of time may violate, any presently
existing federal, state or local law or regulation governing or pertaining to
such substances and materials.

      ARTICLE 3.17 Reserves. The allowance for possible loan and lease losses in
the September 30, 1997 Jersey Financial Statements was adequate at the time
based upon past loan loss experiences and potential losses in the portfolio at
the time to cover all known or reasonably anticipated loan losses.

ARTICLE 3.18 Disclosure. There are no material facts concerning the business,
operations, assets or financial condition of Jersey which have not been
disclosed to Interchange which would have a material adverse effect on the
business, operations or financial condition of Jersey. No representation or
warranty contained in Article III of this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein not misleading. Where this Agreement refers to the
knowledge of Jersey, such reference shall be deemed to be the actual knowledge
of the President and Chief Financial Officer of Jersey. Where a matter has been
disclosed in one section of the Jersey

<PAGE>

Disclosure Schedule, such matters shall be deemed to have been disclosed with
respect to each warranty and representation of Jersey in this Agreement. Such
limitation with respect to the scope of knowledge in the preceding sentence
shall not be understood to release any person from claims arising outside this
Agreement.

ARTICLE 3.19 Duration of Warranties. All representations and warranties of
Jersey under this Agreement shall survive for a period of four (4) years from
the date of this Agreement, and shall thereafter expire and be of no further
force or effect.

                                   ARTICLE 4

                         REPRESENTATIONS AND WARRANTIES
                             OF BANK AND INTERCHANGE

      References herein to the "Interchange Disclosure Schedule" shall mean all
of the disclosure schedules required by this Article 4, dated as of the date
hereof and referenced to the specific sections and subsections of Article 4 of
this Agreement, which have been delivered on the date hereof by Interchange to
Jersey. Interchange hereby represents and warrants to Jersey as follows:

ARTICLE 4.1 Corporate Organization.

(a) Interchange is a corporation duly organized and validly existing and in good
standing under the laws of the State of New Jersey. Interchange 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 and is in good standing 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, except where the failure to be so licensed, qualified
or in good standing would not have a material adverse effect on the business,
operations, assets or financial condition of Interchange or any of its
Subsidiaries (defined below). Interchange is registered as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA").

(b) Each of the Subsidiaries of Interchange are listed in the Interchange
Disclosure Schedule. The term "Subsidiary" when used in this Agreement with
reference to Interchange means any corporation, joint venture, association,
partnership, trust or other entity in which Interchange has, directly or
indirectly, at least a 50 percent interest or acts as a general partner,
including without limitation, Bank. Each Subsidiary of Interchange is duly
organized and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Bank is a New Jersey commercial bank whose
deposits are insured by the Bank Insurance Fund of the FDIC to the fullest
extent permitted by law. Each Subsidiary of Interchange 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 and is in good standing 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,
except where the failure to be so licensed, qualified or in good standing would
not have a material adverse effect on the business, operations, assets or
financial condition of Interchange or any of its Subsidiaries. The Interchange
Disclosure Schedule sets forth true and complete copies of the Certificate of
Incorporation and Bylaws of Bank as in effect on the date hereof.

ARTICLE 4.2 Capitalization. The authorized capital stock of Interchange consists
of 10,000,000 shares of Interchange Common Stock. As of September 30, 1997, (i)
4,224,909 shares of Interchange Common Stock were issued and outstanding,
including 20,476 shares of restricted stock issued under the Interchange Stock
Option and Incentive Plan of 1997 ("Interchange Stock Option and Incentive
Plan"), (ii) 96,772 shares of Interchange Common Stock were issuable upon
exercise of current stock options granted pursuant to the Interchange Stock
Option and Incentive Plan and (iii) 89,350 shares were issued

<PAGE>

and held in treasury. Since September 30, 1997, to and including the date of
this Agreement, no additional shares of Interchange Common Stock have been
issued except in connection with the exercise of options granted under the
Interchange Stock Option and Incentive Plan or grants of restricted stock under
the Interchange Stock Option and Incentive Plan. All issued and outstanding
shares of Interchange Common Stock, and all issued and outstanding shares of
capital stock of Interchange's Subsidiaries, have been duly authorized and
validly issued, are fully paid, nonassessable and free of preemptive rights. All
of the outstanding shares of capital stock of Interchange's Subsidiaries are
owned by Interchange free and clear of any liens, encumbrances, charges,
restrictions or rights of third parties. Except for options or other awards
granted pursuant to the Interchange Stock Option and Incentive Plan, neither
Interchange nor any of Interchange's Subsidiaries has or is bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the transfer, purchase or issuance of any shares of
capital stock of Interchange or Interchange's Subsidiaries or any securities
representing the right to purchase or subscribe to any such shares, and there
are no agreements or understandings with respect to voting of any such shares.

ARTICLE 4.3 Authority; No Violation.

(a) Interchange and Bank have full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby in
accordance with the terms hereof. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Interchange and Bank. Except for
the approval of Interchange as a shareholder of Bank and as required by the AMEX
listing rules for the listing of shares of Interchange Common Stock, no other
corporate proceedings on the part of Interchange and Bank are necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Interchange and Bank and constitutes a
valid and binding obligation of Interchange and Bank, enforceable against
Interchange and Bank in accordance with its terms.

(b) Neither the execution or delivery of this Agreement nor the consummation by
Interchange and Bank of the transactions contemplated hereby in accordance with
the terms hereof, will violate any provision of the Certificate of Incorporation
or other governing instrument or Bylaws of Interchange or Bank, assuming that
the consents and approvals set forth below are duly obtained, violate any
statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Interchange or Bank or any of their respective
properties or assets, or violate, conflict with, result in a breach of any
provision of, 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,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of Interchange or 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 Interchange or Bank is a party, or by
which Interchange or Bank or any of their properties or assets may be bound or
affected, except, with respect to (ii) and (iii) above, such as individually and
in the aggregate will not have a material adverse effect on the business,
operations, assets or financial condition of Interchange and Interchange's
Subsidiaries on a consolidated basis, or the ability of Interchange and Bank to
consummate the transactions contemplated hereby. Except for consents and
approvals of or filings or registrations with or notices to the Commissioner,
FRB, the SEC, applicable state securities bureaus or commissions, and the AMEX,
no consents or approvals of or filings or registrations with or notices to any
third party or any public body or authority are necessary on behalf of
Interchange or Bank in connection with (a) the execution and delivery by
Interchange or Bank of this Agreement and (b) the consummation by Interchange of
the Merger and the other transactions contemplated hereby. To the best of
Interchange's knowledge, no fact or condition exists which Interchange has
reason to believe will prevent it or Bank from obtaining the aforementioned
consents and approvals within the time frame contemplated hereby.


<PAGE>

ARTICLE 4.4 Financial Statements.

(a) Interchange has previously delivered to Jersey copies of the consolidated
(of Interchange and its Subsidiaries) statements of financial condition as of
December 31, 1994, 1995 and 1996, the related consolidated statements (of
Interchange and its Subsidiaries) of income, changes in stockholders' equity and
of cash flows for the periods ended December 31 in each of the three fiscal
years 1994 through 1996, in each case accompanied by the audit report of
Deloitte & Touche LLP, independent public accountants with respect to
Interchange, and the unaudited consolidated (of Interchange and its
Subsidiaries) statements of condition as of March 31, June 30, and September 30,
1997 and the related unaudited consolidated (of Interchange and its
Subsidiaries) statements of income, changes in stockholders' equity and cash
flows for the three months then ended as reported in Interchange's Quarterly
Reports on Form 10-Q, filed with the SEC under the Securities and Exchange Act
of 1934, as amended (the "1934 Act") (collectively, the "Interchange Financial
Statements"). The Interchange Financial Statements (including the related
notes), have been prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved, and fairly present
the consolidated financial position of Interchange and its Subsidiaries as of
the respective dates set forth therein, and the related consolidated statements
of income, changes in stockholders' equity and of cash flows (including the
related notes, where applicable) fairly present the results of the consolidated
operations and changes in stockholders' equity and of cash flows of Interchange
and its Subsidiaries for the respective fiscal periods set forth therein, except
for any year-end adjustment(s) which, alone or in the aggregate, do not
materially impair the fair presentation of the financial condition of
Interchange and its Subsidiaries, taken as a whole, as of the respective dates
of such prior Interchange Financial Statements as are affected by any such
adjustment, and which, alone or in the aggregate, do not result in the
presentation of a material adverse financial condition of Interchange and its
Subsidiaries, taken as a whole, as of the respective dates of such prior
Interchange Financial Statements.

(b) The books and records of Interchange and its Subsidiaries have been and are
being maintained in material compliance with applicable legal and accounting
requirements, and reflect only actual transactions.

(c) Except as and to the extent reflected, disclosed or reserved against in the
Interchange Financial Statements (including the notes thereto), as of September
30, 1997 neither Interchange nor any of its Subsidiaries had or has, as the case
may be, any obligation or liability, whether absolute, accrued, contingent or
otherwise, which are material to the business, operations, assets or financial
condition of Interchange or any of its Subsidiaries. Since September 30, 1997,
neither Interchange nor any of its Subsidiaries have incurred any liabilities,
except in the ordinary course of business and consistent with prudent banking
practice.

ARTICLE 4.5 Brokerage and Other Fees. Other than McConnell, Budd & Downes, Inc.,
neither Interchange nor Bank nor any of their respective directors or officers
has employed any broker or finder or incurred any liability for any broker's or
finder's fees or commissions in connection with any of the transactions
contemplated by this Agreement.

ARTICLE 4.6 Absence of Certain Changes or Events. There has not been any
material adverse change in the business, operations, assets or financial
condition of Interchange and Interchange's Subsidiaries on a consolidated basis
since September 30, 1997 and to the best of Interchange's knowledge, no fact or
condition exists which Interchange believes will cause or is likely to cause
such a material adverse change in the future.

ARTICLE 4.7 Interchange Information. The information relating to Interchange,
its Subsidiaries, this Agreement and the transactions contemplated hereby in the
Proxy Statement/Prospectus (as defined in Section (a) hereof), as of the date of
the mailing of the Proxy Statement/Prospectus, and up to and

<PAGE>

including the date of the meeting of stockholders of Jersey to which such Proxy
Statement/Prospectus relates, will 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 under which they were made, not
misleading. The information relating to Interchange, its Subsidiaries, this
Agreement and the transactions contemplated hereby in the Registration Statement
(as defined in Section (a) hereof), as of the date of the filing thereof, will
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
under which they were made, not misleading.

ARTICLE 4.8 Capital Adequacy. At the Effective Time, after taking into effect
the Merger and the transactions contemplated hereunder, Interchange and Bank
will have sufficient capital to satisfy all applicable regulatory capital
requirements.

ARTICLE 4.9 Interchange Common Stock. At the Effective Time, the Interchange
Common Stock to be issued pursuant to the terms of Section 2.2, when so issued,
shall be duly authorized, validly issued, fully paid, and non-assessable, free
of preemptive rights and free and clear of all liens, encumbrances or
restrictions created by or through Interchange.

ARTICLE 4.10 Legal Proceedings. Except as disclosed in the Interchange
Disclosure Schedule, neither Interchange nor any of its Subsidiaries is a party
to any, and there are no material pending or, to the best of Interchange's
knowledge, threatened, legal, administrative, arbitral or other proceedings,
claims, actions or governmental investigations of any nature against Interchange
or any of its Subsidiaries which, if decided adversely to Interchange, or any of
its Subsidiaries, would have a material adverse effect on the business,
operations, assets or financial condition of Interchange and its Subsidiaries on
a consolidated basis or on the unconsolidated business, operations, assets or
financial condition of Bank. Except as disclosed in the Interchange Disclosure
Schedule, neither Interchange nor any of Interchange's Subsidiaries is a party
to any order, judgment or decree entered against Interchange or any such
Subsidiary in any lawsuit or proceeding which would have a material adverse
affect on the business, operations, assets or financial condition of Interchange
and its Subsidiaries on a consolidated basis.

ARTICLE 4.11 Taxes and Tax Returns. Interchange and each of its Subsidiaries has
duly filed (and until the Effective Time will so file) all Returns required to
be filed by it in respect of any federal, state and local taxes (including
withholding taxes, penalties or other payments required) and has duly paid (and
until the Effective Time will so pay) all such taxes due and payable, other than
taxes or other charges which are being contested in good faith. Interchange and
each of its Subsidiaries have established (and until the Effective Time will
establish) on its books and records reserves that it reasonably believes are
adequate for the payment of all federal, state and local taxes not yet due and
payable, but anticipated to be incurred in respect of Interchange and its
Subsidiaries through the Effective Time. No deficiencies exist or have been
asserted based upon the federal or state income tax returns of Interchange and
Bank. To the best knowledge of Interchange, there are no audits or other
administrative or court proceedings pending, or claims asserted, for taxes or
assessments upon Interchange or any of its Subsidiaries.

ARTICLE 4.12 Employee Benefit Plans.

(a) Interchange and its Subsidiaries maintain or contribute to certain "employee
pension benefit plans" (the "Interchange Pension Plans"), as such term is
defined in Section 3 of ERISA, and "employee welfare benefit plans" (the
"Interchange Welfare Plans"), as such term is defined in Section 3 of ERISA.
Since September 2, 1974, neither Interchange nor its Subsidiaries have
contributed to any "Multiemployer Plan", as such term is defined in Section
3(37) of ERISA.

(b) Each of the Interchange Pension Plans and each of the Interchange Welfare
Plans has been operated in compliance in all material respects with the
provisions of ERISA, the Code, all regulations, rulings

<PAGE>

and announcements promulgated or issued thereunder, and all other applicable
governmental laws and regulations.

(c) To the knowledge of Interchange, except with respect to customary health and
disability benefits, there are no unfunded benefits obligations which are not
accounted for by reserves shown on the Interchange Financial Statements and
established under generally accepted accounting principles, or otherwise noted
on such Interchange Financial Statements.

ARTICLE 4.13 Reports.

(a) Each communication mailed by Interchange to all of its stockholders since
January 1, 1994, and each annual, quarterly or special report, and proxy
statement as of its date, complied in all material respects with all applicable
statutes, rules and regulations enforced or promulgated by the applicable
regulatory agency and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading; provided that disclosures as of a later
date shall be deemed to modify disclosures as of an earlier date.

(b) Interchange and Bank have, since January 1, 1994, duly filed with the SEC,
FDIC and FRB in correct form the monthly, quarterly and annual reports required
to be filed under applicable laws and regulations, copies of which have been
furnished by Interchange to Jersey.

ARTICLE 4.14 Compliance with Applicable Law. Interchange and its Subsidiaries
hold all material licenses, franchises, permits and authorizations necessary for
the lawful conduct of their respective businesses under and pursuant to each,
and has complied with and is not in default in any respect under any, applicable
law, statute, order, rule, regulation, policy and/or guideline of any federal,
state or local governmental authority or the AMEX relating to Interchange and
its Subsidiaries (other than where such default or non-compliance will not
result in a material adverse effect on the business, operations, assets or
financial condition of Interchange and its Subsidiaries on a consolidated
basis), and neither Interchange nor any of its Subsidiaries has received notice
of violation of, nor does it know of any violations (other than violations which
will not, alone or in the aggregate, result in a material adverse effect on the
business operations, assets or financial condition of Interchange and its
Subsidiaries on a consolidated basis) of any of the above.

ARTICLE 4.15 Properties and Insurance.

(a) Interchange and its Subsidiaries have good and, as to owned real property,
marketable title to all material assets and properties, whether real or
personal, tangible or intangible, reflected in Interchange's consolidated
balance sheet as of December 31, 1996, or owned and acquired subsequent thereto
(except to the extent that such assets and properties have been disposed of for
fair value in the ordinary course of business since December 31, 1996).
Interchange and its Subsidiaries as lessees have the right under valid and
subsisting leases to occupy, use, possess and control in all material respects,
all real property leased by them as presently occupied, used, possessed and
controlled by them.

(b) The business operations and all insurable properties and assets of
Interchange and its Subsidiaries are insured for their benefit against all risks
which, in accordance with reasonably prudent business practice should be insured
against, with such deductibles and against such risks and losses as are
reasonably adequate for the business engaged in by Interchange and its
Subsidiaries. As of the date hereof, Interchange has not received any notice of
cancellation of or material amendment to any such insurance policy or bond and
is not in default in any material respect under any such policy or bond, and, to
the best of its knowledge, no coverage thereunder is being disputed and all
material claims thereunder have been filed in a timely fashion.

<PAGE>

ARTICLE 4.16 Minute Books. The minute books of Interchange and its Subsidiaries
contain accurate records of all meetings and other corporate action held of
their respective stockholders and Boards of Directors (including committees of
their respective Boards of Directors).

ARTICLE 4.17 Environmental Matters. Except as disclosed in the Interchange
Disclosure Schedule, neither Interchange nor any of its Subsidiaries has
received any written notice, citation, claim, assessment, proposed assessment or
demand for abatement alleging that Interchange or any of its Subsidiaries
(either directly or as a successor-in-interest in connection with the
enforcement of remedies to realize the value of properties serving as collateral
for outstanding loans) is responsible for the correction or clean-up of any
condition material to the business, operations, assets or financial condition of
Interchange or its Subsidiaries. Except as disclosed in the Interchange
Disclosure Schedule, Interchange has no knowledge that any toxic or hazardous
substances or materials have been emitted, generated, disposed of or stored on
any property owned or leased by Interchange or any of its Subsidiaries in any
manner that violates or, after the lapse of time may violate, any presently
existing federal, state or local law or regulation governing or pertaining to
such substances and materials, the violation of which would have a material
adverse effect on the business, operations, assets or financial condition of
Interchange and its Subsidiaries on a consolidated basis.

ARTICLE 4.18 Reserves. The allowance for possible loan and lease losses in the
September 30, 1997 Interchange Financial Statements was adequate based at the
time upon past loan loss experiences and potential losses in the portfolio at
the time to cover all known or reasonably anticipated loan losses.

ARTICLE 4.19 Certain Contracts. Neither Interchange nor any of its Subsidiaries
are party to, or are bound by, any contract or understanding (i) which would
prevent or impair the ability of Interchange and Bank to enter into this
Agreement and consummate the transactions contemplated hereby, or (ii) as to
which there is any default or threatened default by Interchange, its
Subsidiaries or any other party to such contracts or understandings which would
have a material adverse impact upon the business, operations, assets or
financial condition of Interchange or any of its Subsidiaries.

ARTICLE 4.20 Disclosures. There are no material facts concerning the business,
operations, assets or financial condition of Interchange which would have a
material adverse effect on the business, operations or financial condition of
Interchange which have not been disclosed to Jersey directly or indirectly by
access to any filing by Interchange under the 1934 Act. No representation or
warranty contained in Article 4 of this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements herein not misleading.

ARTICLE 4.21 Duration of Warranties. All representations and warranties of
Interchange under this Agreement shall survive for a period of four (4) years
from the date of this Agreement, and shall thereafter expire and be of no
further force or effect.

                                   ARTICLE 5

                            COVENANTS OF THE PARTIES

ARTICLE 5.1 Conduct of the Business of Jersey. During the period from the date
of this Agreement to the Effective Time, Jersey shall conduct its business and
engage in transactions permitted hereunder only in the ordinary course and
consistent with prudent banking practice, except with the prior written consent
of Interchange, which consent will not be unreasonably withheld. Jersey also
shall use its best efforts to (i) preserve its business organization intact,
(ii) keep available to itself the present services of its employees and (iii)
preserve for itself and Interchange the goodwill of its customers and others
with whom business relationships exist, in each case provided that Jersey shall
not be required to take any unreasonable or extraordinary act or any action
which would conflict with any other term of this Agreement.

<PAGE>

ARTICLE 5.2 Negative Covenants and Dividend Covenants. Jersey agrees that from
the date hereof to the Effective Time, except as otherwise approved by
Interchange in writing, or as permitted or required by this Agreement or as
contained in the Jersey Disclosure Schedule, it will not:

(a) change any provision of its Certificate of Incorporation or Bylaws or any
similar governing documents;

(b) change the number of shares of its authorized capital stock or issue any
more shares of Jersey Common Stock or Jersey Preferred Stock or other capital
stock or issue or grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character relating to the authorized or
issued capital stock of Jersey or any securities convertible into shares of such
stock, or split, combine or reclassify any shares of its capital stock;

(c) except for the declaration and payment of periodic cash dividends with
respect to its capital stock in amounts not higher than the last paid dividend
and paid no more frequently than once a calendar quarter, declare, set aside or
pay any dividend, or other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock, or redeem or otherwise
acquire any shares of such capital stock, or allow any optional purchases of
capital stock under Jersey's Dividend Reinvestment and Stock Purchase Plan

(d) grant any severance or termination pay (other than pursuant to policies of
Jersey in effect on the date hereof and disclosed to Interchange in the Jersey
Disclosure Schedule or as agreed to by Interchange in writing) to, or enter into
or amend any employment agreement with, any of its directors, officers or
employees; adopt any new employee benefit plan or arrangement of any type or
amend any such existing benefit plan or arrangement; or award any increase in
compensation or benefits to its directors, officers or employees except with
respect to salary increases and bonuses for employees in the ordinary course of
business and consistent with past practices and policies and in no event to
exceed the amount of salary increases or bonuses paid in or with respect to
1997;

(e) sell or dispose of any substantial amount of assets or incur any significant
liabilities other than in the ordinary course of business consistent with past
practices and policies;

(f) make any capital expenditures outside of the ordinary course of business
other than pursuant to binding commitments existing on the date hereof and other
than expenditures necessary to maintain existing assets in good repair;
provided, however that each individual expenditure shall not exceed $10,000 and
the aggregate expenditures shall not exceed $25,000;

(g) file any applications or make any contract with respect to branching or site
location or relocation;

(h) agree to acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;

(i) make any material change in its accounting methods or practices, other than
changes required in accordance with generally accepted accounting principles; or

(j) agree to do any of the foregoing.

      In the event Jersey shall request the consent of Interchange to take some
or all of the above proscribed actions, Interchange shall not unreasonably
withhold or delay its consent.

ARTICLE 5.3 No Solicitation. Jersey shall not, directly or indirectly, encourage
or solicit or hold discussions or negotiations with, or provide any information
to, any person, entity or group (other than Interchange) concerning any merger
or sale of shares of capital stock or sale of substantial assets or liabilities
not in the ordinary course of business, or similar transactions involving Jersey
(an "Acquisition

<PAGE>

Transaction"). Notwithstanding the foregoing, Jersey may (i) enter into
discussions or negotiations or provide information in connection with an
unsolicited possible Acquisition Transaction if the Board of Directors of
Jersey, after consulting with counsel, determines that such discussions or
negotiations should be commenced in the exercise of its fiduciary
responsibilities or such information should be furnished in the exercise of its
fiduciary responsibilities; and (ii) respond to inquiries from its shareholders
in the ordinary course of business. Jersey will immediately communicate to
Interchange the terms of any proposal, whether written or oral, which it may
receive in respect of any Acquisition Transaction and the fact that it is having
discussions or negotiations with, or supplying information to, a third party in
connection with a possible Acquisition Transaction.

ARTICLE 5.4 Current Information. During the period from the date of this
Agreement to the Effective Time, Jersey will, at the request of Interchange,
cause one or more of its designated representatives to confer on a monthly or
more frequent basis with representatives of Interchange regarding Jersey's
business, operations, properties, assets and financial condition and matters
relating to the completion of the transactions contemplated herein. Without
limiting the foregoing, before granting any loan or extension of credit by
renewal or otherwise where the amount in question exceeds $50,000, Jersey will
send to Interchange a description (i.e., a copy of the loan documents) for each
new loan or extension of credit, and each renewal of an existing loan or
extension of credit. Without the prior written approval of Interchange, Jersey
shall not grant (i) any new loan or extension of credit or (ii) any renewal of
an existing loan or extension of credit which exceeds $50,000. As soon as
reasonably available, but in no event more than 45 days after the end of each
fiscal quarter (other than the last fiscal quarter of each fiscal year) ending
after the date of this Agreement, Jersey will deliver to Interchange Jersey's
call reports filed with the FDIC and Jersey's unaudited comparative statements
of condition and related comparative statements of operations provided to the
shareholders of Jersey and Interchange will deliver to Jersey Interchange's
quarterly reports on Form 10-Q, as filed with the SEC under the 1934 Act. As
soon as reasonably available, but in no event more than 90 days after the end of
each fiscal year, Jersey will deliver to Interchange and Interchange will
deliver to Jersey their respective Annual Reports.

ARTICLE 5.5 Access to Properties and Records; Confidentiality.

(a) Jersey shall permit Interchange and its agents and representatives,
including, without limitation, officers, directors, employees, attorneys,
accountants and financial advisors (collectively, "Representatives"), and
Interchange and Bank shall permit Jersey and its Representatives reasonable
access to their respective properties, and shall disclose and make available to
Interchange and its Representatives or Jersey and its Representatives, as the
case may be, all books, papers and records relating to their respective assets,
stock ownership, properties, operations, obligations and liabilities, including,
but not limited to, all books of account (including the general ledger), tax
records, minute books of directors' and stockholders' meetings, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, independent auditors' work papers (subject to the receipt
by such auditors of a standard access representation letter), litigation files,
plans affecting employees, and any other business activities or prospects in
which Interchange and its representatives or Jersey and its representatives may
have a reasonable interest. Neither party shall be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights of any customer or would contravene any law, rule,
regulation, order or judgment. The parties will use their best efforts to obtain
waivers of any such restriction and in any event make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply.

      (b) All information furnished by the parties hereto previously in
connection with transactions contemplated by this Agreement or pursuant hereto
shall be used solely for the purpose of evaluating the Merger contemplated
hereby and shall be treated as the sole property of the party delivering the
information until consummation of the Merger contemplated hereby and, if such
Merger shall not occur, each party and each party's Representatives shall return
to the other party all documents or other materials containing, reflecting or
referring to such

<PAGE>

information, will not retain any copies of such information, shall keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or commercial purposes or any other purpose not
expressing permitted hereby. Each party hereto shall inform its Representatives
of the terms of this Section 5.5. Any breach of this Section 5.5 by a
Representative of a party hereto shall conclusively be deemed to be a breach
thereof by such party. In the event that the Merger contemplated hereby does not
occur or this Agreement is terminated, all documents, notes and other writings
prepared by a party hereto or its Representatives based on information furnished
by the other party, and all other documents and records obtained from another
party hereto in connection herewith, shall be promptly destroyed. The obligation
to keep such information confidential shall continue for five (5) years from the
date the proposed Merger is abandoned but shall not apply to any information
which the party receiving the information can establish by convincing evidence
was already in its possession prior to the disclosure thereof to it by the other
party; was then generally known to the public other than as a result of a
disclosure by any party hereto or its Representative; became known to the public
through no fault of the party receiving such information; or was disclosed to
the party receiving such information by a third party not bound by an obligation
of confidentiality; or disclosures pursuant to a legal, regulatory or
examination requirement or in accordance with an order of a court of competent
jurisdiction, provided that in the event of any disclosure required by this
clause (ii) the disclosing party will give at least ten (10) days prior written
notice of such disclosure to the other parties and shall not disclose any such
information without an opinion of counsel supporting its position that such
information must be disclosed.

(c) In addition to all other remedies that may be available to any party hereto
in connection with a breach by any other party hereto of its or its
Representative's obligations hereunder, each party hereto shall be entitled to
specific performance and injunctive and other equitable relief. Each party
hereto waives, and agrees to use its best efforts to cause its Representatives
to waive, any requirement to secure or post a bond in connection with any such
relief.

(d) The parties agree that, in the event the merger is not consummated, for a
period of five (5) years from the date hereof, except to the extent Interchange
has the right to acquire Jersey Common Stock pursuant to the Interchange Stock
Option, neither party nor any of their respective subsidiaries or affiliates
will, unless invited (where such invitation is not directly or indirectly
solicited by the invited party) by the other party's Board of Directors: (i)
acquire, offer or propose to acquire, or agree or seek to acquire, directly or
indirectly, by purchase or otherwise, any securities or direct or indirect
rights or options to acquire any securities of the other party or any subsidiary
or affiliate thereof, or of any successor to, or person in control of the other
party, or any assets of the other party or any subsidiary or affiliate or
division thereof or of any such successor or controlling person; (ii) enter into
or agree, offer, propose or seek to enter into, or otherwise be involved in or
part of, directly or indirectly, any acquisition transaction or other business
combination relating to all or part of the other party or its subsidiaries or
affiliates or any acquisition transaction for all or part of the assets of the
other party or any subsidiary or affiliate of the other party or any of their
respective businesses; (iii) make, or in any way participate in, directly or
indirectly, any "solicitations" of "proxies" (as such terms are used in the
rules of the SEC) to vote, or seek to advise or influence any person or entity
with respect to the voting of, any voting securities of the other party; (iv)
form, join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the 1934 Act) or in concert with others to influence or control the
other party's management or policies; (iv) directly or indirectly enter into any
discussions, negotiations, arrangements or understandings with any other person
with respect to any of the foregoing activities or propose any of such
activities to any other person; (vii) advise, assist, encourage, act as a
financing source for or otherwise invest in any other person in connection with
any of the foregoing activities; or (viii) disclose any intention, plan or
arrangement inconsistent with any of the foregoing. Each party agrees to
promptly advise the other party of any inquiry or proposal made to it with
respect to any of the foregoing. Each party also agrees that, during the five
(5) year period referred to in the second preceding sentence, neither it nor any
of its subsidiaries or affiliates will (i) request the other party or its
advisors, directly or indirectly, to (1) amend or waive any provisions of this
paragraph (including this sentence); or (2) otherwise consent to any action
inconsistent with any provision of this paragraph (including this sentence); or
(ii) make any initiative with respect to the other party or any of its
subsidiaries or affiliates which could require the other party to make a public

<PAGE>

announcement regarding (1) such initiative; (2) any of the activities referred
to in the second preceding sentence; (3) the possibility any similar
transaction; or (4) the possibility of that party or any other person acquiring
control of the other party, whether by means of a business combination or
otherwise.

ARTICLE 5.6 Regulatory Matters.

(a) For  the  purposes  of  holding  the  meeting  of  Jersey  stockholders  and
registering  or  otherwise   qualifying  under  applicable   federal  and  state
securities  laws  Interchange  Common  Stock to be issued to Record  Holders  in
connection  with  the  Merger,   the  parties  hereto  shall  cooperate  in  the
preparation  and filing by Interchange of a Registration  Statement with the SEC
which shall include an appropriate proxy statement and prospectus satisfying all
applicable  requirements  of applicable  state and federal  laws,  including the
Securities Act of 1933, as amended (the "1933 Act"), the 1934 Act and applicable
state  securities  laws and the rules and  regulations  thereunder.  (Such proxy
statement and prospectus in the form mailed by Jersey to the Jersey shareholders
and optionees,  together with any and all amendments and supplements thereto, is
herein referred to as the "Proxy Statement/Prospectus" and the various documents
to be filed by Interchange  under the 1933 Act with the SEC to register for sale
the  Interchange  Common  Stock to be issued to Record  Holders  and  optionees,
including  the  Proxy   Statement/Prospectus,   and  the  Proxy   Statement  for
Interchange stockholders, if necessary, together with any and all amendments and
supplements  thereto,  are referred to herein as the "Registration  Statement").
Interchange  and  Jersey  shall  cooperate  to allow the  prompt  filing of such
Registration Statement.

(b) Interchange shall furnish information concerning Interchange as is necessary
in order to cause the Proxy Statement/Prospectus, insofar as it relates to
Interchange, to comply with Section (a) hereof. Interchange agrees promptly to
advise Jersey if at any time prior to the Jersey shareholder meeting referred to
in Section 5.7 hereof, any information provided by Interchange in the Proxy
Statement/Prospectus becomes incorrect or incomplete in any material respect and
to provide Jersey with the information needed to correct such inaccuracy or
omission. Interchange shall furnish Jersey with such supplemental information as
may be necessary in order to cause the Proxy Statement/Prospectus, insofar as it
relates to Interchange, to comply with Section (a) after the mailing thereof to
Jersey shareholders.

(c) Jersey shall furnish Interchange with such information concerning Jersey as
is necessary in order to cause the Proxy Statement/Prospectus and Registration
Statement, insofar as it relates to Jersey, to comply with Section (a) hereof.
Jersey agrees promptly to advise Interchange if, at any time prior to the Jersey
shareholder's meeting referred to in Section 5.7 hereof, information provided by
Jersey in the Proxy Statement/Prospectus becomes incorrect or incomplete in any
material respect and to provide Interchange with the information needed to
correct such inaccuracy or omission. Jersey shall furnish Interchange with such
supplemental information as may be necessary in order to cause the Proxy
Statement/Prospectus and Registration Statement, insofar as it relates to
Jersey, to comply with Section (a) after the mailing thereof to Jersey
shareholders.

(d) Interchange shall promptly make such filings as are necessary in connection
with the offering of the Interchange Common Stock with applicable state
securities agencies and shall use all reasonable efforts to qualify the offering
of the Interchange Common Stock under applicable state securities laws at the
earliest practicable date. Jersey shall promptly furnish Interchange with such
information regarding the Jersey shareholders as Interchange requires to enable
it to determine what filings are required hereunder. Jersey authorizes
Interchange to utilize in such filings the information concerning Jersey
provided to Interchange in connection with, or contained in, the Proxy
Statement/Prospectus. Interchange shall furnish Jersey with drafts of all such
filings, shall provide Jersey the opportunity to comment thereon, and shall keep
Jersey advised of the status thereof. Interchange and Jersey shall as promptly
as practicable file the Registration Statement containing the Proxy
Statement/Prospectus with the SEC, FRB and the Commissioner, and each of
Interchange and Jersey shall promptly notify the other of all communications,
oral or written, with the SEC, FRB and the Commissioner concerning the
Registration Statement and the Proxy Statement/Prospectus.

<PAGE>

(e) Interchange shall cause the Interchange Common Stock to be issued in
connection with the Merger to be listed on the AMEX.

(f) The parties hereto will cooperate with each other and use their best efforts
to prepare all necessary documentation, to effect all necessary filings and to
obtain all necessary permits, consents, approvals and authorizations of all
third parties and governmental bodies necessary to consummate the transactions
contemplated by this Agreement as soon as possible, including, without
limitation, those required by the Commissioner and FRB. The parties shall each
have the right to review in advance and comment on all information relating to
the other, as the case may be, which appears in any filing made with, or written
material submitted to, any third party or governmental body in connection with
the transactions contemplated by this Agreement. Interchange and Bank shall
cause their applications to the Commissioner and FRB to be filed (i) within 60
days of the date hereof, so long as Jersey provides all information necessary to
complete the application within 45 days of the date hereof, or (ii) within 15
days after all such information is provided, if Jersey does not provide all such
information within such 45 day period. Interchange shall provide to Jersey
drafts of all filings and applications referred to in this Section (f) and shall
give Jersey the opportunity to comment thereon prior to their filing.

(g) Each of the parties will promptly furnish each other with copies of written
communications received by them or any of their respective Subsidiaries from, or
delivered by any of the foregoing to, any governmental body in respect of the
transactions contemplated hereby.

ARTICLE 5.7 Approval of Stockholders. Jersey will (a) take all steps reasonably
necessary duly to call, give notice of, convene and hold a meeting of the
stockholders of Jersey as soon as reasonably practicable for the purpose of
securing the approval by such stockholders of this Agreement, (b) subject to the
Board of Directors of Jersey exercising its fiduciary duties, after consultation
with counsel, with respect to any unsolicited Acquisition Transaction, recommend
to the stockholders of Jersey the approval of this Agreement and the
transactions contemplated hereby and use its best efforts to obtain, as promptly
as practicable, such approval, and (c) cooperate and consult with Interchange
with respect to each of the foregoing matters. Each director of Jersey has
executed this Agreement confirming that each director agrees to vote his or her
shares to approve the Merger.

ARTICLE 5.8 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable laws and regulations
to satisfy the conditions to Closing and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using reasonable efforts to lift or rescind any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated by this Agreement and using its best efforts to
prevent the breach of any representation, warranty, covenant or agreement of
such party contained or referred to in this Agreement and to promptly remedy the
same. Nothing in this section shall be construed to require any party to
participate in any threatened or actual legal, administrative or other
proceedings (other than proceedings, actions or investigations to which it is
otherwise a party or subject or threatened to be made a party or subject) in
connection with consummation of the transactions contemplated by this Agreement
unless such party shall consent in advance and in writing to such participation
and the other party agrees to reimburse and indemnify such party for and against
any and all reasonable costs and damages related thereto.

ARTICLE 5.9 Public Announcements. The parties hereto shall cooperate with each
other in the development and distribution of all news releases and other public
disclosures with respect to this Agreement or any of the transactions
contemplated hereby, except as may be otherwise required by law or regulation or
as to which the party releasing such information has used its best efforts to
discuss with the other party in advance. Unless required by a court of competent
jurisdiction or a regulatory body

<PAGE>

having regulatory jurisdiction over the party proposing to make disclosure, no
public disclosure shall be made without the prior written approval of the CEO or
CFO of Interchange provided that prior to making any public disclosure regarding
the Merger, Interchange shall provide the Chairman of the Board of Directors of
Jersey with a copy of the proposed public disclosure and allow him the
opportunity to comment.

ARTICLE 5.10 Failure to Fulfill Conditions. In the event that Interchange or
Jersey determines that a material condition to its obligation to consummate the
transactions contemplated hereby cannot be fulfilled on or prior to November 30,
1998, and that it will not waive that condition, it will promptly notify the
other party. Jersey and Interchange will promptly inform the other of any facts
applicable to Jersey or Interchange, respectively, or their respective
directors, officers or Subsidiaries, that would be likely to prevent or
materially delay approval of the Merger by any governmental authority or which
would otherwise prevent or materially delay completion of the Merger.

ARTICLE 5.11 Disclosure Supplements. From time to time prior to the Effective
Time, each party hereto will promptly supplement or amend (by written notice to
the other) its respective Disclosure Schedules delivered pursuant hereto with
respect to any matter hereafter arising which, if existing, occurring or known
at the date of this Agreement, would have been required to be set forth or
described in such Schedules or which is necessary to correct any information in
such Schedules which has been rendered materially inaccurate thereby. For the
purpose of determining satisfaction of the conditions set forth in Article
ARTICLE 6, no supplement or amendment to such Schedules shall correct or cure
any warranty which was untrue when made, but supplements or amendments may be
used to disclose subsequent facts or events to maintain the truthfulness of any
warranty.

ARTICLE 5.12 Indemnification and Insurance. Interchange agrees that it will, or
if it is not permitted to do so under applicable law, it will cause Bank to,
after the Effective Time, and to the extent permitted by applicable law, provide
to the former and then current directors and officers of Jersey indemnification
equivalent to that provided by the Certificate of Incorporation and By-laws of
Jersey with respect to acts or omissions occurring prior to the Effective Time,
whether asserted prior to or after the Effective Time, including without
limitation, the authorization of this Agreement and the transactions
contemplated hereby, for a period of six years from the Effective Time, or in
the case of matters occurring prior to the Effective Time which have not been
resolved prior to the sixth anniversary of the Effective Time, until such
matters are finally resolved. Jersey shall purchase, at the expense of
Interchange, continuation coverage for a period of up to six years (as
determined by Interchange in light of costs) following consummation of the
Merger under the policy of Directors and Officers Liability Insurance Jersey
currently has.

ARTICLE 5.13 Pooling and Tax-Free Reorganization Treatment. Neither Interchange
nor Jersey shall intentionally take, fail to take or cause to be taken or not be
taken, any action within its control, whether before or after the Effective
Time, which would disqualify the Merger as a "pooling of interests" for
accounting purposes or as a "reorganization" within the meaning of Section
368(a) of the Code. Interchange and Jersey acknowledge that Interchange requires
the transaction to be accounted for as a "pooling" transaction, as a condition
of the deal.

ARTICLE 5.14 Affiliates.

(a) Promptly, but in any event within two weeks, after the execution and
delivery of this Agreement, (i) Jersey shall deliver to Interchange (x) a letter
identifying all persons who, to the knowledge of Jersey, may be deemed to be
"affiliates" of Jersey under Rule 145 of the 1933 Act, including without
limitation all directors and executive officers of Jersey and (y) a letter
identifying all persons who, to the knowledge of Jersey, may be deemed to be
"affiliates" of Jersey as that term is used for purposes of qualifying for
"pooling of interests" accounting treatment; and (ii) Interchange shall identify
to Jersey all persons who, to the knowledge of Interchange, may be deemed
"affiliates" of Interchange as that term is used for purposes of qualifying for
"pooling of interests" accounting treatment.

<PAGE>

(b) Each person who may be deemed an affiliate of Jersey (under either Rule 145
of the 1933 Act or the accounting treatment rules) shall execute a letter
substantially in the form of Schedule 5.14 hereto agreeing to be bound by the
restrictions of Rule 145, as set forth in Schedule 5.14 and agreeing to be bound
by the rules which permit the Merger to be treated as a pooling of interests for
accounting purposes. In addition, Interchange shall cause its affiliates (as
that term is used for purposes of qualifying for pooling of interests) to
execute a letter within two weeks of the date hereof, in which such persons
agree to be bound by the rules which permit the Merger to be treated as a
pooling of interests for accounting treatment.

ARTICLE 5.15 Compliance with the Industrial Site Recovery Act. Jersey, at its
sole cost and expense, shall obtain prior to the Effective Time, either: (a) a
Letter of Non-Applicability from the New Jersey Department of Environmental
Protection and Energy ("NJDEPE") stating that none of the facilities located in
New Jersey owned or operated by Jersey (each, a "Facility") is an "industrial
establishment," as such term is defined under the Industrial Site Recovery Act
("ISRA"); (b) a Remediation Agreement issued by the NJDEPE pursuant to ISRA
authorizing the consummation of the transactions contemplated by this Agreement;
or (c) a Negative Declaration approval, Remedial Action Workplan approval, No
Further Action letter or other document or documents issued by the NJDEPE
advising that the requirements of ISRA have been satisfied with respect to each
Facility subject to ISRA. In the event Jersey obtains a Remediation Agreement,
Jersey will post or have posted an appropriate Remediation Funding Source or
will have obtained the NJDEPE's approval to self-guaranty any Remediation
Funding Source required under any such Remediation Agreement.

ARTICLE 5.16 Agreement Concerning Termination of Employment. Within 30 days of
the Closing, in cancellation of their respective employment agreements and as a
full release for all other severance and similar payments due either of them
from Jersey or claims against Jersey, Interchange shall pay (i) Britt the sum of
$362,400, and (ii) Ledgerwood the sum of $227,600; provided, however, that such
sums may be reduced or increased, at the option and at the direction of Jersey,
so that the total amount paid to Britt and Ledgerwood is $1 less than the amount
that would constitute an "excess parachute payment", as defined in Section 280G
of the Code or regulations promulgated thereunder. Such sums shall be paid into
trusts established for the benefit of each of Britt and Ledgerwood at a
financial institution(s) located in the State of New Jersey and selected by
Britt and Ledgerwood; provided, however, that Britt and Ledgerwood shall each be
responsible for the expenses related to the establishment and maintenance of
their respective trust. Said trusts will in turn make payment to the respective
beneficiary over a three year period consistent with Jersey's current payroll
periods.

                                   ARTICLE 6

                               CLOSING CONDITIONS

ARTICLE 6.1 Conditions of Each Party's Obligations Under this Agreement. The
respective obligations of each party under this Agreement to consummate the
Merger shall be subject to the satisfaction, or, where permissible under
applicable law, waiver at or prior to the Effective Time of the following
conditions:

      (a) Approval of Stockholders; SEC Registration. This Agreement and the
transactions contemplated hereby shall have been approved by the requisite vote
of the stockholders of Jersey and, if necessary, Interchange. The Registration
Statement shall have been declared effective by the SEC and shall not be subject
to a stop order or any threatened stop order, the issuance of the Interchange
Common Stock shall have been qualified in every state where such qualification
is required under the applicable state securities laws and the Interchange
Common Stock to be issued in connection with the Merger shall have been approved
for listing on the AMEX.

<PAGE>

      (b) Regulatory Filings. All necessary regulatory or governmental approvals
and consents (including without limitation any required approval of the
Commissioner and FRB) required to consummate the transactions contemplated
hereby shall have been obtained without any term or condition which would
materially impair the value of Jersey, taken as a whole, to Interchange. All
conditions required to be satisfied prior to the Effective Time by the terms of
such approvals and consents shall have been satisfied; and all statutory waiting
periods in respect thereof shall have expired. For purposes of the foregoing,
any matter involving 10% or more of the capital of Jersey shall be regarded as
materially impairing the value of Jersey.

      (c) Suits and Proceedings. No order, judgment or decree shall be
outstanding against a party hereto or a third party that would have the effect
of preventing completion of the Merger; no suit, action or other proceeding
shall be pending or threatened by any governmental body in which it is sought to
restrain or prohibit the Merger and no suit, action or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit the Merger or obtain other substantial monetary or other
relief against one or more parties hereto in connection with this Agreement and
which Interchange or Jersey determines in good faith, based upon the advice of
their respective counsel, makes it inadvisable to proceed with the Merger
because any such suit, action or proceeding has a significant potential to be
resolved in such a way as to deprive the party electing not to proceed of any of
the material benefits to it of the Merger.

      (d) Tax Free Exchange. Interchange and Jersey shall have received an
opinion, satisfactory to Interchange and Jersey, of Norris, McLaughlin & Marcus,
P.A., counsel for Interchange, based on appropriate representations from the
parties, to the effect that the transactions contemplated hereby will result in
a reorganization (as defined in Section 368(a) of the Code), and accordingly no
gain or loss will be recognized for federal income tax purposes to Interchange,
Jersey or Bank or to the shareholders of Jersey who exchange their shares of
Jersey for Interchange Common Stock (except to the extent that cash is received
in lieu of fractional shares of Interchange Common Stock).

ARTICLE 6.2 Conditions to the  Obligations of Interchange  Under this Agreement.
The obligations of Interchange  under this Agreement shall be further subject to
the satisfaction or waiver,  at or prior to the Effective Time, of the following
conditions:

      (a) Representations and Warranties; Performance of Obligations of Jersey.
The representations and warranties of Jersey contained in this Agreement shall
be true and correct in all material respects on the Closing Date as though made
on and as of the Closing Date. Jersey shall have performed in all material
respects the agreements, covenants and obligations necessary to be performed by
it prior to the Closing Date. With respect to any representation or warranty
which as of the Closing Date has required a supplement or amendment to the
Jersey Disclosure Schedule to render such representation or warranty true and
correct as of the Closing Date, the representation and warranty shall be deemed
true and correct as of the Closing Date only if the information contained in the
supplement or amendment to the Disclosure Schedule related to events occurring
following the execution of this Agreement and the facts disclosed in such
supplement or amendment would not either alone, or together with any other
supplements or amendments to the Jersey Disclosure Schedule, materially
adversely effect the representation as to which the supplement or amendment
relates; provided, however, even if any facts disclosed in such supplement or
amendment either alone, or together with any other supplements or amendments to
the Jersey Disclosure Schedule, materially adversely effect the representation
as to which the supplement or amendment relates, if the facts will not
materially impair the value of Jersey, taken as a whole, to Interchange,
Interchange will not unreasonably refuse to waive the foregoing condition if
such waiver is requested by Jersey. For purposes of the foregoing, any matter
involving 10% or more of the capital of Jersey shall be regarded as materially
impairing the value of Jersey.

<PAGE>

(b) Opinion of Counsel. Interchange shall have received an opinion of counsel to
Jersey, dated the date of the Closing, in form and substance reasonably
satisfactory to Interchange covering the matters set forth in Schedule 6.2.

(c) Pooling of Interests. The Merger shall be qualified to be treated by
Interchange as a pooling-of-interests for accounting purposes.

(d) Certificates. Jersey shall have furnished Interchange with such certificates
of its officers or others (without personal liability) and such other documents
to evidence fulfillment of the conditions set forth in this Section 6.2 as
Interchange may reasonably request.

(e) Conversion of Jersey Preferred Stock. Each holder of Jersey Preferred Stock
shall have either (i) timely executed and delivered to Interchange, the
Conversion Agreement (which may result in such holder exercising dissenters'
rights as afforded thereunder), or (ii) been ordered (by a final and
non-appealable order) by a court of competent jurisdiction to either (aa)
convert all his, her or its shares of Jersey Preferred Stock in a manner
consistent with the Conversion Agreement, or (bb) exercise such holder's
dissenters' rights provided to the holder under Section 2.4 of this Agreement.

ARTICLE 6.3 Conditions to the Obligations of Jersey Under this Agreement. The
obligations of Jersey under this Agreement shall be further subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:

(a) Representations and Warranties; Performance of Obligations of Interchange.
The representations and warranties of Interchange contained in this Agreement
shall be true and correct in all material respects on the Closing Date as though
made on and as of the Closing Date. Interchange and Bank shall have performed in
all material respects, the agreements, covenants and obligations to be performed
by them prior to the Closing Date. With respect to any representation or
warranty which as of the Closing Date has required a supplement or amendment to
the Interchange Disclosure Schedule to render such representation or warranty
true and correct as of the Closing Date, the representation and warranty shall
be deemed true and correct as of the Closing Date only if (i) the information
contained in the supplement or amendment to the Disclosure Schedule related to
events occurring following the execution of this Agreement and (ii) the facts
disclosed in such supplement or amendment would not either alone, or together
with any other supplements or amendments to the Interchange Disclosure Schedule,
materially adversely effect the representation as to which the supplement or
amendment relates.

(b) Opinion of Counsel to Interchange. Jersey shall have received an opinion of
counsel to Interchange, dated the date of the Closing, in form and substance
reasonably satisfactory to Jersey, covering the matters set forth in Schedule
6.3.

(c) Fairness Opinion. Jersey shall have received an opinion from Financial
Advisor as of the date the Proxy Statement/Prospectus is mailed to Jersey's
stockholders, to the effect that, in its opinion, the consideration to be paid
to stockholders of Jersey hereunder is fair to such stockholders.

(d) Certificates. Interchange shall have furnished Jersey with such certificates
of its officers or others (without personal liability) and such other documents
to evidence fulfillment of the conditions set forth in this Section 6.3 as
Jersey may reasonably request.

                                   ARTICLE 7

                        TERMINATION, AMENDMENT AND WAIVER

ARTICLE 7.1 Termination. This Agreement may be terminated prior to the Effective
Time, whether before or after approval of this Agreement by the stockholders of
Jersey:

<PAGE>

      (a) By mutual written consent of the parties hereto.

      (b) By Interchange or Jersey if the Effective Time shall not have occurred
on or prior to November 30, 1998, or (ii) if a vote of the stockholders of
Jersey or, if necessary, of Interchange, is taken and such stockholders fail to
approve this Agreement at the meeting (or any adjournment thereof) held for such
purpose, unless in each case the failure of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform or observe
its agreements set forth herein to be performed or observed by such party at or
before the Effective Time.

(c) By Interchange or Jersey upon written notice to the other if any application
for regulatory or governmental approval necessary to consummate the Merger and
the other transactions contemplated hereby shall have been denied or withdrawn
at the request or recommendation of the applicable regulatory agency or
governmental authority or by Interchange upon written notice to Jersey if any
such application is approved with conditions which materially impair the value
of Jersey, taken as a whole, to Interchange, unless any such occurrence shall be
due to the failure of the party seeking to terminate this Agreement to perform
or observe its agreements set forth herein to be performed or observed by such
party at or before the Effective Date. For purposes of the foregoing, any matter
involving 10% or more of the capital of Jersey shall be regarded as materially
impairing the value of Jersey.

      (d) By Interchange if there shall have occurred a material adverse change
in the business, operations, assets, or financial condition of Jersey from that
disclosed by Jersey on the date of this Agreement, or there was a material
breach in any representation, warranty, covenant, agreement or obligation of
Jersey hereunder and such material breach(es), taken alone or in the aggregate,
will result in a material adverse effect on the business, operations, assets or
financial condition of Jersey.

      (e) By Jersey, if there shall have occurred a material adverse change in
the business, operations, assets or financial condition of Interchange, Bank or
Interchange and its Subsidiaries on a consolidated basis from that disclosed by
Interchange on the date of this Agreement; or there was a material breach in any
representation, warranty, covenant, agreement or obligation of Interchange
hereunder and such material breach(es), taken alone or in the aggregate, will
result in a material adverse effect on the business, operations, assets or
financial condition of Interchange.

      (f) By Interchange or Jersey if any condition to Closing specified under
Article VI hereof applicable to such party cannot reasonably be met after giving
the other party a reasonable opportunity to cure any such condition.

      (g) By Interchange if any supplemental Disclosure Schedule provided by
Jersey after the date hereof discloses facts materially and substantially
adverse to the business, operations or future prospects of Jersey; or

      (h) By Jersey if any supplemental Disclosure Schedule provided by
Interchange after the date hereof discloses facts materially adverse to the
business, operations, assets or future prospects of Interchange; or

      (i) By Interchange if all the holders of Jersey Preferred Stock do not
enter into the Conversion Agreement within 60 days after the execution of this
Agreement by the parties, except that Interchange cannot terminate this
Agreement under this Section 7.1(i) if, after the expiration of such 60 day
period, Jersey has brought an action(s) in a court of competent jurisdiction to
require the holders of Jersey Preferred Stock who have not executed and
delivered to Interchange the Conversion Agreement to either (i) convert their
shares of Jersey Preferred Stock into Jersey Common Stock in a manner consistent

<PAGE>

with the Conversion Agreement, or (ii) exercise their dissenters' rights
provided to them by Section 2.4 of this Agreement.

ARTICLE  7.2  Effect  of  Termination.  In  the  event  of the  termination  and
abandonment  of this  Agreement  by either  Interchange  or Jersey  pursuant  to
Section 7.1, this Agreement (except the provisions of Section 5.5(b) and Section
5.5(d)  hereof)  shall  forthwith  become  void and have no effect,  without any
liability on the part of any party or its officers,  directors or  stockholders,
except  as set  forth in  Section  7.3 and  further  provided  that the limit of
liability  set forth in this Section 7.2 and in Section 7.3 shall not affect the
validity or enforceability of the Stock Option Agreement.

ARTICLE 7.3 Fees, Expenses and Liabilities.

(a) Except as otherwise  set forth  expressly in this  Agreement,  including the
exceptions  set forth this  Section  7.3,  all costs and  expenses  incurred  in
connection  with  this  Agreement  and  the  transactions   contemplated  hereby
(including legal,  accounting and investment banking fees and expenses) shall be
borne by the party incurring such costs; provided, however, that Interchange and
Jersey shall share equally all fees and expenses,  other than  attorneys'  fees,
incurred   in   relation   to   the   printing   and   filing   of   the   Proxy
Statement/Prospectus  (including  any  related  preliminary  materials)  and the
Registration  Statement  (including  financial  statements and exhibits) and any
amendments or supplements.  Interchange  shall pay the filing fees applicable to
the Registration  Statement,  and Jersey shall pay the filing fees applicable to
the Proxy Statement/Prospectus.

(b) Interchange  acknowledges that Jersey will be expending  substantial sums in
performing  under  this  Agreement  and  in  contemplation  of  the  transaction
contemplated  hereby  and,  further,  that the  efforts  necessary  to bring the
transaction  contemplated  herein to  conclusion  may result in the officers and
directors  of Jersey  being  unable to pursue  possible  business  opportunities
arising  during  the term of this  Agreement.  In the event  this  Agreement  is
terminated as a result of a material  breach of this  Agreement by  Interchange,
Interchange  shall  pay  Jersey  as  liquidated  damages  the  sum of  $500,000.
Interchange acknowledges that actual damages to Jersey as a result of a material
breach of this  Agreement by  Interchange  would be difficult or  impossible  to
calculate,  and Interchange further agrees that such sum represents a reasonable
attempt to calculate damages resulting from the overall impact of termination of
the transaction  upon Jersey,  and that the same does not constitute,  nor is it
intended to constitute,  a penalty. Jersey agrees that such sum will be Jersey's
exclusive remedy for Interchange's material breach of this Agreement.

(c) If a third party makes an unsolicited offer to Jersey (and Jersey is able to
sustain the burden of proving by a preponderance of the evidence that the offer
was unsolicited) for an Acquisition Transaction and the Board of Directors of
Jersey, after consulting with counsel, determines that such unsolicited offer
should be considered or recommended by the Board of Directors of Jersey in the
exercise of its fiduciary responsibilities, and the Closing does not occur on or
before November 30, 1998 and/or the Agreement is terminated by Jersey solely
because of such unsolicited offer, Jersey shall promptly reimburse Interchange
for all reasonable costs and expenses incurred by Interchange for itself and on
behalf of Bank in connection with this Agreement and the transactions
contemplated hereby (including legal and accounting fees and disbursements of
advisors). Such reimbursement of reasonable costs and expenses shall be
Interchange's and Bank's exclusive remedy so long as (i) Jersey satisfies its
burden to prove that such offer was unsolicited, and (ii) the Closing does not
occur on or before November 30, 1998 and/or the Agreement is terminated by
Jersey solely because of such unsolicited offer.

(d) If Jersey materially breaches this Agreement, Interchange and/or Bank may
bring suit against Jersey, including the right to seek Jersey's specific
performance of the transactions contemplated by this Agreement. Further, if
specific performance is not ordered or Interchange and/or Bank does not seek
specific performance, Interchange and/or Bank may make a claim for money damages
suffered by Interchange and/or Bank as a result of Jersey's material breach of
this Agreement, including without limitation all damages, reasonable costs and
expenses incurred by Interchange and Bank in connection

<PAGE>

with this Agreement and the transactions contemplated hereby (including legal,
accounting and investment banking fees and expenses), as provided by law;
provided, however, that Interchange and the Bank may not recover such money
damages of any nature in excess of $2,000,000 in the aggregate.

(e) If the Closing does not occur on or before November 30, 1998 because the
Closing condition specified in Section 6.2(e) has not been satisfied, Jersey
shall not be deemed to have committed a material breach of this Agreement as
specified in Section 7.3(d), but Jersey shall nonetheless in such case promptly
reimburse Interchange for all reasonable costs and expenses incurred by
Interchange for itself and on behalf of Bank in connection with this Agreement
and the transactions contemplated hereby (including legal and accounting fees
and disbursements of advisors) and such reimbursement shall be Interchange's and
Bank's exclusive remedy so long as (i) Jersey has used its best efforts to
obtain the fulfillment of the Section 6.2(e) Closing condition, and (ii) the
Closing does not occur on or before November 30, 1998 solely because the Section
6.2(e) Closing condition has not been satisfied. If Jersey fails to use its best
efforts to obtain the timely fulfillment of the 6.2(e) Closing condition, such
failure shall be deemed to be a material breach of this Agreement by Jersey. For
the purposes of this Section 7.3(e), best efforts shall mean timely distribution
of the Conversion Agreement to the Jersey Preferred Stockholders and timely
institution of litigation as long as such litigation is diligently prosecuted.

ARTICLE 7.4  Amendment.  This Agreement may be amended by mutual action taken by
the parties hereto at any time before or after adoption of this Agreement by the
stockholders of Jersey but, after any such adoption,  no amendment shall be made
which reduces or changes the amount or form of the consideration to be delivered
to the  shareholders of Jersey without the approval of such  stockholders.  This
Agreement may not be amended except by an instrument in writing signed on behalf
of Interchange and Jersey.

ARTICLE  7.5  Extension;  Waiver.  The  parties  may,  at any time  prior to the
Effective Time of the Merger,  extend the time for the performance of any of the
obligations or other acts of the other parties hereto; waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant  thereto or waive  compliance  with any of the agreements or conditions
contained  herein.  Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party against which the waiver is sought to be enforced.

                                   ARTICLE 8

                                  MISCELLANEOUS

ARTICLE 8.1 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally
or sent by telecopier with confirming copy sent the same day by registered or
certified mail, postage prepaid, as follows:

                  If to Interchange:

                           Interchange Financial Services Corporation
                           Park 80 West, Plaza Two
                           Saddle Brook, New Jersey 07662
                           Attn.: Anthony S. Abbate, President & CEO

<PAGE>

                  With a copy to:

                           Norris, McLaughlin & Marcus, P.A.
                           721 Route 202-206
                           P.O. Box 1018
                           Somerville, New Jersey 08876
                           Attn.: Peter D. Hutcheon, Esq.

                  If to Jersey:

                           The Jersey Bank For Savings
                           2-8 South Kinderkamack Road
                           Montvale, New Jersey 07645-0333
                           Attn.: Clyde Britt, President & CEO

                  With a copy to:

                           Beattie Padovano
                           50 Chestnut Ridge Road
                           P.O. Box 244
                           Montvale, New Jersey 07645-0244
                           Attn: Adolph A. Romei, Esq.

                           Sills, Cummis, Zuckerman, Radin, Tischman,
                              Epstein & Gross, P.A.
                           One Riverfront Plaza
                           Newark, New Jersey 07102-5400
                           Attn: Victor H. Boyajian, Esq.

or such other addresses as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so delivered or telecopied and mailed.

ARTICLE 8.2 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No assignment of this Agreement may be made except upon the
written consent of the other parties hereto. No person or entity shall be deemed
a third-party beneficiary under this Agreement, other than current and former
directors and officers of Jersey with respect to Section 5.12 hereof

ARTICLE 8.3 Entire  Agreement.  This  Agreement,  which  includes the Disclosure
Schedules  hereto and the other documents,  agreements and instruments  executed
and delivered  pursuant to or in connection  with this  Agreement,  contains the
entire  Agreement  between the parties  hereto with respect to the  transactions
contemplated   by  this  Agreement  and   supersedes  all  prior   negotiations,
arrangements or  understandings,  written or oral with respect  thereto,  except
that the  Confidentiality  Agreement dated November 3, 1997 between  Interchange
and Jersey  remains in effect until the first to occur of the Effective  Time or
the termination of this Agreement.

ARTICLE  8.4  Counterparts.  This  Agreement  may be  executed  in  one or  more
counterparts,  all of which shall bc considered  one and the same  agreement and
each of which shall be deemed an original.

ARTICLE 8.5 Governing Law. This  Agreement  shall be governed by the laws of the
State of New Jersey, without giving effect to the principles of conflict of laws
thereof.

<PAGE>

ARTICLE 8.6 Descriptive Headings. The descriptive headings of this Agreement are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.

      IN WITNESS WHEREOF, Interchange, Bank and Jersey have caused this
Agreement to be executed by their duly authorized officers as of the day and
year first above written and each of the directors of Jersey has joined in this
Agreement as set forth below.

ATTEST                                      INTERCHANGE FINANCIAL SERVICES
CORPORATION

/s/ Anthony Labozzetta                      /s/ Anthony S. Abbate
-----------------------------               ------------------------------------
Anthony Labozzetta                          Anthony S. Abbate,
Secretary                                   President and CEO

ATTEST                                      THE JERSEY BANK FOR SAVINGS

/s/ William C. Ledgerwood                   /s/ Clyde Britt
-----------------------------               ------------------------------------
William C. Ledgerwood                       Clyde Britt
Secretary                                   President and CEO

ATTEST                                      INTERCHANGE STATE BANK

/s/ Anthony Labozzetta                      /s/ Anthony S. Abbate
-----------------------------               ------------------------------------
Anthony Labozzetta                          Anthony S. Abbate,
Secretary                                   President and CEO

<PAGE>

                             EXHIBIT A (page 1 of 1)

Jersey's Principal Office

2-8 South Kinderkamack Road
at Grand Avenue
Montvale, New Jersey 07645

Jersey's Branch Office

876 Kinderkamack Road
River Edge, New Jersey 07661



<PAGE>

                             EXHIBIT B (page 1 of 2)

Bank's Principal Office

Park 80 West -- Plaza Two
Saddle Brook, New Jersey 07663

Bank's Branch Offices (11)

1. 200 Floral Lane, Saddle Brook, New Jersey 07633

2. 444 Boulevard, Elmwood Park, New Jersey 07407

3. 784 Franklin Avenue, Franklin Lakes, New Jersey 07417

4. 351 Midland Avenue, Garfield, New Jersey 07026

5. 321 Broadway Plaza, Hillsdale, New Jersey 07642

6. 225 Main Street, Little Ferry, New Jersey 07643

7. 185 Garibaldi Avenue, Lodi, New Jersey 07644

8. 3 Post Road, Oakland, New Jersey 07436

9. 165 Kinderkamack Road, Park Ridge, New Jersey 07656

10. 250 West Passaic Street, Rochelle Park, New Jersey 07622

11. 590 Pascack Road, Washington Township, New Jersey 07675

Surviving Bank's Principal Office

Park 80 West -- Plaza Two
Saddle Brook, New Jersey 07663

Surviving Bank's Branch Offices (there will be 13 branch offices)

1. 200 Floral Lane, Saddle Brook, New Jersey 07633

2. 444 Boulevard, Elmwood Park, New Jersey 07407

3. 784 Franklin Avenue, Franklin Lakes, New Jersey 07417

4. 351 Midland Avenue, Garfield, New Jersey 07026

<PAGE>

                             EXHIBIT B (page 2 of 2)

5. 321 Broadway Plaza, Hillsdale, New Jersey 07642

6. 225 Main Street, Little Ferry, New Jersey 07643

7. 185 Garibaldi Avenue, Lodi, New Jersey 07644

8. 3 Post Road, Oakland, New Jersey 07436

9. 165 Kinderkamack Road, Park Ridge, New Jersey 07656

10. 250 West Passaic Street, Rochelle Park, New Jersey 07622

11. 590 Pascack Road, Washington Township, New Jersey 07675

12. 2-8 South Kinderkamack Road at Grand Avenue, Montvale,
       New Jersey 07645- 0333

13. 876 Kinderkamack Road, River Edge, New Jersey 07661

Directors of the Surviving Bank

Anthony S. Abbate
Anthony D. Andora
Donald L. Correll
Anthony R. Coscia
John J. Eccleston
David R. Ficca
James E. Healey
Nicholas R. Marcalus
Eleanore S. Nissley
Jeremiah F. O'Connor
Robert P. Rittereiser
Benjamin Rosenzweig
Richard A. Gilsenan
Arthur R. Odabash

Officers of the Surviving Bank

Anthony S. Abbate, President and CEO
Frank R. Giancola, Senior Vice President, Operations
Anthony Labozzeta, Executive Vice President and CFO
Richard N. Latrenta, Senior Vice President, Retail Banking
Patricia Arnold, Senior Vice President, Commercial Banking

<PAGE>

                                    EXHIBIT C

                              Conversion Agreement

                                                            ______________, 1998

The Jersey Bank For Savings
2-8 South Kinderkamack Road
Montvale, New Jersey 07645

Gentlemen:

      Reference is made to (i) the Agreement and Plan of Merger, dated as of
January __, 1998 (the "Merger Agreement"), among Interchange Financial Services
Corporation ("Interchange"), Interchange State Bank ("Bank") and The Jersey Bank
For Savings ("Jersey"), pursuant to which Jersey will be merged into Bank (the
"Merger"); and (ii) the Certificate of Amendment to the Certificate of
Incorporation of Jersey filed with the New Jersey Department of Banking on May
14, 1993 (the "Amendment"), pursuant to which Jersey authorized the issuance of
the Jersey Preferred Stock (as such term is defined in the Merger Agreement).
All capitalized terms used herein, unless otherwise defined herein, shall have
the same meaning as if used in the Merger Agreement.

      The undersigned, a holder of record of ______________ shares of Jersey
Preferred Stock, who expects to derive substantial benefit from the Merger, in
order to induce Interchange, Bank and Jersey to consummate the Merger, hereby
agrees to convert each share of Jersey Preferred Stock into .8695 shares of
Jersey Common Stock.

      I understand that Jersey requires that I deliver this Agreement to
Interchange before the close of business on Friday, February 27, 1998.

      1. Agreement to Convert. Subject to Section 3 of this Agreement, pursuant
to and accordance with the Amendment, I agree that each of my shares of Jersey
Preferred Stock (except for shares of my Jersey Preferred Stock which I have
previously converted) shall immediately prior to the Effective Time
automatically be converted into .8695 shares of Jersey Common Stock. I
understand that I will not receive any fractional share resulting from such
conversion, but in lieu thereof, you will pay me a sum equal to the Average
Closing Price multiplied by such fraction of a whole share of Jersey Common
Stock.

      2. Representations Concerning this Agreement. I now hold and will continue
to hold (until my shares are converted hereunder) my shares of Jersey Preferred
Stock free and clear of any liens, encumbrances, charges, restrictions or rights
of third parties and my entering into and performance of this Agreement will not
violate or conflict with any other agreement, court order, instrument, judgment,
order or decree by which I or any of my shares of Jersey Preferred Stock are
bound.

      3. Right to Dissent. If I timely execute and deliver this Agreement to
Interchange, I will have a right to dissent to the consummation of the Merger
and receive a cash payment equal to the fair value of the shares of Jersey
Common Stock that I would receive under this Agreement. I understand that fair
value will be determined by an appraisal proceeding supervised by a court of
competent jurisdiction. I also understand that Jersey will deliver to me a copy
of the Proxy Statement\Prospectus when such Proxy Statement\Prospectus is
delivered to the Jersey Common Stockholders and that I will have adequate
opportunity to review the Proxy Statement\Prospectus prior to the expiration of
my right to dissent to the Merger and seek a cash payment for my shares. Unless
I waive my right to dissent and seek such cash

<PAGE>

payment, such right shall continue after the delivery of the Proxy/Statement
Prospectus and until the third day prior to the day fixed for the meeting of the
Jersey Common Stockholders to vote on the Merger, as set forth in the Proxy
Statement\Prospectus.

      4. Acknowledgment of Receipt of Information and Effect of Merger. I
acknowledge that I have received copies of and have read the Amendment and the
Merger Agreement, together with all exhibits and disclosure schedules attached
thereto. I also have received copies and read each of the following: the Annual
Report of Interchange on Form 10-K for the year ended December 31, 1996, the
Quarterly Reports on Form 10-Q for the Quarters ended March 31, June 30 and
September 30, 1997 and the Proxy Statement for the 1997 Annual Meeting of
Interchange. I have had adequate opportunity to consult with my advisers
concerning any questions I might have regarding the conversion of my shares of
Jersey Preferred Stock or the Merger and I understand that, at the Effective
Time, each share of Jersey Common Stock received from the conversion of my
shares of Jersey Preferred Stock shall be automatically converted into one (1)
share of Interchange Common Stock.

              _____________________________________________________
              (sign exactly the same as shares are held of record)

              Please print name:


<PAGE>

                                    EXHIBIT D

                                     OMITTED