Document:

<PAGE>

                                                                 EXHIBIT (10)(n)

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                        AMENDED AND RESTATED DECLARATION
                                    OF TRUST

                                  BY AND AMONG

                         U.S. BANK NATIONAL ASSOCIATION,
                            AS INSTITUTIONAL TRUSTEE,

                      CITY NATIONAL BANCSHARES CORPORATION,
                                   AS SPONSOR,

                                       AND

                     EDWARD R. WRIGHT AND VLADIMIR GASPAREC,
                               AS ADMINISTRATORS,

                           DATED AS OF MARCH 17, 2004

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                            Page
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<S>                                                                                                                         <C>
ARTICLE I INTERPRETATION AND DEFINITIONS.................................................................................     1
     Section 1.1.   Definitions..........................................................................................     1

ARTICLE II ORGANIZATION..................................................................................................     7
     Section 2.1.   Name.................................................................................................     7
     Section 2.2.   Office...............................................................................................     7
     Section 2.3.   Purpose..............................................................................................     7
     Section 2.4.   Authority............................................................................................     7
     Section 2.5.   Title to Property of the Trust.......................................................................     8
     Section 2.6.   Powers and Duties of the Institutional Trustee and the Administrators................................     8
     Section 2.7.   Prohibition of Actions by the Trust and the Institutional Trustee....................................    11
     Section 2.8.   Powers and Duties of the Institutional Trustee.......................................................    12
     Section 2.9.   Certain Duties and Responsibilities of the Institutional Trustee and Administrators..................    13
     Section 2.10.  Certain Rights of Institutional Trustee..............................................................    14
     Section 2.11.  Execution of Documents...............................................................................    16
     Section 2.12.  Not Responsible for Recitals or Issuance of Securities...............................................    16
     Section 2.13.  Duration of Trust....................................................................................    16
     Section 2.14.  Mergers..............................................................................................    17

ARTICLE III SPONSOR......................................................................................................    18
     Section 3.1.   Sponsor's Purchase of Common Securities..............................................................    18
     Section 3.2.   Responsibilities of the Sponsor......................................................................    18
     Section 3.3.   Expenses.............................................................................................    18
     Section 3.4.   Right to Proceed.....................................................................................    19

ARTICLE IV INSTITUTIONAL TRUSTEE AND ADMINISTRATORS......................................................................    19
     Section 4.1.   Institutional Trustee; Eligibility...................................................................    19
     Section 4.2.   Administrators.......................................................................................    20
     Section 4.3.   Appointment, Removal and Resignation of Institutional Trustee and Administrators.....................    20
     Section 4.4.   Institutional Trustee Vacancies......................................................................    21
     Section 4.5.   Effect of Vacancies..................................................................................    21
     Section 4.6.   Meetings of the Institutional Trustee and the Administrators.........................................    21
     Section 4.7.   Delegation of Power..................................................................................    22
     Section 4.8.   Conversion, Consolidation or Succession to Business..................................................    22

ARTICLE V DISTRIBUTIONS..................................................................................................    22
     Section 5.1.   Distributions........................................................................................    22

ARTICLE VI ISSUANCE OF SECURITIES.......................................................................................     22
     Section 6.1.   General Provisions Regarding Securities..............................................................    22
     Section 6.2.   Paying Agent, Transfer Agent and Registrar...........................................................    23
     Section 6.3.   Form and Dating......................................................................................    23
     Section 6.4.   Mutilated, Destroyed, Lost or Stolen Certificates....................................................    24
     Section 6.5.   Temporary Securities.................................................................................    24
     Section 6.6.   Cancellation.........................................................................................    24
</TABLE>

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<TABLE>
<S>                                                                                                                          <C>
     Section 6.7.   Rights of Holders; Waivers of Past Defaults..........................................................    25

ARTICLE VII DISSOLUTION AND TERMINATION OF TRUST.........................................................................    26
     Section 7.1.   Dissolution and Termination of Trust.................................................................    26

ARTICLE VIII TRANSFER OF INTERESTS.......................................................................................    27
     Section 8.1.   General..............................................................................................    27
     Section 8.2.   Transfer Procedures and Restrictions.................................................................    28
     Section 8.3.   Deemed Security Holders..............................................................................    30

ARTICLE IX LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS.............................    30
     Section 9.1.   Liability............................................................................................    30
     Section 9.2.   Exculpation..........................................................................................    30
     Section 9.3.   Fiduciary Duty.......................................................................................    31
     Section 9.4.   Indemnification......................................................................................    31
     Section 9.5.   Outside Businesses...................................................................................    33
     Section 9.6.   Compensation; Fee....................................................................................    33

ARTICLE X ACCOUNTING                                                                                                         34
     Section 10.1.  Fiscal Year..........................................................................................    34
     Section 10.2.  Certain Accounting Matters...........................................................................    34
     Section 10.3.  Banking..............................................................................................    34
     Section 10.4.  Withholding..........................................................................................    34

ARTICLE XI AMENDMENTS AND MEETINGS.......................................................................................    35
     Section 11.1.  Amendments...........................................................................................    35
     Section 11.2.  Meetings of the Holders of Securities; Action by Written Consent.....................................    36

ARTICLE XII REPRESENTATIONS OF INSTITUTIONAL TRUSTEE....................................................................     37
     Section 12.1.  Representations and Warranties of Institutional Trustee..............................................    37

ARTICLE XIII MISCELLANEOUS...............................................................................................    38
     Section 13.1.  Notices..............................................................................................    38
     Section 13.2.  Governing Law........................................................................................    39
     Section 13.3.  Intention of the Parties.............................................................................    39
     Section 13.4.  Headings.............................................................................................    39
     Section 13.5.  Successors and Assigns...............................................................................    39
     Section 13.6.  Partial Enforceability...............................................................................    39
     Section 13.7.  Counterparts.........................................................................................    40
</TABLE>

<TABLE>
<S>                                      <S>
Annex I.............................     Terms of Securities
Exhibit A-1.........................     Form of Capital Security Certificate
Exhibit A-2.........................     Form of Common Security Certificate
Exhibit B...........................     Specimen of Initial Debenture
Exhibit C...........................     Placement Agreement
</TABLE>

                                       ii

<PAGE>

                              AMENDED AND RESTATED

                              DECLARATION OF TRUST

                                       OF

           CITY NATIONAL BANK OF NEW JERSEY CAPITAL STATUTORY TRUST II

                                 MARCH 17, 2004

      AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and
effective as of March 17, 2004, by the Institutional Trustee (as defined
herein), the Administrators (as defined herein), the Sponsor (as defined herein)
and by the holders, from time to time, of undivided beneficial interests in the
Trust (as defined herein) to be issued pursuant to this Declaration;

      WHEREAS, the Institutional Trustee, the Administrators and the Sponsor
established City National Bank of New Jersey Capital Statutory Trust II (the
"Trust"), a statutory trust under the Statutory Trust Act (as defined herein)
pursuant to a Declaration of Trust dated as of March 4, 2004 (the "Original
Declaration"), and a Certificate of Trust filed with the Secretary of State of
the State of Connecticut on March 4, 2004, for the sole purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain debentures of
the Debenture Issuer (as defined herein);

      WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and

      WHEREAS, the Institutional Trustee, the Administrators and the Sponsor, by
this Declaration, amend and restate each and every term and provision of the
Original Declaration;

      NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a statutory trust under the Statutory Trust Act and that this
Declaration constitutes the governing instrument of such statutory trust, the
Institutional Trustee declares that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration. The
parties hereto hereby agree as follows:

                                    ARTICLE I

                         INTERPRETATION AND DEFINITIONS

      SECTION 1.1.DEFINITIONS. Unless the context otherwise requires:

      (a)   Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

      (b)   a term defined anywhere in this Declaration has the same meaning
throughout;

      (c)   all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;

      (d)   all references in this Declaration to Articles and Sections and
Annexes and Exhibits are to Articles and Sections of and Annexes and Exhibits to
this Declaration unless otherwise specified; and

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<PAGE>

      (e)   a reference to the singular includes the plural and vice versa.

      "Additional Interest" has the meaning set forth in the Indenture.

      "Administrative Action" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Administrators" means each of Edward R. Wright and Vladimir Gasparec,
solely in such Person's capacity as Administrator of the Trust created and
continued hereunder and not in such Person's individual capacity, or such
Administrator's successor in interest in such capacity, or any successor
appointed as herein provided.

      "Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.

      "Authorized Officer" of a Person means any Person that is authorized to
bind such Person.

      "Bankruptcy Event" means, with respect to any Person:

      (a)   a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of such Person or for any substantial part of
its property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or

      (b)   such Person shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of such Person of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due.

      "Business Day" means any day other than Saturday, Sunday or any other day
on which banking institutions in New York City or Hartford, Connecticut are
permitted or required by any applicable law or executive order to close.

      "Capital Securities" has the meaning set forth in paragraph 1(a) of Annex
I.

      "Capital Security Certificate" means a definitive Certificate in fully
registered form representing a Capital Security substantially in the form of
Exhibit A-1.

      "Capital Treatment Event" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Certificate" means any certificate evidencing Securities.

      "Closing Date" has the meaning set forth in the Placement Agreement.

      "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.

               "Common Securities" has the meaning set forth in paragraph 1(b)
of Annex I.

                                       2

<PAGE>

      "Common Security Certificate" means a definitive Certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.

      "Company Indemnified Person" means (a) any Administrator; (b) any
Affiliate of any Administrator; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Administrator; or
(d) any officer, employee or agent of the Trust or its Affiliates.

      "Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at 225 Asylum Street, Goodwin Square,
Hartford, Connecticut 06103.

      "Coupon Rate" has the meaning set forth in paragraph 2(a) of Annex I.

      "Covered Person" means: (a) any Administrator, officer, director,
shareholder, partner, member, representative, employee or agent of (i) the Trust
or (ii) any of the Trust's Affiliates; and (b) any Holder of Securities.

      "Creditor" has the meaning set forth in Section 3.3.

      "Debenture Issuer" means City National Bancshares Corporation, a New
Jersey corporation, in its capacity as issuer of the Debentures under the
Indenture.

      "Debenture Trustee" means U.S. Bank National Association, as trustee under
the Indenture until a successor is appointed thereunder, and thereafter means
such successor trustee.

      "Debentures" means the Floating Rate Junior Subordinated Deferrable
Interest Debentures due 2034 to be issued by the Debenture Issuer under the
Indenture.

      "Defaulted Interest" has the meaning set forth in the Indenture.

      "Determination Date" has the meaning set forth in paragraph 4(a) of Annex
I.

      "Direct Action" has the meaning set forth in Section 2.8(d).

      "Distribution" means a distribution payable to Holders of Securities in
accordance with Section 5.1.

      "Distribution Payment Date" has the meaning set forth in paragraph 2(b) of
Annex I.

      "Distribution Period" means (i) with respect to the Distribution paid on
the first Distribution Payment Date, the period beginning on (and including) the
date of original issuance and ending on (but excluding) the Distribution Payment
Date in June 2004 and (ii) thereafter, with respect to a Distribution paid on
each successive Distribution Payment Date, the period beginning on (and
including) the preceding Distribution Payment Date and ending on (but excluding)
such current Distribution Payment Date.

      "Distribution Rate" means, for the Distribution Period beginning on (and
including) the date of original issuance and ending on (but excluding) the
Distribution Payment Date in June 2004, the rate per annum of 3.90%, and for
each Distribution Period beginning on or after the Distribution Payment Date in
June 2004, the Coupon Rate for such Distribution Period.

                                       3

<PAGE>

      "Event of Default" means any one of the following events (whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body):

      (a)   the occurrence of an Indenture Event of Default; or

      (b)   default by the Trust in the payment of any Redemption Price or
Special Redemption Price of any Security when it becomes due and payable; or

      (c)   default in the performance, or breach, in any material respect, of
any covenant or warranty of the Institutional Trustee in this Declaration (other
than those specified in clause (a) or (b) above) and continuation of such
default or breach for a period of 60 days after there has been given, by
registered or certified mail to the Institutional Trustee and to the Sponsor by
the Holders of at least 25% in aggregate liquidation amount of the outstanding
Capital Securities, a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or

      (d)   the occurrence of a Bankruptcy Event with respect to the
Institutional Trustee if a successor Institutional Trustee has not been
appointed within 90 days thereof.

      "Extension Period" has the meaning set forth in paragraph 2(b) of Annex I.

      "Federal Reserve" has the meaning set forth in paragraph 3 of Annex I.

      "Fiduciary Indemnified Person" shall mean the Institutional Trustee, any
Affiliate of the Institutional Trustee and any officers, directors,
shareholders, members, partners, employees, representatives, custodians,
nominees or agents of the Institutional Trustee.

      "Fiscal Year" has the meaning set forth in Section 10.1.

      "Guarantee" means the guarantee agreement to be dated as of the Closing
Date, of the Sponsor in respect of the Capital Securities.

      "Holder" means a Person in whose name a Certificate representing a
Security is registered, such Person being a beneficial owner within the meaning
of the Statutory Trust Act.

      "Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.

      "Indenture" means the Indenture dated as of the Closing Date, between the
Debenture Issuer and the Debenture Trustee, and any indenture supplemental
thereto pursuant to which the Debentures are to be issued, as such Indenture and
any supplemental indenture may be amended, supplemented or otherwise modified
from time to time.

      "Indenture Event of Default" means an "Event of Default" as defined in the
Indenture.

      "Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 4.1.

      "Interest" means any interest due on the Debentures including any
Additional Interest and Defaulted Interest.

                                       4

<PAGE>

      "Investment Company" means an investment company as defined in the
Investment Company Act.

      "Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.

      "Investment Company Event" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Liquidation" has the meaning set forth in paragraph 3 of Annex I.

      "Liquidation Distribution" has the meaning set forth in paragraph 3 of
Annex I.

      "Majority in liquidation amount of the Securities" means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of
more than 50% of the aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Securities of the relevant class.

      "Maturity Date" has the meaning set forth in paragraph 4(a) of Annex I.

      "Officers' Certificates" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant providing for
it in this Declaration shall include:

      (a)   a statement that each officer signing the Certificate has read the
covenant or condition and the definitions relating thereto;

      (b)   a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;

      (c)   a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

      (d)   a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.

      "OTS" has the meaning set forth in paragraph 3 of Annex I.

      "Paying Agent" has the meaning specified in Section 6.2.

      "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

      "Placement Agreement" means the Placement Agreement relating to the
offering and sale of Capital Securities in the form of Exhibit C.

      "Property Account" has the meaning set forth in Section 2.8(c).

      "Pro Rata" has the meaning set forth in paragraph 8 of Annex I.

                                       5

<PAGE>

      "Quorum" means a majority of the Administrators or, if there are only two
Administrators, both of them.

      "Redemption Date" has the meaning set forth in paragraph 4(a) of Annex I.

      "Redemption/Distribution Notice" has the meaning set forth in paragraph
4(e) of Annex I.

      "Redemption Price" has the meaning set forth in paragraph 4(a) of Annex I.

      "Registrar" has the meaning set forth in Section 6.2.

      "Responsible Officer" means, with respect to the Institutional Trustee,
any officer within the Corporate Trust Office of the Institutional Trustee,
including any vice-president, any assistant vice-president, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or other
officer of the Corporate Trust Office of the Institutional Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.

      "Restricted Securities Legend" has the meaning set forth in Section
8.2(b).

      "Rule 3a-5" means Rule 3a-5 under the Investment Company Act.

      "Rule 3a-7" means Rule 3a-7 under the Investment Company Act.

      "Securities" means the Common Securities and the Capital Securities.

      "Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.

      "Special Event" has the meaning set forth in paragraph 4(a) of Annex I.

      "Special Redemption Date" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Special Redemption Price" has the meaning set forth in paragraph 4(a) of
Annex I.

      "Sponsor" means City National Bancshares Corporation, a New Jersey
corporation, or any successor entity in a merger, consolidation or amalgamation,
in its capacity as sponsor of the Trust.

      "Statutory Trust Act" means Chapter 615 of Title 34 of the Connecticut
General Statutes, Sections 500, et seq. as may be amended from time to time.

      "Successor Entity" has the meaning set forth in Section 2.14(b).

      "Successor Institutional Trustee" has the meaning set forth in Section
4.3(a).

      "Successor Securities" has the meaning set forth in Section 2.14(b).

      "Super Majority" has the meaning set forth in paragraph 5(b) of Annex I.

      "Tax Event" has the meaning set forth in paragraph 4(a) of Annex I.

                                       6

<PAGE>

      "10% in liquidation amount of the Securities" means Holder(s) of
outstanding Securities voting together as a single class or, as the context may
require, Holders of outstanding Capital Securities or Holders of outstanding
Common Securities voting separately as a class, who are the record owners of 10%
or more of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.

      "3-Month LIBOR" has the meaning set forth in paragraph 4(a) of Annex I.

      "Transfer Agent" has the meaning set forth in Section 6.2.

      "Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

      "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or
owing to, the Property Account and (c) all proceeds and rights in respect of the
foregoing and any other property and assets for the time being held or deemed to
be held by the Institutional Trustee pursuant to the trusts of this Declaration.

      "U.S. Person" means a United States Person as defined in Section
7701(a)(30) of the Code.

                                   ARTICLE II

                                  ORGANIZATION

      SECTION 2.1. NAME. The Trust is named "City National Bank of New Jersey
Capital Statutory Trust II," as such name may be modified from time to time by
the Administrators following written notice to the Holders of the Securities.
The Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrators.

      SECTION 2.2. OFFICE. The address of the principal office of the Trust is
c/o U.S. Bank National Association, 225 Asylum Street, Goodwin Square, Hartford,
Connecticut 06103. On at least 10 Business Days written notice to the Holders of
the Securities, the Administrators may designate another principal office, which
shall be in a state of the United States or in the District of Columbia.

      SECTION 2.3. PURPOSE. The exclusive purposes and functions of the Trust
are (a) to issue and sell the Securities representing undivided beneficial
interests in the assets of the Trust, (b) to invest the gross proceeds from such
sale to acquire the Debentures, (c) to facilitate direct investment in the
assets of the Trust through issuance of the Common Securities and the Capital
Securities and (d) except as otherwise limited herein, to engage in only those
other activities necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be undertaken) any activity
that would cause the Trust not to be classified for United States federal income
tax purposes as a grantor trust.

      SECTION 2.4. AUTHORITY. Except as specifically provided in this
Declaration, the Institutional Trustee shall have exclusive and complete
authority to carry out the purposes of the Trust. An action taken by the
Institutional Trustee in accordance with its powers shall constitute the act of
and serve to bind the Trust. In dealing with the Institutional Trustee acting on
behalf of the Trust, no Person shall be required to inquire into the authority
of the Institutional Trustee to bind the Trust. Persons dealing with the Trust
are entitled to rely conclusively on the power and authority of the
Institutional Trustee as set forth in this Declaration. The Administrators shall
have only those ministerial duties set forth herein with

                                       7

<PAGE>

respect to accomplishing the purposes of the Trust and are not intended to be
trustees or fiduciaries with respect to the Trust or the Holders. The
Institutional Trustee shall have the right, but shall not be obligated except as
provided in Section 2.6, to perform those duties assigned to the Administrators.

      SECTION 2.5. TITLE TO PROPERTY OF THE TRUST. Except as provided in Section
2.8 with respect to the Debentures and the Property Account or as otherwise
provided in this Declaration, legal title to all assets of the Trust shall be
vested in the Trust. The Holders shall not have legal title to any part of the
assets of the Trust, but shall have an undivided beneficial interest in the
assets of the Trust.

      SECTION 2.6. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE AND THE
ADMINISTRATORS.

      (a)   The Institutional Trustee and the Administrators shall conduct the
affairs of the Trust in accordance with the terms of this Declaration. Subject
to the limitations set forth in paragraph (b) of this Section, and in accordance
with the following provisions (i) and (ii), the Institutional Trustee and the
Administrators shall have the authority to enter into all transactions and
agreements determined by the Institutional Trustee to be appropriate in
exercising the authority, express or implied, otherwise granted to the
Institutional Trustee or the Administrators, as the case may be, under this
Declaration, and to perform all acts in furtherance thereof, including without
limitation, the following:

            (i)   Each Administrator shall have the power and authority to act
      on behalf of the Trust with respect to the following matters:

                  (A)   the issuance and sale of the Securities;

                  (B)   to cause the Trust to enter into, and to execute and
            deliver on behalf of the Trust, such agreements as may be necessary
            or desirable in connection with the purposes and function of the
            Trust, including agreements with the Paying Agent;

                  (C)   ensuring compliance with the Securities Act, applicable
            state securities or blue sky laws;

                  (D)   the sending of notices (other than notices of default),
            and other information regarding the Securities and the Debentures to
            the Holders in accordance with this Declaration;

                  (E)   the consent to the appointment of a Paying Agent,
            Transfer Agent and Registrar in accordance with this Declaration,
            which consent shall not be unreasonably withheld or delayed;

                  (F)   execution and delivery of the Securities in accordance
            with this Declaration;

                  (G)   execution and delivery of closing certificates pursuant
            to the Placement Agreement and the application for a taxpayer
            identification number;

                  (H)   unless otherwise determined by the Holders of a Majority
            in liquidation amount of the Securities or as otherwise required by
            the Statutory Trust Act, to execute on behalf of the Trust (either
            acting alone or together with any or all of the Administrators) any
            documents that the Administrators have the power to execute pursuant
            to this Declaration;

                  (I)   the taking of any action incidental to the foregoing as
            the Institutional Trustee may from time to time determine is
            necessary or advisable to give effect to the terms of

                                       8

<PAGE>

            this Declaration for the benefit of the Holders (without
            consideration of the effect of any such action on any particular
            Holder);

                  (J)   to establish a record date with respect to all actions
            to be taken hereunder that require a record date be established,
            including Distributions, voting rights, redemptions and exchanges,
            and to issue relevant notices to the Holders of Capital Securities
            and Holders of Common Securities as to such actions and applicable
            record dates; and

                  (K)   to duly prepare and file all applicable tax returns and
            tax information reports that are required to be filed with respect
            to the Trust on behalf of the Trust.

            (ii)  As among the Institutional Trustee and the Administrators, the
      Institutional Trustee shall have the power, duty and authority to act on
      behalf of the Trust with respect to the following matters:

                  (A)   the establishment of the Property Account;

                  (B)   the receipt of the Debentures;

                  (C)   the collection of interest, principal and any other
            payments made in respect of the Debentures in the Property Account;

                  (D)   the distribution through the Paying Agent of amounts
            owed to the Holders in respect of the Securities;

                  (E)   the exercise of all of the rights, powers and privileges
            of a holder of the Debentures;

                  (F)   the sending of notices of default and other information
            regarding the Securities and the Debentures to the Holders in
            accordance with this Declaration;

                  (G)   the distribution of the Trust Property in accordance
            with the terms of this Declaration;

                  (H)   to the extent provided in this Declaration, the winding
            up of the affairs of and liquidation of the Trust and the
            preparation, execution and filing of the certificate of cancellation
            with the Secretary of State of the State of Connecticut;

                  (I)   after any Event of Default (provided that such Event of
            Default is not by or with respect to the Institutional Trustee) the
            taking of any action incidental to the foregoing as the
            Institutional Trustee may from time to time determine is necessary
            or advisable to give effect to the terms of this Declaration and
            protect and conserve the Trust Property for the benefit of the
            Holders (without consideration of the effect of any such action on
            any particular Holder); and

                  (J)   to take all action that may be necessary for the
            preservation and the continuation of the Trust's valid existence,
            rights, franchises and privileges as a statutory trust under the
            laws of the State of Connecticut and of each other jurisdiction in
            which such existence is necessary to protect the limited liability
            of the Holders of the Capital Securities or to enable the Trust to
            effect the purposes for which the Trust was created.

            (iii) The Institutional Trustee shall have the power and authority
      to act on behalf of the Trust with respect to any of the duties,
      liabilities, powers or the authority of the

                                       9

<PAGE>

      Administrators set forth in Section 2.6(a)(i)(D), (E) and (F) herein but
      shall not have a duty to do any such act unless specifically requested to
      do so in writing by the Sponsor, and shall then be fully protected in
      acting pursuant to such written request; and in the event of a conflict
      between the action of the Administrators and the action of the
      Institutional Trustee, the action of the Institutional Trustee shall
      prevail.

      (b)   So long as this Declaration remains in effect, the Trust (or the
Institutional Trustee or Administrators acting on behalf of the Trust) shall not
undertake any business, activities or transaction except as expressly provided
herein or contemplated hereby. In particular, neither the Institutional Trustee
nor the Administrators may cause the Trust to (i) acquire any investments or
engage in any activities not authorized by this Declaration, (ii) sell, assign,
transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Holders, except as expressly
provided herein, (iii) take any action that would reasonably be expected (x) to
cause the Trust to fail or cease to qualify as a "grantor trust" for United
States federal income tax purposes or (y) to require the trust to register as an
Investment Company under the Investment Company Act, (iv) incur any indebtedness
for borrowed money or issue any other debt or (v) take or consent to any action
that would result in the placement of a lien on any of the Trust Property. The
Institutional Trustee shall, at the sole cost and expense of the Trust, defend
all claims and demands of all Persons at any time claiming any lien on any of
the Trust Property adverse to the interest of the Trust or the Holders in their
capacity as Holders.

      (c)   In connection with the issuance and sale of the Capital Securities,
the Sponsor shall have the right and responsibility to assist the Trust with
respect to, or effect on behalf of the Trust, the following (and any actions
taken by the Sponsor in furtherance of the following prior to the date of this
Declaration are hereby ratified and confirmed in all respects):

            (i)   the taking of any action necessary to obtain an exemption from
      the Securities Act;

            (ii)  the determination of the States in which to take appropriate
      action to qualify or register for sale all or part of the Capital
      Securities and the determination of any and all such acts, other than
      actions which must be taken by or on behalf of the Trust, and the advice
      to the Administrators of actions they must take on behalf of the Trust,
      and the preparation for execution and filing of any documents to be
      executed and filed by the Trust or on behalf of the Trust, as the Sponsor
      deems necessary or advisable in order to comply with the applicable laws
      of any such States in connection with the sale of the Capital Securities;

            (iii) the negotiation of the terms of, and the execution and
      delivery of, the Placement Agreement providing for the sale of the Capital
      Securities; and

            (iv)  the taking of any other actions necessary or desirable to
      carry out any of the foregoing activities.

      (d)   Notwithstanding anything herein to the contrary, the Administrators
and the Holders of a Majority in liquidation amount of the Common Securities are
authorized and directed to conduct the affairs of the Trust and to operate the
Trust so that the Trust will not (i) be deemed to be an Investment Company
required to be registered under the Investment Company Act, and (ii) fail to be
classified as a "grantor trust" for United States federal income tax purposes.
The Administrators and the Holders of a Majority in liquidation amount of the
Common Securities shall not take any action inconsistent with the treatment of
the Debentures as indebtedness of the Debenture Issuer for United States federal
income tax purposes. In this connection, the Administrators and the Holders of a
Majority in liquidation amount of the Common Securities are authorized to take
any action, not inconsistent with applicable laws, the

                                       10

<PAGE>

Certificate of Trust or this Declaration, as amended from time to time, that
each of the Administrators and the Holders of a Majority in liquidation amount
of the Common Securities determines in their discretion to be necessary or
desirable for such purposes.

      (e)   All expenses incurred by the Administrators or the Institutional
Trustee pursuant to this Section 2.6 shall be reimbursed by the Sponsor, and the
Institutional Trustee and the Administrators shall have no obligations with
respect to such expenses.

      (f)   The assets of the Trust shall consist of the Trust Property.

      (g)   Legal title to all Trust Property shall be vested at all times in
the Institutional Trustee (in its capacity as such) and shall be held and
administered by the Institutional Trustee and the Administrators for the benefit
of the Trust in accordance with this Declaration.

      (h)   If the Institutional Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Declaration and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Institutional Trustee or to such Holder, then and in
every such case the Sponsor, the Institutional Trustee and the Holders shall,
subject to any determination in such proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Institutional Trustee and the Holders shall continue as though
no such proceeding had been instituted.

      SECTION 2.7. PROHIBITION OF ACTIONS BY THE TRUST AND THE INSTITUTIONAL
TRUSTEE.

      (a)   The Trust shall not, and the Institutional Trustee shall cause the
Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Institutional
Trustee shall cause the Trust not to:

            (i)    invest any proceeds received by the Trust from holding the
      Debentures, but shall distribute all such proceeds to Holders of the
      Securities pursuant to the terms of this Declaration and of the
      Securities;

            (ii)   acquire any assets other than as expressly provided herein;

            (iii)  possess Trust Property for other than a Trust purpose;

            (iv)   make any loans or incur any indebtedness other than loans
      represented by the Debentures;

            (v)    possess any power or otherwise act in such a way as to vary
      the Trust assets or the terms of the Securities in any way whatsoever
      other than as expressly provided herein;

            (vi)   issue any securities or other evidences of beneficial
      ownership of, or beneficial interest in, the Trust other than the
      Securities;

            (vii)  carry on any "trade or business" as that phrase is used in
      the Code; or

            (viii) other than as provided in this Declaration (including Annex
      I), (A) direct the time, method and place of exercising any trust or power
      conferred upon the Debenture Trustee with respect to the Debentures, (B)
      waive any past default that is waivable under the Indenture, (C) exercise
      any right to rescind or annul any declaration that the principal of all
      the Debentures shall be due and payable, or (D) consent to any amendment,
      modification or termination of the Indenture or the Debentures where such
      consent shall be required unless the Trust shall have

                                       11

<PAGE>

      received a written opinion of counsel to the effect that such modification
      will not cause the Trust to cease to be classified as a "grantor trust"
      for United States federal income tax purposes.

      SECTION 2.8. POWERS AND DUTIES OF THE INSTITUTIONAL TRUSTEE.

      (a)   The legal title to the Debentures shall be owned by and held of
record in the name of the Institutional Trustee in trust for the benefit of the
Trust and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 4.3. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.

      (b)   The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Administrators.

      (c)   The Institutional Trustee shall:

            (i)   establish and maintain a segregated non-interest bearing trust
      account (the "Property Account") in the name of and under the exclusive
      control of the Institutional Trustee, and maintained in the Institutional
      Trustee's trust department, on behalf of the Holders of the Securities
      and, upon the receipt of payments of funds made in respect of the
      Debentures held by the Institutional Trustee, deposit such funds into the
      Property Account and make payments, or cause the Paying Agent to make
      payments, to the Holders of the Capital Securities and Holders of the
      Common Securities from the Property Account in accordance with Section
      5.1. Funds in the Property Account shall be held uninvested until
      disbursed in accordance with this Declaration;

            (ii)  engage in such ministerial activities as shall be necessary or
      appropriate to effect the redemption of the Capital Securities and the
      Common Securities to the extent the Debentures are redeemed or mature; and

            (iii) upon written notice of distribution issued by the
      Administrators in accordance with the terms of the Securities, engage in
      such ministerial activities as shall be necessary or appropriate to effect
      the distribution of the Debentures to Holders of Securities upon the
      occurrence of certain circumstances pursuant to the terms of the
      Securities.

      (d)   The Institutional Trustee may bring or defend, pay, collect,
compromise, arbitrate, resort to legal action with respect to, or otherwise
adjust claims or demands of or against, the Trust which arises out of or in
connection with an Event of Default of which a Responsible Officer of the
Institutional Trustee has actual knowledge or arises out of the Institutional
Trustee's duties and obligations under this Declaration; provided, however, that
if an Event of Default has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of the
Capital Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of the Capital
Securities of such Holder (a "Direct Action") on or after the respective due
date specified in the Debentures. In connection with such Direct Action, the
rights of the Holders of the Common Securities will be subrogated to the rights
of such Holder of the Capital Securities to the extent of any payment made by
the Debenture Issuer to such Holder of the Capital Securities in such Direct
Action; provided, however, that no Holder of the Common Securities may exercise
such right of subrogation so long as an Event of Default with respect to the
Capital Securities has occurred and is continuing.

                                       12

<PAGE>

      (e)   The Institutional Trustee shall continue to serve as a Trustee until
either:

            (i)   the Trust has been completely liquidated and the proceeds of
      the liquidation distributed to the Holders of the Securities pursuant to
      the terms of the Securities and this Declaration; or

            (ii)  a Successor Institutional Trustee has been appointed and has
      accepted that appointment in accordance with Section 4.3.

      (f)   The Institutional Trustee shall have the legal power to exercise all
of the rights, powers and privileges of a Holder of the Debentures under the
Indenture and, if an Event of Default occurs and is continuing, the
Institutional Trustee may, for the benefit of Holders of the Securities, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to this Declaration (including Annex I) and the terms of the
Securities.

      The Institutional Trustee must exercise the powers set forth in this
Section 2.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 2.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 2.3.

      SECTION 2.9. CERTAIN DUTIES AND RESPONSIBILITIES OF THE INSTITUTIONAL
TRUSTEE AND ADMINISTRATORS.

      (a)   The Institutional Trustee, before the occurrence of any Event of
Default and after the curing or waiving of all such Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 6.7), the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.

      (b)   The duties and responsibilities of the Institutional Trustee and the
Administrators shall be as provided by this Declaration. Notwithstanding the
foregoing, no provision of this Declaration shall require the Institutional
Trustee or Administrators to expend or risk their own funds or otherwise incur
any financial liability in the performance of any of their duties hereunder, or
in the exercise of any of their rights or powers if it shall have reasonable
grounds to believe that repayment of such funds or adequate protection against
such risk of liability is not reasonably assured to it. Whether or not therein
expressly so provided, every provision of this Declaration relating to the
conduct or affecting the liability of or affording protection to the
Institutional Trustee or Administrators shall be subject to the provisions of
this Article. Nothing in this Declaration shall be construed to relieve an
Administrator or the Institutional Trustee from liability for its own negligent
act, its own negligent failure to act, or its own willful misconduct. To the
extent that, at law or in equity, the Institutional Trustee or an Administrator
has duties and liabilities relating to the Trust or to the Holders, the
Institutional Trustee or such Administrator shall not be liable to the Trust or
to any Holder for the Institutional Trustee's or such Administrator's good faith
reliance on the provisions of this Declaration. The provisions of this
Declaration, to the extent that they restrict the duties and liabilities of the
Administrators or the Institutional Trustee otherwise existing at law or in
equity, are agreed by the Sponsor and the Holders to replace such other duties
and liabilities of the Administrators or the Institutional Trustee.

      (c)   All payments made by the Institutional Trustee or a Paying Agent in
respect of the Securities shall be made only from the revenue and proceeds from
the Trust Property and only to the extent that there shall be sufficient revenue
or proceeds from the Trust Property to enable the Institutional

                                       13

<PAGE>

Trustee or a Paying Agent to make payments in accordance with the terms hereof.
Each Holder, by its acceptance of a Security, agrees that it will look solely to
the revenue and proceeds from the Trust Property to the extent legally available
for distribution to it as herein provided and that the Institutional Trustee and
the Administrators are not personally liable to it for any amount distributable
in respect of any Security or for any other liability in respect of any
Security. This Section 2.9(c) does not limit the liability of the Institutional
Trustee expressly set forth elsewhere in this Declaration.

      (d)   The Institutional Trustee shall not be liable for its own acts or
omissions hereunder except as a result of its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:

            (i)   the Institutional Trustee shall not be liable for any error of
      judgment made in good faith by an Authorized Officer of the Institutional
      Trustee, unless it shall be proved that the Institutional Trustee was
      negligent in ascertaining the pertinent facts;

            (ii)  the Institutional Trustee shall not be liable with respect to
      any action taken or omitted to be taken by it in good faith in accordance
      with the direction of the Holders of not less than a Majority in
      liquidation amount of the Capital Securities or the Common Securities, as
      applicable, relating to the time, method and place of conducting any
      proceeding for any remedy available to the Institutional Trustee, or
      exercising any trust or power conferred upon the Institutional Trustee
      under this Declaration;

            (iii) the Institutional Trustee's sole duty with respect to the
      custody, safekeeping and physical preservation of the Debentures and the
      Property Account shall be to deal with such property in a similar manner
      as the Institutional Trustee deals with similar property for its fiduciary
      accounts generally, subject to the protections and limitations on
      liability afforded to the Institutional Trustee under this Declaration;

            (iv)  the Institutional Trustee shall not be liable for any interest
      on any money received by it except as it may otherwise agree in writing
      with the Sponsor; and money held by the Institutional Trustee need not be
      segregated from other funds held by it except in relation to the Property
      Account maintained by the Institutional Trustee pursuant to Section
      2.8(c)(i) and except to the extent otherwise required by law; and

            (v)   the Institutional Trustee shall not be responsible for
      monitoring the compliance by the Administrators or the Sponsor with their
      respective duties under this Declaration, nor shall the Institutional
      Trustee be liable for any default or misconduct of the Administrators or
      the Sponsor.

      SECTION 2.10. CERTAIN RIGHTS OF INSTITUTIONAL TRUSTEE. Subject to the
provisions of Section 2.9:

      (a)   the Institutional Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting in good faith upon any resolution,
opinion of counsel, certificate, written representation of a Holder or
transferee, certificate of auditors or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, debenture, note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

      (b)   if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained

                                       14

<PAGE>

herein, or (iii) the Institutional Trustee is unsure of the application of any
provision of this Declaration, then, except as to any matter as to which the
Holders of Capital Securities are entitled to vote under the terms of this
Declaration, the Institutional Trustee may deliver a notice to the Sponsor
requesting the Sponsor's written instructions as to the course of action to be
taken and the Institutional Trustee shall take such action, or refrain from
taking such action, as the Institutional Trustee shall be instructed in writing,
in which event the Institutional Trustee shall have no liability except for its
own negligence or willful misconduct;

      (c)   any direction or act of the Sponsor or the Administrators
contemplated by this Declaration shall be sufficiently evidenced by an Officers'
Certificate;

      (d)   whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be proved or
established before undertaking, suffering or omitting any action hereunder, the
Institutional Trustee (unless other evidence is herein specifically prescribed)
may request and conclusively rely upon an Officers' Certificate as to factual
matters which, upon receipt of such request, shall be promptly delivered by the
Sponsor or the Administrators;

      (e)   the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof;

      (f)   the Institutional Trustee may consult with counsel of its selection
(which counsel may be counsel to the Sponsor or any of its Affiliates) and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon and in accordance with such advice; the
Institutional Trustee shall have the right at any time to seek instructions
concerning the administration of this Declaration from any court of competent
jurisdiction;

      (g)   the Institutional Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction; provided,
that nothing contained in this Section 2.10(g) shall be taken to relieve the
Institutional Trustee, subject to Section 2.9(b), upon the occurrence of an
Event of Default (that has not been cured or waived pursuant to Section 6.7), to
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs;

      (h)   the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond, debenture, note or other evidence of indebtedness or other paper
or document, unless requested in writing to do so by one or more Holders, but
the Institutional Trustee may make such further inquiry or investigation into
such facts or matters as it may see fit;

      (i)   the Institutional Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through its
agents or attorneys and the Institutional Trustee shall not be responsible for
any misconduct or negligence on the part of or for the supervision of, any such
agent or attorney appointed with due care by it hereunder;

      (j)   whenever in the administration of this Declaration the Institutional
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder the
Institutional Trustee (i) may request instructions from the Holders of the
Capital Securities

                                       15

<PAGE>

which instructions may only be given by the Holders of the same proportion in
liquidation amount of the Capital Securities as would be entitled to direct the
Institutional Trustee under the terms of the Capital Securities in respect of
such remedy, right or action, (ii) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and
(iii) shall be fully protected in acting in accordance with such instructions;

      (k)   except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;

      (l)   when the Institutional Trustee incurs expenses or renders services
in connection with a Bankruptcy Event, such expenses (including the fees and
expenses of its counsel) and the compensation for such services are intended to
constitute expenses of administration under any bankruptcy law or law relating
to creditors rights generally;

      (m)   the Institutional Trustee shall not be charged with knowledge of an
Event of Default unless a Responsible Officer of the Institutional Trustee
obtains actual knowledge of such event or the Institutional Trustee receives
written notice of such event from any Holder, the Sponsor or the Debenture
Trustee;

      (n)   any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities, and the
signature of the Institutional Trustee or its agents alone shall be sufficient
and effective to perform any such action and no third party shall be required to
inquire as to the authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this Declaration, both of
which shall be conclusively evidenced by the Institutional Trustee's or its
agent's taking such action; and

      (o)   no provision of this Declaration shall be deemed to impose any duty
or obligation on the Institutional Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty.

      SECTION 2.11. EXECUTION OF DOCUMENTS. Unless otherwise determined in
writing by the Institutional Trustee, and except as otherwise required by the
Statutory Trust Act, the Institutional Trustee, or any one or more of the
Administrators, as the case may be, is authorized to execute on behalf of the
Trust any documents that the Institutional Trustee or the Administrators, as the
case may be, have the power and authority to execute pursuant to Section 2.6.

      SECTION 2.12. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The
recitals contained in this Declaration and the Securities shall be taken as the
statements of the Sponsor, and the Institutional Trustee does not assume any
responsibility for their correctness. The Institutional Trustee makes no
representations as to the value or condition of the property of the Trust or any
part thereof. The Institutional Trustee makes no representations as to the
validity or sufficiency of this Declaration, the Debentures or the Securities.

      SECTION 2.13. DURATION OF TRUST. The Trust, unless earlier dissolved
pursuant to the provisions of Article VII hereof, shall be in existence for 35
years from the Closing Date.

                                       16

<PAGE>

      SECTION 2.14. MERGERS.

      (a)   The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in Section 2.14(b) and (c) and except in connection with the
liquidation of the Trust and the distribution of the Debentures to Holders of
Securities pursuant to Section 7.1(a)(iv) of the Declaration or Section 4 of
Annex I.

      (b)   The Trust may, with the consent of the Institutional Trustee and
without the consent of the Holders of the Capital Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust organized as such
under the laws of any state; provided that:

            (i)   if the Trust is not the surviving entity, such successor
entity (the "Successor Entity") either:

                  (A)   expressly assumes all of the obligations of the Trust
            under the Securities; or

                  (B)   substitutes for the Securities other securities having
            substantially the same terms as the Securities (the "Successor
            Securities") so that the Successor Securities rank the same as the
            Securities rank with respect to Distributions and payments upon
            Liquidation, redemption and otherwise;

            (ii)  the Sponsor expressly appoints a trustee of the Successor
      Entity that possesses substantially the same powers and duties as the
      Institutional Trustee as the Holder of the Debentures;

            (iii) such merger, consolidation, amalgamation or replacement does
      not adversely affect the rights, preferences and privileges of the Holders
      of the Securities (including any Successor Securities) in any material
      respect;

            (iv)  the Institutional Trustee receives written confirmation from
      Moody's Investor Services, Inc. and any other nationally recognized
      statistical rating organization that rates securities issued by the
      initial purchaser of the Capital Securities that it will not reduce or
      withdraw the rating of any such securities because of such merger,
      conversion, consolidation, amalgamation or replacement;

            (v)   such Successor Entity has a purpose substantially identical to
      that of the Trust;

            (vi)  prior to such merger, consolidation, amalgamation or
      replacement, the Trust has received an opinion of a nationally recognized
      independent counsel to the Trust experienced in such matters to the effect
      that:

                  (A)   such merger, consolidation, amalgamation or replacement
            does not adversely affect the rights, preferences and privileges of
            the Holders of the Securities (including any Successor Securities)
            in any material respect;

                  (B)   following such merger, consolidation, amalgamation or
            replacement, neither the Trust nor the Successor Entity will be
            required to register as an Investment Company; and

                                       17

<PAGE>

                  (C)   following such merger, consolidation, amalgamation or
            replacement, the Trust (or the Successor Entity) will continue to be
            classified as a "grantor trust" for United States federal income tax
            purposes;

            (vii) the Sponsor guarantees the obligations of such Successor
      Entity under the Successor Securities at least to the extent provided by
      the Guarantee;

            (viii) the Sponsor owns 100% of the common securities of any
      Successor Entity; and

            (ix)  prior to such merger, consolidation, amalgamation or
      replacement, the Institutional Trustee shall have received an Officers'
      Certificate of the Administrators and an opinion of counsel, each to the
      effect that all conditions precedent under this Section 2.14(b) to such
      transaction have been satisfied.

      (c)   Notwithstanding Section 2.14(b), the Trust shall not, except with
the consent of Holders of 100% in aggregate liquidation amount of the
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity to be classified as other
than a grantor trust for United States federal income tax purposes.

                                   ARTICLE III

                                     SPONSOR

      SECTION 3.1. SPONSOR'S PURCHASE OF COMMON SECURITIES. On the Closing Date,
the Sponsor will purchase all of the Common Securities issued by the Trust in an
amount at least equal to 3% of the capital of the Trust, at the same time as the
Capital Securities are sold.

      SECTION 3.2. RESPONSIBILITIES OF THE SPONSOR. In connection with the issue
and sale of the Capital Securities, the Sponsor shall have the exclusive right
and responsibility to engage in, or direct the Administrators to engage in, the
following activities:

      (a)   to determine the States in which to take appropriate action to
qualify or register for sale all or part of the Capital Securities and to do any
and all such acts, other than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and prepare for execution and filing
any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States; and

      (b)   to negotiate the terms of and/or execute on behalf of the Trust, the
Placement Agreement and other related agreements providing for the sale of the
Capital Securities.

      SECTION 3.3. EXPENSES. In connection with the offering, sale and issuance
of the Debentures to the Trust and in connection with the sale of the Securities
by the Trust, the Sponsor, in its capacity as Debenture Issuer, shall:

      (a)   pay all reasonable costs and expenses owing to the Debenture Trustee
pursuant to Section 6.6 of the Indenture;

      (b)   be responsible for and shall pay all debts and obligations (other
than with respect to the Securities) and all costs and expenses of the Trust,
the offering, sale and issuance of the Securities (including fees to the
placement agents in connection therewith), the costs and expenses (including

                                       18

<PAGE>

reasonable counsel fees and expenses) of the Institutional Trustee and the
Administrators, the costs and expenses relating to the operation of the Trust,
including, without limitation, costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, Paying Agents, Registrars, Transfer Agents,
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets and the enforcement by the Institutional Trustee of
the rights of the Holders (for purposes of clarification, this Section 3.3(b)
does not contemplate the payment by the Sponsor of acceptance or annual
administration fees owing to the Institutional Trustee pursuant to the services
to be provided by the Institutional Trustee under this Declaration or the fees
and expenses of the Institutional Trustee's counsel in connection with the
closing of the transactions contemplated by this Declaration); and

      (c)   pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and expenses
with respect to such taxes of the Trust.

      The Sponsor's obligations under this Section 3.3 shall be for the benefit
of, and shall be enforceable by, any Person to whom such debts, obligations,
costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor
has received notice hereof. Any such Creditor may enforce the Sponsor's
obligations under this Section 3.3 directly against the Sponsor and the Sponsor
irrevocably waives any right or remedy to require that any such Creditor take
any action against the Trust or any other Person before proceeding against the
Sponsor. The Sponsor agrees to execute such additional agreements as may be
necessary or desirable in order to give full effect to the provisions of this
Section 3.3.

      SECTION 3.4. RIGHT TO PROCEED. The Sponsor acknowledges the rights of
Holders to institute a Direct Action as set forth in Section 2.8(d) hereto.

                                   ARTICLE IV

                    INSTITUTIONAL TRUSTEE AND ADMINISTRATORS

      SECTION 4.1. INSTITUTIONAL TRUSTEE; ELIGIBILITY.

      (a)   There shall at all times be one Institutional Trustee which shall:

            (i)   not be an Affiliate of the Sponsor;

            (ii)  not offer or provide credit or credit enhancement to the
      Trust; and

            (iii) be a banking corporation or trust company organized and doing
      business under the laws of the United States of America or any state
      thereof or the District of Columbia, authorized under such laws to
      exercise corporate trust powers, having a combined capital and surplus of
      at least 50 million U.S. dollars ($50,000,000.00), and subject to
      supervision or examination by Federal, state, or District of Columbia
      authority. If such corporation publishes reports of condition at least
      annually, pursuant to law or to the requirements of the supervising or
      examining authority referred to above, then for the purposes of this
      Section 4.1(a)(iii), the combined capital and surplus of such corporation
      shall be deemed to be its combined capital and surplus as set forth in its
      most recent report of condition so published.

      (b)   If at any time the Institutional Trustee shall cease to be eligible
to so act under Section 4.1(a), the Institutional Trustee shall immediately
resign in the manner and with the effect set forth in Section 4.3(a).

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<PAGE>

      (c)   If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act of
1939, as amended, the Institutional Trustee shall either eliminate such interest
or resign, to the extent and in the manner provided by, and subject to this
Declaration.

      (d)   The initial Institutional Trustee shall be U.S. Bank National
Association.

      SECTION 4.2. ADMINISTRATORS. Each Administrator shall be a U.S. Person, 21
years of age or older and authorized to bind the Sponsor. The initial
Administrators shall be Edward R. Wright and Vladimir Gasparec. There shall at
all times be at least one Administrator. Except where a requirement for action
by a specific number of Administrators is expressly set forth in this
Declaration and except with respect to any action the taking of which is the
subject of a meeting of the Administrators, any action required or permitted to
be taken by the Administrators may be taken by, and any power of the
Administrators may be exercised by, or with the consent of, any one such
Administrator.

      SECTION 4.3. APPOINTMENT, REMOVAL AND RESIGNATION OF INSTITUTIONAL TRUSTEE
AND ADMINISTRATORS.

      (a)   Notwithstanding anything to the contrary in this Declaration, no
resignation or removal of the Institutional Trustee and no appointment of a
Successor Institutional Trustee pursuant to this Article shall become effective
until the acceptance of appointment by the Successor Institutional Trustee in
accordance with the applicable requirements of this Section 4.3.

      Subject to the immediately preceding paragraph, the Institutional Trustee
may resign at any time by giving written notice thereof to the Holders of the
Securities and by appointing a Successor Institutional Trustee. Upon the
resignation of the Institutional Trustee, the Institutional Trustee shall
appoint a successor by requesting from at least three Persons meeting the
eligibility requirements, its expenses and charges to serve as the successor
Institutional Trustee on a form provided by the Administrators, and selecting
the Person who agrees to the lowest expense and charges (the "Successor
Institutional Trustee"). If the instrument of acceptance by the Successor
Institutional Trustee required by this Section 4.3 shall not have been delivered
to the Institutional Trustee within 60 days after the giving of such notice of
resignation or delivery of the instrument of removal, the Institutional Trustee
may petition, at the expense of the Trust, any Federal, state or District of
Columbia court of competent jurisdiction for the appointment of a Successor
Institutional Trustee. Such court may thereupon, after prescribing such notice,
if any, as it may deem proper, appoint a Successor Institutional Trustee. The
Institutional Trustee shall have no liability for the selection of such
successor pursuant to this Section 4.3.

      The Institutional Trustee may be removed by the act of the Holders of a
Majority in liquidation amount of the Capital Securities, delivered to the
Institutional Trustee (in its individual capacity and on behalf of the Trust) if
an Event of Default shall have occurred and be continuing. If the Institutional
Trustee shall be so removed, the Holders of Capital Securities, by act of the
Holders of a Majority in liquidation amount of the Capital Securities then
outstanding delivered to the Institutional Trustee, shall promptly appoint a
Successor Institutional Trustee, and such Successor Institutional Trustee shall
comply with the applicable requirements of this Section 4.3. If no Successor
Institutional Trustee shall have been so appointed by the Holders of a Majority
in liquidation amount of the Capital Securities and accepted appointment in the
manner required by this Section 4.3, within 30 days after delivery of an
instrument of removal, any Holder who has been a Holder of the Securities for at
least 6 months may, on behalf of himself and all others similarly situated,
petition any Federal, state or District of Columbia court of competent
jurisdiction for the appointment of the Successor Institutional Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Institutional Trustee.

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<PAGE>

      The Institutional Trustee shall give notice of its resignation and removal
and each appointment of a Successor Institutional Trustee to all Holders in the
manner provided in Section 13.1(d) and shall give notice to the Sponsor. Each
notice shall include the name of the Successor Institutional Trustee and the
address of its Corporate Trust Office.

      (b)   In case of the appointment hereunder of a Successor Institutional
Trustee, the retiring Institutional Trustee and the Successor Institutional
Trustee shall execute and deliver an amendment hereto wherein the Successor
Institutional Trustee shall accept such appointment and which (i) shall contain
such provisions as shall be necessary or desirable to transfer and confirm to,
and to vest in, the Successor Institutional Trustee all the rights, powers,
trusts and duties of the retiring Institutional Trustee with respect to the
Securities and the Trust and (ii) shall add to or change any of the provisions
of this Declaration as shall be necessary to provide for or facilitate the
administration of the Trust by more than one Institutional Trustee, it being
understood that nothing herein or in such amendment shall constitute such
Institutional Trustees co-trustees and upon the execution and delivery of such
amendment the resignation or removal of the retiring Institutional Trustee shall
become effective to the extent provided therein and each Successor Institutional
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Institutional Trustee;
but, on request of the Trust or any Successor Institutional Trustee such
retiring Institutional Trustee shall duly assign, transfer and deliver to such
Successor Institutional Trustee all Trust Property, all proceeds thereof and
money held by such retiring Institutional Trustee hereunder with respect to the
Securities and the Trust.

      (c)   No Institutional Trustee shall be liable for the acts or omissions
to act of any Successor Institutional Trustee.

      (d)   The Holders of the Capital Securities will have no right to vote to
appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Holder of the Common Securities.

      SECTION 4.4. INSTITUTIONAL TRUSTEE VACANCIES. If the Institutional Trustee
ceases to hold office for any reason a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Institutional Trustee shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a trustee appointed in accordance with Section 4.3.

      SECTION 4.5. EFFECT OF VACANCIES. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of the Institutional Trustee shall not operate to dissolve,
terminate or annul the Trust or terminate this Declaration.

      SECTION 4.6. MEETINGS OF THE INSTITUTIONAL TRUSTEE AND THE ADMINISTRATORS.
Meetings of the Administrators shall be held from time to time upon the call of
an Administrator. Regular meetings of the Administrators may be held in person
in the United States or by telephone, at a place (if applicable) and time fixed
by resolution of the Administrators. Notice of any in-person meetings of the
Institutional Trustee with the Administrators or meetings of the Administrators
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 48 hours before
such meeting. Notice of any telephonic meetings of the Institutional Trustee
with the Administrators or meetings of the Administrators or any committee
thereof shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of the Institutional Trustee or an Administrator, as the case may be,
at a meeting shall constitute a waiver of notice of such meeting except where
the Institutional Trustee or an Administrator, as the case may be, attends a
meeting for the express purpose of objecting to the transaction of any activity
on the grounds that the meeting has not

                                       21

<PAGE>

been lawfully called or convened. Unless provided otherwise in this Declaration,
any action of the Institutional Trustee or the Administrators, as the case may
be, may be taken at a meeting by vote of the Institutional Trustee or a majority
vote of the Administrators present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided that a Quorum is present,
or without a meeting by the unanimous written consent of the Institutional
Trustee or the Administrators. Meetings of the Institutional Trustee and the
Administrators together shall be held from time to time upon the call of the
Institutional Trustee or an Administrator.

      SECTION 4.7. DELEGATION OF POWER.

      (a)   Any Administrator may, by power of attorney consistent with
applicable law, delegate to any other natural person over the age of 21 that is
a U.S. Person his or her power for the purpose of executing any documents
contemplated in Section 2.6; and

      (b)   the Administrators shall have power to delegate from time to time to
such of their number the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Administrators
or otherwise as the Administrators may deem expedient, to the extent such
delegation is not prohibited by applicable law or contrary to the provisions of
the Trust, as set forth herein.

      SECTION 4.8. CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any
Person into which the Institutional Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Institutional Trustee shall be a party,
or any Person succeeding to all or substantially all the corporate trust
business of the Institutional Trustee shall be the successor of the
Institutional Trustee hereunder, provided such Person shall be otherwise
qualified and eligible under this Article, without the execution or filing of
any paper or any further act on the part of any of the parties hereto.

                                    ARTICLE V

                                  DISTRIBUTIONS

      SECTION 5.1. DISTRIBUTIONS. Holders shall receive Distributions in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Capital Securities and the Common Securities
in accordance with the preferences set forth in their respective terms. If and
to the extent that the Debenture Issuer makes a payment of Interest or any
principal on the Debentures held by the Institutional Trustee, the Institutional
Trustee shall and is directed, to the extent funds are available for that
purpose, to make a distribution (a "Distribution") of such amounts to Holders.

                                   ARTICLE VI

                             ISSUANCE OF SECURITIES

      SECTION 6.1. GENERAL PROVISIONS REGARDING SECURITIES.

      (a)   The Administrators shall, on behalf of the Trust, issue one series
of capital securities substantially in the form of Exhibit A-1 representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I and one series of common securities representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I. The Trust shall issue no securities or other interests
in the assets of the Trust other than the Capital Securities and the Common
Securities. The Capital Securities rank pari passu to, and payment thereon shall
be made Pro Rata with, the Common Securities except that, where an Event of
Default has occurred and is

                                       22

<PAGE>

continuing, the rights of Holders of the Common Securities to payment in respect
of Distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights to payment of the Holders of the Capital Securities
as set forth in Annex I.

      (b)   The Certificates shall be signed on behalf of the Trust by one or
more Administrators. Such signature shall be the facsimile or manual signature
of any Administrator. In case any Administrator of the Trust who shall have
signed any of the Securities shall cease to be such Administrator before the
Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrator, and any Certificate may be signed on
behalf of the Trust by such persons who, at the actual date of execution of such
Security, shall be an Administrator of the Trust, although at the date of the
execution and delivery of the Declaration any such person was not such an
Administrator. A Capital Security shall not be valid until authenticated by the
facsimile or manual signature of an Authorized Officer of the Institutional
Trustee. Such signature shall be conclusive evidence that the Capital Security
has been authenticated under this Declaration. Upon written order of the Trust
signed by one Administrator, the Institutional Trustee shall authenticate the
Capital Securities for original issue. The Institutional Trustee may appoint an
authenticating agent that is a U.S. Person acceptable to the Trust to
authenticate the Capital Securities. A Common Security need not be so
authenticated.

      (c)   The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.

      (d)   Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and,
except as provided in Section 9.1(b) with respect to the Common Securities,
non-assessable.

      (e)   Every Person, by virtue of having become a Holder in accordance with
the terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Declaration and the
Guarantee.

      SECTION 6.2. PAYING AGENT, TRANSFER AGENT AND REGISTRAR. The Trust shall
maintain in Hartford, Connecticut, an office or agency where the Capital
Securities may be presented for payment ("Paying Agent"), and an office or
agency where Securities may be presented for registration of transfer or
exchange (the "Transfer Agent"). The Trust shall keep or cause to be kept at
such office or agency a register for the purpose of registering Securities,
transfers and exchanges of Securities, such register to be held by a registrar
(the "Registrar"). The Administrators may appoint the Paying Agent, the
Registrar and the Transfer Agent and may appoint one or more additional Paying
Agents or one or more co-Registrars, or one or more co-Transfer Agents in such
other locations as it shall determine. The term "Paying Agent" includes any
additional paying agent, the term "Registrar" includes any additional registrar
or co-Registrar and the term "Transfer Agent" includes any additional transfer
agent. The Administrators may change any Paying Agent, Transfer Agent or
Registrar at any time without prior notice to any Holder. The Administrators
shall notify the Institutional Trustee of the name and address of any Paying
Agent, Transfer Agent and Registrar not a party to this Declaration. The
Administrators hereby initially appoint the Institutional Trustee to act as
Paying Agent, Transfer Agent and Registrar for the Capital Securities and the
Common Securities. The Institutional Trustee or any of its Affiliates in the
United States may act as Paying Agent, Transfer Agent or Registrar.

      SECTION 6.3. FORM AND DATING. The Capital Securities and the Institutional
Trustee's certificate of authentication thereon shall be substantially in the
form of Exhibit A-1, and the Common Securities shall be substantially in the
form of Exhibit A-2, each of which is hereby incorporated in and expressly made
a part of this Declaration. Certificates may be typed, printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrators, as conclusively

                                       23

<PAGE>

evidenced by their execution thereof. The Securities may have letters, numbers,
notations or other marks of identification or designation and such legends or
endorsements required by law, stock exchange rule, agreements to which the Trust
is subject if any, or usage (provided that any such notation, legend or
endorsement is in a form acceptable to the Sponsor). The Trust at the direction
of the Sponsor shall furnish any such legend not contained in Exhibit A-1 to the
Institutional Trustee in writing. Each Capital Security shall be dated on or
before the date of its authentication. The terms and provisions of the
Securities set forth in Annex I and the forms of Securities set forth in
Exhibits A-1 and A-2 are part of the terms of this Declaration and to the extent
applicable, the Institutional Trustee, the Administrators and the Sponsor, by
their execution and delivery of this Declaration, expressly agree to such terms
and provisions and to be bound thereby. Capital Securities will be issued only
in blocks having a stated liquidation amount of not less than $100,000.00 and
any multiple of $1,000.00 in excess thereof.

      The Capital Securities are being offered and sold by the Trust pursuant to
the Placement Agreement in definitive, registered form without coupons and with
the Restricted Securities Legend.

      SECTION 6.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.

      If:

      (a)   any mutilated Certificates should be surrendered to the Registrar,
or if the Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate; and

      (b)   there shall be delivered to the Registrar, the Administrators and
the Institutional Trustee such security or indemnity as may be required by them
to keep each of them harmless;

then, in the absence of notice that such Certificate shall have been acquired by
a protected purchaser, an Administrator on behalf of the Trust shall execute
(and in the case of a Capital Security Certificate, the Institutional Trustee
shall authenticate) and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 6.4, the Registrar or the Administrators may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection therewith. Any duplicate Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
relevant Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.

      SECTION 6.5. TEMPORARY SECURITIES. Until definitive Securities are ready
for delivery, the Administrators may prepare and, in the case of the Capital
Securities, the Institutional Trustee shall authenticate, temporary Securities.
Temporary Securities shall be substantially in the form of definitive Securities
but may have variations that the Administrators consider appropriate for
temporary Securities. Without unreasonable delay, the Administrators shall
prepare and, in the case of the Capital Securities, the Institutional Trustee
shall authenticate, definitive Securities in exchange for temporary Securities.

      SECTION 6.6. CANCELLATION. The Administrators at any time may deliver
Securities to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any Securities surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all Securities surrendered for registration of transfer,
payment, replacement or cancellation and shall dispose of such canceled
Securities as the Administrators direct. The Administrators may not issue new
Securities to replace Securities that have been paid or that have been delivered
to the Institutional Trustee for cancellation.

                                       24

<PAGE>

      SECTION 6.7. RIGHTS OF HOLDERS; WAIVERS OF PAST DEFAULTS.

      (a)   The legal title to the Trust Property is vested exclusively in the
Institutional Trustee (in its capacity as such) in accordance with Section 2.5,
and the Holders shall not have any right or title therein other than the
undivided beneficial interest in the assets of the Trust conferred by their
Securities and they shall have no right to call for any partition or division of
property, profits or rights of the Trust except as described below. The
Securities shall be personal property giving only the rights specifically set
forth therein and in this Declaration. The Securities shall have no preemptive
or similar rights.

      (b)   For so long as any Capital Securities remain outstanding, if upon an
Indenture Event of Default, the Debenture Trustee fails or the holders of not
less than 25% in principal amount of the outstanding Debentures fail to declare
the principal of all of the Debentures to be immediately due and payable, the
Holders of a Majority in liquidation amount of the Capital Securities then
outstanding shall have the right to make such declaration by a notice in writing
to the Institutional Trustee, the Sponsor and the Debenture Trustee.

      At any time after a declaration of acceleration with respect to the
Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Debenture Trustee as provided in the
Indenture, if the Institutional Trustee, subject to the provisions hereof, fails
to annul any such declaration and waive such default, the Holders of a Majority
in liquidation amount of the Capital Securities, by written notice to the
Institutional Trustee, the Sponsor and the Debenture Trustee, may rescind and
annul such declaration and its consequences if:

            (i)   the Debenture Issuer has paid or deposited with the Debenture
      Trustee a sum sufficient to pay

                  (A)   all overdue installments of interest on all of the
            Debentures,

                  (B)   any accrued Additional Interest on all of the
            Debentures,

                  (C)   the principal of (and premium, if any, on) any
            Debentures that have become due otherwise than by such declaration
            of acceleration and interest and Additional Interest thereon at the
            rate borne by the Debentures, and

                  (D)   all sums paid or advanced by the Debenture Trustee under
            the Indenture and the reasonable compensation, expenses,
            disbursements and advances of the Debenture Trustee and the
            Institutional Trustee, their agents and counsel; and

            (ii)  all Events of Default with respect to the Debentures, other
      than the non-payment of the principal of the Debentures that has become
      due solely by such acceleration, have been cured or waived as provided in
      Section 5.7 of the Indenture.

      The Holders of at least a Majority in liquidation amount of the Capital
Securities may, on behalf of the Holders of all the Capital Securities, waive
any past default under the Indenture or any Indenture Event of Default, except a
default or Indenture Event of Default in the payment of principal or interest on
the Debentures (unless such default or Indenture Event of Default has been cured
and a sum sufficient to pay all matured installments of interest and principal
due otherwise than by acceleration has been deposited with the Debenture
Trustee) or a default under the Indenture or an Indenture Event of Default in
respect of a covenant or provision that under the Indenture cannot be modified
or amended without the consent of the holder of each outstanding Debenture. No
such rescission shall affect any subsequent default or impair any right
consequent thereon.

                                       25

<PAGE>

      Upon receipt by the Institutional Trustee of written notice declaring such
an acceleration, or rescission and annulment thereof, by Holders of any part of
the Capital Securities, a record date shall be established for determining
Holders of outstanding Capital Securities entitled to join in such notice, which
record date shall be at the close of business on the day the Institutional
Trustee receives such notice. The Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to join in such
notice, whether or not such Holders remain Holders after such record date;
provided, that unless such declaration of acceleration, or rescission and
annulment, as the case may be, shall have become effective by virtue of the
requisite percentage having joined in such notice prior to the day that is 90
days after such record date, such notice of declaration of acceleration, or
rescission and annulment, as the case may be, shall automatically and without
further action by any Holder be canceled and of no further effect. Nothing in
this paragraph shall prevent a Holder, or a proxy of a Holder, from giving,
after expiration of such 90-day period, a new written notice of declaration of
acceleration, or rescission and annulment thereof, as the case may be, that is
identical to a written notice that has been canceled pursuant to the proviso to
the preceding sentence, in which event a new record date shall be established
pursuant to the provisions of this Section 6.7.

      (c)   Except as otherwise provided in paragraphs (a) and (b) of this
Section 6.7, the Holders of at least a Majority in liquidation amount of the
Capital Securities may, on behalf of the Holders of all the Capital Securities,
waive any past default or Event of Default and its consequences. Upon such
waiver, any such default or Event of Default shall cease to exist, and any
default or Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default or impair any right
consequent thereon.

                                  ARTICLE VII

                      DISSOLUTION AND TERMINATION OF TRUST

      SECTION 7.1. DISSOLUTION AND TERMINATION OF TRUST.

      (a)   The Trust shall dissolve on the first to occur of:

            (i)   unless earlier dissolved, on March 17, 2039, the expiration of
      the term of the Trust;

            (ii)  upon a Bankruptcy Event with respect to the Sponsor, the Trust
      or the Debenture Issuer;

            (iii) upon the filing of a certificate of dissolution or its
      equivalent with respect to the Sponsor (other than in connection with a
      merger, consolidation or similar transaction not prohibited by the
      Indenture, this Declaration or the Guarantee, as the case may be) or upon
      the revocation of the charter of the Sponsor and the expiration of 90 days
      after the date of revocation without a reinstatement thereof;

            (iv)  upon the distribution of the Debentures to the Holders of the
      Securities, upon exercise of the right of the Holder of all of the
      outstanding Common Securities to dissolve the Trust as provided in Annex I
      hereto;

            (v)   upon the entry of a decree of judicial dissolution of the
      Holder of the Common Securities, the Sponsor, the Trust or the Debenture
      Issuer;

                                       26

<PAGE>

            (vi)  when all of the Securities shall have been called for
      redemption and the amounts necessary for redemption thereof shall have
      been paid to the Holders in accordance with the terms of the Securities;
      or

            (vii) before the issuance of any Securities, with the consent of the
      Institutional Trustee and the Sponsor.

      (b)   As soon as is practicable after the occurrence of an event referred
to in Section 7.1(a), and after satisfaction of liabilities to creditors of the
Trust as required by applicable law, including of the Statutory Trust Act, and
subject to the terms set forth in Annex I, the Institutional Trustee shall
terminate the Trust by filing a certificate of cancellation with the Secretary
of State of the State of Connecticut.

      (c)   The provisions of Section 2.9 and Article IX shall survive the
termination of the Trust.

                                  ARTICLE VIII

                              TRANSFER OF INTERESTS

      SECTION 8.1. GENERAL.

      (a)   Subject to Section 8.1(c), where Capital Securities are presented to
the Registrar or a co-registrar with a request to register a transfer or to
exchange them for an equal number of Capital Securities represented by different
certificates, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfer and exchanges, the Trust shall issue and the Institutional Trustee
shall authenticate Capital Securities at the Registrar's request.

      (b)   Upon issuance of the Common Securities, the Sponsor shall acquire
and retain beneficial and record ownership of the Common Securities and for so
long as the Securities remain outstanding, the Sponsor shall maintain 100%
ownership of the Common Securities; provided, however, that any permitted
successor of the Sponsor, in its capacity as Debenture Issuer, under the
Indenture that is a U.S. Person may succeed to the Sponsor's ownership of the
Common Securities.

      (c)   Capital Securities may only be transferred, in whole or in part, in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by applicable law,
any transfer or purported transfer of any Security not made in accordance with
this Declaration shall be null and void and will be deemed to be of no legal
effect whatsoever and any such transferee shall be deemed not to be the holder
of such Capital Securities for any purpose, including but not limited to the
receipt of Distributions on such Capital Securities, and such transferee shall
be deemed to have no interest whatsoever in such Capital Securities.

      (d)   The Registrar shall provide for the registration of Securities and
of transfers of Securities, which will be effected without charge but only upon
payment (with such indemnity as the Registrar may require) in respect of any tax
or other governmental charges that may be imposed in relation to it. Upon
surrender for registration of transfer of any Securities, the Registrar shall
cause one or more new Securities of the same tenor to be issued in the name of
the designated transferee or transferees. Every Security surrendered for
registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each Security surrendered for
registration of transfer shall be canceled by the Institutional Trustee pursuant
to Section 6.6. A transferee of a Security shall be entitled to the rights and
subject to the obligations of a Holder hereunder upon the receipt by such
transferee of a Security. By acceptance of a Security, each transferee shall be
deemed to have agreed to be bound by this Declaration.

                                       27

<PAGE>

      (e)   The Trust shall not be required (i) to issue, register the transfer
of, or exchange any Securities during a period beginning at the opening of
business 15 days before the day of any selection of Securities for redemption
and ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all Holders of the
Securities to be redeemed, or (ii) to register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.

      SECTION 8.2. TRANSFER PROCEDURES AND RESTRICTIONS.

      (a)   The Capital Securities shall bear the Restricted Securities Legend,
which shall not be removed unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of counsel satisfactory to
the Trustee, as may be reasonably required by the Trust, that neither the legend
nor the restrictions on transfer set forth therein are required to ensure that
transfers thereof comply with the provisions of the Securities Act. Upon
provision of such satisfactory evidence, the Institutional Trustee, at the
written direction of the Trust, shall authenticate and deliver Capital
Securities that do not bear the legend.

      (b)   Except as permitted by Section 8.2(a), each Capital Security shall
bear a legend (the "Restricted Securities Legend") in substantially the
following form and a Capital Security shall not be transferred except in
compliance with such legend, unless otherwise determined by the Sponsor, upon
the advice of counsel expert in securities law, in accordance with applicable
law:

            THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY
      OTHER APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
      PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
      PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
      REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
      THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE
      STATE SECURITIES LAWS. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
      HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY ONLY (A)
      TO THE SPONSOR OR THE TRUST, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
      HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A PERSON WHOM
      THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER IN A
      TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A SO LONG AS THIS SECURITY
      IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN ACCORDANCE WITH RULE 144A,
      (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
      RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER THE SECURITIES
      ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
      SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
      THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
      INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
      VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN
      VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE
      EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
      SUBJECT TO THE SPONSOR'S AND THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER,
      SALE OR TRANSFER

                                       28

<PAGE>

      TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
      OTHER INFORMATION SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE
      DECLARATION OF TRUST, A COPY OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR
      THE TRUST. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE
      CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

            THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
      REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
      RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
      EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
      SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")
      (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN
      ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON
      INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR
      ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR
      EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED
      TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER
      APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT
      PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH
      RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
      SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY
      ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE
      BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO
      WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON
      ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON
      OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE
      SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED
      TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR
      WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

            THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS
      HAVING A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES)
      AND MULTIPLES OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF
      SECURITIES IN A BLOCK HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00
      SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER.

            THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE
      FOREGOING RESTRICTIONS.

      (c)   To permit registrations of transfers and exchanges, the Trust shall
execute and the Institutional Trustee shall authenticate Capital Securities at
the Registrar's request.

      (d)   Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Registrar or the
Sponsor may require) in respect of any tax or other governmental charge that may
be imposed in relation to it.

                                       29

<PAGE>

      (e)   All Capital Securities issued upon any registration of transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration as
the Capital Securities surrendered upon such registration of transfer or
exchange.

      SECTION 8.3. DEEMED SECURITY HOLDERS. The Trust, the Administrators, the
Institutional Trustee, the Paying Agent, the Transfer Agent or the Registrar may
treat the Person in whose name any Certificate shall be registered on the books
and records of the Trust as the sole holder of such Certificate and of the
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Securities represented by such Certificate on the part of
any Person, whether or not the Trust, the Administrators, the Institutional
Trustee, the Paying Agent, the Transfer Agent or the Registrar shall have actual
or other notice thereof.

                                   ARTICLE IX

                           LIMITATION OF LIABILITY OF
             HOLDERS OF SECURITIES, INSTITUTIONAL TRUSTEE OR OTHERS

      SECTION 9.1. LIABILITY.

      (a)   Except as expressly set forth in this Declaration, the Guarantee and
the terms of the Securities, the Sponsor shall not be:

            (i)   personally liable for the return of any portion of the capital
      contributions (or any return thereon) of the Holders of the Securities
      which shall be made solely from assets of the Trust; or

            (ii)  required to pay to the Trust or to any Holder of the
      Securities any deficit upon dissolution of the Trust or otherwise.

      (b)   The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than with respect to the Securities)
to the extent not satisfied out of the Trust's assets.

      (c)   Pursuant to the Statutory Trust Act, the Holders of the Capital
Securities shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Connecticut.

      SECTION 9.2. EXCULPATION.

      (a)   No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.

      (b)   An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and, if selected by such

                                       30

<PAGE>

Indemnified Person, has been selected by such Indemnified Person with reasonable
care by or on behalf of the Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Securities might properly be paid.

      SECTION 9.3. FIDUCIARY DUTY.

      (a)   To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity, are agreed by the
parties hereto to replace such other duties and liabilities of the Indemnified
Person.

      (b)   Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:

            (i)   in its "discretion" or under a grant of similar authority, the
      Indemnified Person shall be entitled to consider such interests and
      factors as it desires, including its own interests, and shall have no duty
      or obligation to give any consideration to any interest of or factors
      affecting the Trust or any other Person; or

            (ii)  in its "good faith" or under another express standard, the
      Indemnified Person shall act under such express standard and shall not be
      subject to any other or different standard imposed by this Declaration or
      by applicable law.

      SECTION 9.4. INDEMNIFICATION.

      (a)   The Sponsor shall indemnify, to the full extent permitted by law,
any Indemnified Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Trust) arising out of or in connection with the acceptance or
administration of this Declaration by reason of the fact that he is or was an
Indemnified Person against expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Indemnified Person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.

      (b)   The Sponsor shall indemnify, to the full extent permitted by law,
any Indemnified Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Trust to procure a judgment in its favor arising out of or in connection with
the acceptance or administration of this Declaration by reason of the fact that
he is or was an Indemnified Person against expenses (including reasonable
attorneys' fees and expenses) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust; provided, however, that no such indemnification
shall be made in respect of any claim, issue or

                                       31

<PAGE>

matter as to which such Indemnified Person shall have been adjudged to be liable
to the Trust unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.

      (c)   To the extent that an Indemnified Person shall be successful on the
merits or otherwise (including dismissal of an action without prejudice or the
settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b) of this Section
9.4, or in defense of any claim, issue or matter therein, he shall be
indemnified, to the full extent permitted by law, against expenses (including
attorneys' fees and expenses) actually and reasonably incurred by him in
connection therewith.

      (d)   Any indemnification of an Administrator under paragraphs (a) and (b)
of this Section 9.4 (unless ordered by a court) shall be made by the Sponsor
only as authorized in the specific case upon a determination that
indemnification of the Indemnified Person is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Administrators by a majority
vote of a Quorum consisting of such Administrators who were not parties to such
action, suit or proceeding, (ii) if such a Quorum is not obtainable, or, even if
obtainable, if a Quorum of disinterested Administrators so directs, by
independent legal counsel in a written opinion, or (iii) by the Common Security
Holder of the Trust.

      (e)   To the fullest extent permitted by law, expenses (including
reasonable attorneys' fees and expenses) incurred by an Indemnified Person in
defending a civil, criminal, administrative or investigative action, suit or
proceeding referred to in paragraphs (a) and (b) of this Section 9.4 shall be
paid by the Sponsor in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Sponsor as authorized in this Section 9.4.
Notwithstanding the foregoing, no advance shall be made by the Sponsor if a
determination is reasonably and promptly made (i) by the Administrators by a
majority vote of a Quorum of disinterested Administrators, (ii) if such a Quorum
is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrators so directs, by independent legal counsel in a written opinion or
(iii) by the Common Security Holder of the Trust, that, based upon the facts
known to the Administrators, counsel or the Common Security Holder at the time
such determination is made, such Indemnified Person acted in bad faith or in a
manner that such Indemnified Person did not believe to be in the best interests
of the Trust, or, with respect to any criminal proceeding, that such Indemnified
Person believed or had reasonable cause to believe his conduct was unlawful. In
no event shall any advance be made in instances where the Administrators,
independent legal counsel or the Common Security Holder reasonably determine
that such Indemnified Person deliberately breached his duty to the Trust or its
Common or Capital Security Holders.

      (f)   The Institutional Trustee, at the sole cost and expense of the
Sponsor, retains the right to representation by counsel of its own choosing in
any action, suit or any other proceeding for which it is indemnified under
paragraphs (a) and (b) of this Section 9.4, without affecting its right to
indemnification hereunder or waiving any rights afforded to it under this
Declaration or applicable law.

      (g)   The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 9.4 shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
stockholders or disinterested directors of the Sponsor or Capital Security
Holders of the Trust or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office. All rights to
indemnification under this Section 9.4 shall be deemed to be provided by a
contract

                                       32

<PAGE>

between the Sponsor and each Indemnified Person who serves in such capacity at
any time while this Section 9.4 is in effect. Any repeal or modification of this
Section 9.4 shall not affect any rights or obligations then existing.

      (h)   The Sponsor or the Trust may purchase and maintain insurance on
behalf of any Person who is or was an Indemnified Person against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Sponsor would have the power to indemnify
him against such liability under the provisions of this Section 9.4.

      (i)   For purposes of this Section 9.4, references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any Person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
9.4 with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.

      (j)   The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 9.4 shall, unless otherwise provided when
authorized or ratified, (i) continue as to a Person who has ceased to be an
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person; and (ii) survive the termination or expiration
of this Declaration or the earlier removal or resignation of an Indemnified
Person.

      SECTION 9.5. OUTSIDE BUSINESSES. Any Covered Person, the Sponsor and the
Institutional Trustee may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the Holders of
Securities shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. None of any Covered Person, the Sponsor or
the Institutional Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the Sponsor and the Institutional Trustee shall have the right
to take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person and the Institutional Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of holders of, securities or other obligations of the Sponsor or its
Affiliates.

      SECTION 9.6. COMPENSATION; FEE. The Sponsor agrees:

      (a)   to pay to the Institutional Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall
agree from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and

      (b)   except as otherwise expressly provided herein, to reimburse the
Institutional Trustee upon request for all reasonable expenses, disbursements
and advances incurred or made by the Institutional Trustee in accordance with
any provision of this Declaration (including the reasonable compensation and the
expenses and disbursements of their respective agents and counsel), except any
such expense, disbursement or advance as may be attributable to its negligence,
bad faith or willful misconduct.

                                       33

<PAGE>

      The provisions of this Section 9.6 shall survive the dissolution of the
Trust and the termination of this Declaration and the removal or resignation of
the Institutional Trustee.

      No Institutional Trustee may claim any lien or charge on any property of
the Trust as a result of any amount due pursuant to this Section 9.6.

                                    ARTICLE X

                                   ACCOUNTING

      SECTION 10.1. FISCAL YEAR. The fiscal year ("Fiscal Year") of the Trust
shall be the calendar year, or such other year as is required by the Code.

      SECTION 10.2. CERTAIN ACCOUNTING MATTERS.

      (a)   At all times during the existence of the Trust, the Administrators
shall keep, or cause to be kept at the principal office of the Trust in the
United States, as defined for purposes of Treasury Regulations section
301.7701-7, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be maintained, at the Sponsor's expense, in accordance with generally
accepted accounting principles, consistently applied. The books of account and
the records of the Trust shall be examined by and reported upon (either
separately or as part of the Sponsor's regularly prepared consolidated financial
report) as of the end of each Fiscal Year of the Trust by a firm of independent
certified public accountants selected by the Administrators.

      (b)   The Administrators shall cause to be duly prepared and delivered to
each of the Holders of Securities Form 1099 or such other annual United States
federal income tax information statement required by the Code, containing such
information with regard to the Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Administrators shall endeavor
to deliver all such statements within 30 days after the end of each Fiscal Year
of the Trust.

      (c)   The Administrators, at the Sponsor's expense, shall cause to be duly
prepared at the principal office of the Sponsor in the United States, as `United
States' is defined in Section 7701(a)(9) of the Code (or at the principal office
of the Trust if the Sponsor has no such principal office in the United States),
and filed an annual United States federal income tax return on a Form 1041 or
such other form required by United States federal income tax law, and any other
annual income tax returns required to be filed by the Administrators on behalf
of the Trust with any state or local taxing authority.

      SECTION 10.3. BANKING. The Trust shall maintain in the United States, as
defined for purposes of Treasury Regulations section 301.7701-7, one or more
bank accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Debentures held by the
Institutional Trustee shall be made directly to the Property Account and no
other funds of the Trust shall be deposited in the Property Account. The sole
signatories for such accounts (including the Property Account) shall be
designated by the Institutional Trustee.

      SECTION 10.4. WITHHOLDING. The Institutional Trustee or any Paying Agent
and the Administrators shall comply with all withholding requirements under
United States federal, state and local law. The Institutional Trustee or any
Paying Agent shall request, and each Holder shall provide to the Institutional
Trustee or any Paying Agent, such forms or certificates as are necessary to
establish an exemption from withholding with respect to the Holder, and any
representations and forms as shall reasonably be requested by the Institutional
Trustee or any Paying Agent to assist it in determining the

                                       34

<PAGE>

extent of, and in fulfilling, its withholding obligations. The Administrators
shall file required forms with applicable jurisdictions and, unless an exemption
from withholding is properly established by a Holder, shall remit amounts
withheld with respect to the Holder to applicable jurisdictions. To the extent
that the Institutional Trustee or any Paying Agent is required to withhold and
pay over any amounts to any authority with respect to distributions or
allocations to any Holder, the amount withheld shall be deemed to be a
Distribution in the amount of the withholding to the Holder. In the event of any
claimed overwithholding, Holders shall be limited to an action against the
applicable jurisdiction. If the amount required to be withheld was not withheld
from actual Distributions made, the Institutional Trustee or any Paying Agent
may reduce subsequent Distributions by the amount of such withholding.

                                   ARTICLE XI

                             AMENDMENTS AND MEETINGS

      SECTION 11.1. AMENDMENTS.

      (a)   Except as otherwise provided in this Declaration or by any
applicable terms of the Securities, this Declaration may only be amended by a
written instrument approved and executed by the Institutional Trustee.

      (b)   Notwithstanding any other provision of this Article XI, an amendment
may be made, and any such purported amendment shall be valid and effective only
if:

            (i)   the Institutional Trustee shall have first received

                  (A)   an Officers' Certificate from each of the Trust and the
            Sponsor that such amendment is permitted by, and conforms to, the
            terms of this Declaration (including the terms of the Securities);
            and

                  (B)   an opinion of counsel (who may be counsel to the Sponsor
            or the Trust) that such amendment is permitted by, and conforms to,
            the terms of this Declaration (including the terms of the
            Securities); and

            (ii)  the result of such amendment would not be to

                  (A)   cause the Trust to cease to be classified for purposes
            of United States federal income taxation as a grantor trust; or

                  (B)   cause the Trust to be deemed to be an Investment Company
            required to be registered under the Investment Company Act.

      (c)   Except as provided in Section 11.1(d), (e) or (h), no amendment
shall be made, and any such purported amendment shall be void and ineffective,
unless the Holders of a Majority in liquidation amount of the Capital Securities
shall have consented to such amendment.

      (d)   In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration may
not be amended to (i) change the amount or timing of any Distribution on the
Securities or otherwise adversely affect the amount of any Distribution required
to be made in respect of the Securities as of a specified date or change any
conversion or exchange provisions or (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such date.

                                       35

<PAGE>

      (e)   Sections 9.1(b) and 9.1(c) and this Section 11.1 shall not be
amended without the consent of all of the Holders of the Securities.

      (f)   Article III shall not be amended without the consent of the Holders
of a Majority in liquidation amount of the Common Securities.

      (g)   The rights of the Holders of the Capital Securities under Article IV
to appoint and remove the Institutional Trustee shall not be amended without the
consent of the Holders of a Majority in liquidation amount of the Capital
Securities.

      (h)   This Declaration may be amended by the Institutional Trustee and the
Holders of a Majority in liquidation amount of the Common Securities without the
consent of the Holders of the Capital Securities to:

            (i)   cure any ambiguity;

            (ii)  correct or supplement any provision in this Declaration that
      may be defective or inconsistent with any other provision of this
      Declaration;

            (iii) add to the covenants, restrictions or obligations of the
      Sponsor; or

            (iv)  modify, eliminate or add to any provision of this Declaration
      to such extent as may be necessary to ensure that the Trust will be
      classified for United States federal income tax purposes at all times as a
      grantor trust and will not be required to register as an Investment
      Company (including without limitation to conform to any change in Rule
      3a-5, Rule 3a-7 or any other applicable rule under the Investment Company
      Act or written change in interpretation or application thereof by any
      legislative body, court, government agency or regulatory authority) which
      amendment does not have a material adverse effect on the rights,
      preferences or privileges of the Holders of Securities;

      provided, however, that no such modification, elimination or addition
referred to in clauses (i), (ii), (iii) or (iv) shall adversely affect in any
material respect the powers, preferences or special rights of Holders of Capital
Securities.

      SECTION 11.2. MEETINGS OF THE HOLDERS OF SECURITIES; ACTION BY WRITTEN
CONSENT.

      (a)   Meetings of the Holders of any class of Securities may be called at
any time by the Administrators (or as provided in the terms of the Securities)
to consider and act on any matter on which Holders of such class of Securities
are entitled to act under the terms of this Declaration or the terms of the
Securities. The Administrators shall call a meeting of the Holders of such class
if directed to do so by the Holders of at least 10% in liquidation amount of
such class of Securities. Such direction shall be given by delivering to the
Administrators one or more calls in a writing stating that the signing Holders
of the Securities wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Holders of the Securities
calling a meeting shall specify in writing the Certificates held by the Holders
of the Securities exercising the right to call a meeting and only those
Securities represented by such Certificates shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.

      (b)   Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders of the
Securities:

                                       36

<PAGE>

            (i)   notice of any such meeting shall be given to all the Holders
      of the Securities having a right to vote thereat at least 7 days and not
      more than 60 days before the date of such meeting. Whenever a vote,
      consent or approval of the Holders of the Securities is permitted or
      required under this Declaration, such vote, consent or approval may be
      given at a meeting of the Holders of the Securities. Any action that may
      be taken at a meeting of the Holders of the Securities may be taken
      without a meeting if a consent in writing setting forth the action so
      taken is signed by the Holders of the Securities owning not less than the
      minimum amount of Securities in liquidation amount that would be necessary
      to authorize or take such action at a meeting at which all Holders of the
      Securities having a right to vote thereon were present and voting. Prompt
      notice of the taking of action without a meeting shall be given to the
      Holders of the Securities entitled to vote who have not consented in
      writing. The Administrators may specify that any written ballot submitted
      to the Holders of the Securities for the purpose of taking any action
      without a meeting shall be returned to the Trust within the time specified
      by the Administrators;

            (ii)  each Holder of a Security may authorize any Person to act for
      it by proxy on all matters in which a Holder of Securities is entitled to
      participate, including waiving notice of any meeting, or voting or
      participating at a meeting. No proxy shall be valid after the expiration
      of 11 months from the date thereof unless otherwise provided in the proxy.
      Every proxy shall be revocable at the pleasure of the Holder of the
      Securities executing it. Except as otherwise provided herein, all matters
      relating to the giving, voting or validity of proxies shall be governed by
      the General Corporation Law of the State of Connecticut relating to
      proxies, and judicial interpretations thereunder, as if the Trust were a
      Connecticut corporation and the Holders of the Securities were
      stockholders of a Connecticut corporation; each meeting of the Holders of
      the Securities shall be conducted by the Administrators or by such other
      Person that the Administrators may designate; and

            (iii) unless the Statutory Trust Act, this Declaration, or the terms
      of the Securities otherwise provides, the Administrators, in their sole
      discretion, shall establish all other provisions relating to meetings of
      Holders of Securities, including notice of the time, place or purpose of
      any meeting at which any matter is to be voted on by any Holders of the
      Securities, waiver of any such notice, action by consent without a
      meeting, the establishment of a record date, quorum requirements, voting
      in person or by proxy or any other matter with respect to the exercise of
      any such right to vote; provided, however, that each meeting shall be
      conducted in the United States (as that term is defined in Treasury
      Regulations section 301.7701-7).

                                   ARTICLE XII

                    REPRESENTATIONS OF INSTITUTIONAL TRUSTEE

      SECTION 12.1. REPRESENTATIONS AND WARRANTIES OF INSTITUTIONAL TRUSTEE. The
initial Institutional Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration, and each Successor Institutional
Trustee represents and warrants to the Trust and the Sponsor at the time of the
Successor Institutional Trustee's acceptance of its appointment as Institutional
Trustee, that:

      (a)   the Institutional Trustee is a national banking association with
trust powers, duly organized and validly existing under the laws of the United
States of America with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration;

                                       37

<PAGE>

      (b)   the execution, delivery and performance by the Institutional Trustee
of this Declaration has been duly authorized by all necessary corporate action
on the part of the Institutional Trustee. This Declaration has been duly
executed and delivered by the Institutional Trustee, and it constitutes a legal,
valid and binding obligation of the Institutional Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity (regardless of
whether considered in a proceeding in equity or at law);

      (c)   the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and

      (d)   no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority is required for the execution,
delivery or performance by the Institutional Trustee of this Declaration.

                                  ARTICLE XIII

                                  MISCELLANEOUS

      SECTION 13.1. NOTICES. All notices provided for in this Declaration shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied (which telecopy shall be followed by notice delivered or
mailed by first class mail) or mailed by first class mail, as follows:

      (a)   if given to the Trust, in care of the Administrators at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):

            City National Bank of New Jersey Capital Statutory Trust II
            c/o City National Bancshares Corporation
            900 Broad Street
            Newark, New Jersey 07102
            Attention: Edward R. Wright
            Telecopy:  973-624-5754

      (b)   if given to the Institutional Trustee, at the Institutional
Trustee's mailing address set forth below (or such other address as the
Institutional Trustee may give notice of to the Holders of the Securities):

            U.S. Bank National Association
            225 Asylum Street, Goodwin Square
            Hartford, Connecticut 06103
            Attention: Vice President, Corporate Trust Services Division
            Telecopy:  860-241-6889

            With a copy to:

            U.S. Bank National Association
            1 Federal Street - 3rd Floor
            Boston, Massachusetts 02110
            Attention: Paul D. Allen, Corporate Trust Services Division
            Telecopy:  617-603-6665

                                       38

<PAGE>

      (c)   if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice of to the Trust):

            City National Bancshares Corporation
            900 Broad Street
            Newark, New Jersey 07102
            Attention: Edward R. Wright
            Telecopy:  973-624-5754

      (d)   if given to any other Holder, at the address set forth on the books
and records of the Trust.

      All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

      SECTION 13.2. GOVERNING LAW. This Declaration and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
law of the State of Connecticut and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Connecticut or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Connecticut; provided, however,
that there shall not be applicable to the Trust, the Institutional Trustee or
this Declaration any provision of the laws (statutory or common) of the State of
Connecticut pertaining to trusts that relate to or regulate, in a manner
inconsistent with the terms hereof (a) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges, (b)
affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (c) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (d) fees or other sums payable to trustees, officers,
agents or employees of a trust, (e) the allocation of receipts and expenditures
to income or principal, or (f) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding or investing trust assets.

      SECTION 13.3. INTENTION OF THE PARTIES. It is the intention of the parties
hereto that the Trust be classified for United States federal income tax
purposes as a grantor trust. The provisions of this Declaration shall be
interpreted to further this intention of the parties.

      SECTION 13.4. HEADINGS. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.

      SECTION 13.5. SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Institutional Trustee shall bind and inure to
the benefit of their respective successors and assigns, whether or not so
expressed.

      SECTION 13.6. PARTIAL ENFORCEABILITY. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.

                                       39

<PAGE>

      SECTION 13.7. COUNTERPARTS. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Institutional Trustee and
Administrators to any of such counterpart signature pages. All of such
counterpart signature pages shall be read as though one, and they shall have the
same force and effect as though all of the signers had signed a single signature
page.

                     Signatures appear on the following page

                                       40

<PAGE>

      IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.

                                          U.S. BANK NATIONAL ASSOCIATION,
                                          as Institutional Trustee

                                          By. __________________________________
                                                   Name:
                                                   Title:

                                          CITY NATIONAL BANCSHARES CORPORATION,
                                          as Sponsor

                                          By: __________________________________
                                                   Name:
                                                   Title:

                                          CITY NATIONAL BANK OF NEW JERSEY
                                          CAPITAL STATUTORY TRUST II

                                          By: __________________________________
                                                   Administrator

                                          By: __________________________________
                                                   Administrator

                                       41

<PAGE>

                                     ANNEX I

                               TERMS OF SECURITIES

            Pursuant to Section 6.1 of the Amended and Restated Declaration of
Trust, dated as of March 17, 2004 (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration):

      1.    Designation and Number.

            (a)   4,000 Floating Rate Capital Securities of City National Bank
of New Jersey Capital Statutory Trust II (the "Trust"), with an aggregate stated
liquidation amount with respect to the assets of the Trust of four million and
00/100 dollars ($4,000,000.00) and a stated liquidation amount with respect to
the assets of the Trust of $1,000.00 per Capital Security, are hereby designated
for the purposes of identification only as the "Capital Securities". The Capital
Security Certificates evidencing the Capital Securities shall be substantially
in the form of Exhibit A-1 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.

            (b)   124 Floating Rate Common Securities of the Trust (the "Common
Securities") will be evidenced by Common Security Certificates substantially in
the form of Exhibit A-2 to the Declaration, with such changes and additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice.

      2.    Distributions.

            (a)   Distributions will be payable on each Security for the
Distribution Period beginning on (and including) the date of original issuance
and ending on (but excluding) the Distribution Payment Date in June 2004 at a
rate per annum of 3.90% and shall bear interest for each successive Distribution
Period beginning on (and including) the Distribution Payment Date in June 2004,
and each succeeding Distribution Payment Date, and ending on (but excluding) the
next succeeding Distribution Payment Date at a rate per annum equal to the
3-Month LIBOR, determined as described below, plus 2.79% (the "Coupon Rate"),
applied to the stated liquidation amount thereof, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears will bear interest thereon compounded quarterly at the
applicable Distribution Rate (to the extent permitted by law). Distributions, as
used herein, include cash distributions and any such compounded distributions
unless otherwise noted. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the Institutional Trustee
and to the extent the Institutional Trustee has funds available therefor. The
amount of the Distribution payable for any Distribution Period will be
calculated by applying the Distribution Rate to the stated liquidation amount
outstanding at the commencement of the Distribution Period on the basis of the
actual number of days in the Distribution Period concerned divided by 360. All
percentages resulting from any calculations on the Capital Securities will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one-millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upward)).

            (b)   Distributions on the Securities will be cumulative, will
accrue from the date of original issuance, and will be payable, subject to
extension of distribution payment periods as described herein, quarterly in
arrears on March 17, June 17, September 17 and December 17 of each year, or if
such

                                      I-1

<PAGE>

day is not a Business Day, then the next succeeding Business Day (each a
"Distribution Payment Date"), commencing on the Distribution Payment Date in
June 2004 when, as and if available for payment. The Debenture Issuer has the
right under the Indenture to defer payments of interest on the Debentures, so
long as no Indenture Event of Default has occurred and is continuing, by
deferring the payment of interest on the Debentures for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to
time, subject to the conditions described below, during which Extension Period
no interest shall be due and payable. During any Extension Period, interest will
continue to accrue on the Debentures, and interest on such accrued interest will
accrue at an annual rate equal to the Distribution Rate in effect for each such
Extension Period, compounded quarterly from the date such interest would have
been payable were it not for the Extension Period, to the extent permitted by
law (such interest referred to herein as "Additional Interest"). No Extension
Period may end on a date other than a Distribution Payment Date. At the end of
any such Extension Period, the Debenture Issuer shall pay all interest then
accrued and unpaid on the Debentures (together with Additional Interest
thereon); provided, however, that no Extension Period may extend beyond the
Maturity Date and provided further, however, that during any such Extension
Period, the Debenture Issuer and its Affiliates shall not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Debenture Issuer's or its
Affiliates' capital stock (other than payments of dividends or distributions to
the Debenture Issuer) or make any guarantee payments with respect to the
foregoing, or (ii) make any payment of principal of or interest or premium, if
any, on or repay, repurchase or redeem any debt securities of the Debenture
Issuer or any Affiliate that rank pari passu in all respects with or junior in
interest to the Debentures (other than, with respect to clauses (i) and (ii)
above, (a) repurchases, redemptions or other acquisitions of shares of capital
stock of the Debenture Issuer in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors or consultants, in connection with a dividend
reinvestment or stockholder stock purchase plan or in connection with the
issuance of capital stock of the Debenture Issuer (or securities convertible
into or exercisable for such capital stock) as consideration in an acquisition
transaction entered into prior to the applicable Extension Period, (b) as a
result of any exchange or conversion of any class or series of the Debenture
Issuer's capital stock (or any capital stock of a subsidiary of the Debenture
Issuer) for any class or series of the Debenture Issuer's capital stock or of
any class or series of the Debenture Issuer's indebtedness for any class or
series of the Debenture Issuer's capital stock, (c) the purchase of fractional
interests in shares of the Debenture Issuer's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, (d) any declaration of a dividend in connection with any
stockholders' rights plan, or the issuance of rights, stock or other property
under any stockholders' rights plan, or the redemption or repurchase of rights
pursuant thereto, (e) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock and any
cash payments in lieu of fractional shares issued in connection therewith, or
(f) payments under the Capital Securities Guarantee). Prior to the termination
of any Extension Period, the Debenture Issuer may further extend such period,
provided that such period together with all such previous and further
consecutive extensions thereof shall not exceed 20 consecutive quarterly
periods, or extend beyond the Maturity Date. Upon the termination of any
Extension Period and upon the payment of all accrued and unpaid interest and
Additional Interest, the Debenture Issuer may commence a new Extension Period,
subject to the foregoing requirements. No interest or Additional Interest shall
be due and payable during an Extension Period, except at the end thereof, but
each installment of interest that would otherwise have been due and payable
during such Extension Period shall bear Additional Interest. During any
Extension Period, Distributions on the Securities shall be deferred for a period
equal to the Extension Period. If Distributions are deferred, the Distributions
due shall be paid on the date that the related Extension Period terminates to
Holders of the Securities as they appear on the books and records of the Trust
on the record date immediately preceding such date. Distributions on the
Securities must be paid on the dates payable (after giving effect to any
Extension Period) to the extent that the Trust has

                                      I-2

<PAGE>

funds available for the payment of such distributions in the Property Account of
the Trust. The Trust's funds available for Distribution to the Holders of the
Securities will be limited to payments received from the Debenture Issuer. The
payment of Distributions out of moneys held by the Trust is guaranteed by the
Guarantor pursuant to the Guarantee.

            (c)   Distributions on the Securities will be payable to the Holders
thereof as they appear on the books and records of the Trust on the relevant
record dates. The relevant record dates shall be 15 days before the relevant
Distribution Payment Date. Distributions payable on any Securities that are not
punctually paid on any Distribution Payment Date, as a result of the Debenture
Issuer having failed to make a payment under the Debentures, as the case may be,
when due (taking into account any Extension Period), will cease to be payable to
the Person in whose name such Securities are registered on the relevant record
date, and such defaulted Distribution will instead be payable to the Person in
whose name such Securities are registered on the special record date or other
specified date determined in accordance with the Indenture.

            (d)   In the event that there is any money or other property held by
or for the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.

      3.    Liquidation Distribution Upon Dissolution. In the event of the
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation") other than in connection with a redemption of
the Debentures, the Holders of the Securities will be entitled to receive out of
the assets of the Trust available for distribution to Holders of the Securities,
after satisfaction of liabilities to creditors of the Trust (to the extent not
satisfied by the Debenture Issuer), distributions equal to the aggregate of the
stated liquidation amount of $1,000.00 per Security plus accrued and unpaid
Distributions thereon to the date of payment (such amount being the "Liquidation
Distribution"), unless in connection with such Liquidation, the Debentures in an
aggregate stated principal amount equal to the aggregate stated liquidation
amount of such Securities, with an interest rate equal to the Distribution Rate
of, and bearing accrued and unpaid interest in an amount equal to the accrued
and unpaid Distributions on, and having the same record date as, such
Securities, after paying or making reasonable provision to pay all claims and
obligations of the Trust in accordance with the Statutory Trust Act, shall be
distributed on a Pro Rata basis to the Holders of the Securities in exchange for
such Securities.

      The Sponsor, as the Holder of all of the Common Securities, has the right
at any time to dissolve the Trust (including, without limitation, upon the
occurrence of a Special Event), subject to the receipt by the Debenture Issuer
of prior approval from the Board of Governors of the Federal Reserve System, or
its designated district bank, as applicable, and any successor federal agency
that is primarily responsible for regulating the activities of the Sponsor (the
"Federal Reserve"), if the Sponsor is a bank holding company, or from the Office
of Thrift Supervision and any successor federal agency that is primarily
responsible for regulating the activities of Sponsor, (the "OTS") if the Sponsor
is a savings and loan holding company, in either case if then required under
applicable capital guidelines or policies of the Federal Reserve or OTS, as
applicable, and, after satisfaction of liabilities to creditors of the Trust,
cause the Debentures to be distributed to the Holders of the Securities on a Pro
Rata basis in accordance with the aggregate stated liquidation amount thereof.

      If a Liquidation of the Trust occurs as described in clause (i), (ii),
(iii) or (v) in Section 7.1(a) of the Declaration, the Trust shall be liquidated
by the Institutional Trustee as expeditiously as it determines to be possible by
distributing, after satisfaction of liabilities to creditors of the Trust, to
the Holders of the Securities, the Debentures on a Pro Rata basis to the extent
not satisfied by the Debenture Issuer, unless such distribution is determined by
the Institutional Trustee not to be practical, in which event such Holders will
be entitled to receive out of the assets of the Trust available for distribution
to the Holders,

                                      I-3

<PAGE>

after satisfaction of liabilities of creditors of the Trust to the extent not
satisfied by the Debenture Issuer, an amount equal to the Liquidation
Distribution. An early Liquidation of the Trust pursuant to clause (iv) of
Section 7.1(a) of the Declaration shall occur if the Institutional Trustee
determines that such Liquidation is possible by distributing, after satisfaction
of liabilities to creditors of the Trust, to the Holders of the Securities on a
Pro Rata basis, the Debentures, and such distribution occurs.

      If, upon any such Liquidation the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on such Capital Securities shall be paid to the Holders of the Trust
Securities on a Pro Rata basis, except that if an Event of Default has occurred
and is continuing, the Capital Securities shall have a preference over the
Common Securities with regard to such distributions.

      After the date for any distribution of the Debentures upon dissolution of
the Trust (i) the Securities of the Trust will be deemed to be no longer
outstanding, (ii) upon surrender of a Holder's Securities certificate, such
Holder of the Securities will receive a certificate representing the Debentures
to be delivered upon such distribution, (iii) any certificates representing the
Securities still outstanding will be deemed to represent undivided beneficial
interests in such of the Debentures as have an aggregate principal amount equal
to the aggregate stated liquidation amount with an interest rate identical to
the Distribution Rate of, and bearing accrued and unpaid interest equal to
accrued and unpaid distributions on, the Securities until such certificates are
presented to the Debenture Issuer or its agent for transfer or reissuance (and
until such certificates are so surrendered, no payments of interest or principal
shall be made to Holders of Securities in respect of any payments due and
payable under the Debentures; provided, however that such failure to pay shall
not be deemed to be an Event of Default and shall not entitle the Holder to the
benefits of the Guarantee), and (iv) all rights of Holders of Securities under
the Declaration shall cease, except the right of such Holders to receive
Debentures upon surrender of certificates representing such Securities.

      4.    Redemption and Distribution.

            (a)   The Debentures will mature on March 17, 2034. The Debentures
may be redeemed by the Debenture Issuer, in whole or in part, at any
Distribution Payment Date on or after the Distribution Payment Date in March
2009, at the Redemption Price. In addition, the Debentures may be redeemed by
the Debenture Issuer at the Special Redemption Price, in whole but not in part,
at any Distribution Payment Date, upon the occurrence and continuation of a
Special Event within 120 days following the occurrence of such Special Event at
the Special Redemption Price, upon not less than 30 nor more than 60 days'
notice to holders of such Debentures so long as such Special Event is
continuing. In each case, the right of the Debenture Issuer to redeem the
Debentures is subject to the Debenture Issuer having received prior approval
from the Federal Reserve (if the Debenture Issuer is a bank holding company) or
prior approval from the OTS (if the Debenture Issuer is a savings and loan
holding company), in each case if then required under applicable capital
guidelines or policies of the applicable federal agency.

      "3-Month LIBOR" means the London interbank offered interest rate for
three-month, U.S. dollar deposits determined by the Debenture Trustee in the
following order of priority:

            (1)   the rate (expressed as a percentage per annum) for U.S. dollar
      deposits having a three-month maturity that appears on Telerate Page 3750
      as of 11:00 a.m. (London time) on the related Determination Date (as
      defined below). "Telerate Page 3750" means the display designated as "Page
      3750" on the Dow Jones Telerate Service or such other page as may replace
      Page 3750 on that service or such other service or services as may be
      nominated by the British Bankers' Association as the information vendor
      for the purpose of displaying London interbank offered rates for U.S.
      dollar deposits;

                                      I-4

<PAGE>

            (2)   if such rate cannot be identified on the related Determination
      Date, the Debenture Trustee will request the principal London offices of
      four leading banks in the London interbank market to provide such banks'
      offered quotations (expressed as percentages per annum) to prime banks in
      the London interbank market for U.S. dollar deposits having a three-month
      maturity as of 11:00 a.m. (London time) on such Determination Date. If at
      least two quotations are provided, 3-Month LIBOR will be the arithmetic
      mean of such quotations;

            (3)   if fewer than two such quotations are provided as requested in
      clause (2) above, the Debenture Trustee will request four major New York
      City banks to provide such banks' offered quotations (expressed as
      percentages per annum) to leading European banks for loans in U.S. dollars
      as of 11:00 a.m. (London time) on such Determination Date. If at least two
      such quotations are provided, 3-Month LIBOR will be the arithmetic mean of
      such quotations; and

            (4)   if fewer than two such quotations are provided as requested in
      clause (3) above, 3-Month LIBOR will be a 3-Month LIBOR determined with
      respect to the Distribution Period immediately preceding such current
      Distribution Period.

      If the rate for U.S. dollar deposits having a three-month maturity that
initially appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the
related Determination Date is superseded on the Telerate Page 3750 by a
corrected rate by 12:00 noon (London time) on such Determination Date, then the
corrected rate as so substituted on the applicable page will be the applicable
3-Month LIBOR for such Determination Date.

      The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.

      "Capital Treatment Event" means the receipt by the Debenture Issuer and
the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of any amendment to, or change (including
any announced prospective change) in, the laws, rules or regulations of the
United States or any political subdivision thereof or therein, or as the result
of any official or administrative pronouncement or action or decision
interpreting or applying such laws, rules or regulations, which amendment or
change is effective or which pronouncement, action or decision is announced on
or after the date of original issuance of the Debentures, there is more than an
insubstantial risk that the Sponsor will not, within 90 days of the date of such
opinion, be entitled to treat an amount equal to the aggregate liquidation
amount of the Capital Securities as "Tier 1 Capital" (or its then equivalent)
for purposes of the capital adequacy guidelines of the Federal Reserve, as then
in effect and applicable to the Sponsor (or if the Sponsor is not a bank holding
company, such guidelines applied to the Sponsor as if the Sponsor were subject
to such guidelines); provided, however, that the inability of the Sponsor to
treat all or any portion of the liquidation amount of the Capital Securities as
Tier l Capital shall not constitute the basis for a Capital Treatment Event, if
such inability results from the Sponsor having cumulative preferred stock,
minority interests in consolidated subsidiaries, or any other class of security
or interest which the Federal Reserve or OTS, as applicable, may now or
hereafter accord Tier 1 Capital treatment in excess of the amount which may now
or hereafter qualify for treatment as Tier 1 Capital under applicable capital
adequacy guidelines; provided further, however, that the distribution of
Debentures in connection with the Liquidation of the Trust shall not in and of
itself constitute a Capital Treatment Event unless such Liquidation shall have
occurred in connection with a Tax Event or an Investment Company Event.

      "Determination Date" means the date that is two London Banking Days (i.e.,
a business day in which dealings in deposits in U.S. dollars are transacted in
the London interbank market) preceding the particular Distribution Period for
which a Coupon Rate is being determined.

                                      I-5

<PAGE>

      "Investment Company Event" means the receipt by the Debenture Issuer and
the Trust of an opinion of counsel experienced in such matters to the effect
that, as a result of the occurrence of a change in law or regulation or written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, there is more than an insubstantial risk that
the Trust is or, within 90 days of the date of such opinion, will be considered
an Investment Company that is required to be registered under the Investment
Company Act which change or prospective change becomes effective or would become
effective, as the case may be, on or after the date of the issuance of the
Debentures.

      "Maturity Date" means March 17, 2034.

      "Redemption Date" shall mean the date fixed for the redemption of Capital
Securities, which shall be any Distribution Payment Date on or after the
Distribution Payment Date in March 2009.

      "Redemption Price" means 100% of the principal amount of the Debentures
being redeemed, plus accrued and unpaid Interest on such Debentures to the
Redemption Date.

      "Special Event" means a Tax Event, an Investment Company Event or a
Capital Treatment Event.

      "Special Redemption Date" means a date on which a Special Event redemption
occurs, which shall be a Distribution Payment Date.

      "Special Redemption Price" means the price set forth in the following
table for any Special Redemption Date that occurs on the date indicated below
(or if such day is not a Business Day, then the next succeeding Business Day),
expressed as the percentage of the principal amount of the Debentures being
redeemed:

<TABLE>
<CAPTION>
MONTH IN WHICH SPECIAL
REDEMPTION DATE OCCURS       SPECIAL REDEMPTION PRICE
----------------------       -------------------------
<S>                          <C>
      June 2004                      104.625%

    September 2004                   104.300%

     December 2004                   104.000%

      March 2005                     103.650%

      June 2005                      103.350%

    September 2005                   103.000%

     December 2005                   102.700%

      March 2006                     102.350%

      June 2006                      102.050%

    September 2006                   101.700%

     December 2006                   101.400%
</TABLE>

                                      I-6

<PAGE>

<TABLE>
<S>                                  <C>
      March 2007                     101.050%

      June 2007                      100.750%

    September 2007                   100.450%

     December 2007                   100.200%

March 2008 and thereafter            100.000%
</TABLE>

      plus, in each case, accrued and unpaid Interest on such Debentures to the
Special Redemption Date.

      "Tax Event" means the receipt by the Debenture Issuer and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to or change (including any announced prospective change) in
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement (including any private letter ruling,
technical advice memorandum, field service advice, regulatory procedure, notice
or announcement including any notice or announcement of intent to adopt such
procedures or regulations) (an "Administrative Action") or judicial decision
interpreting or applying such laws or regulations, regardless of whether such
Administrative Action or judicial decision is issued to or in connection with a
proceeding involving the Debenture Issuer or the Trust and whether or not
subject to review or appeal, which amendment, clarification, change,
Administrative Action or decision is enacted, promulgated or announced, in each
case on or after the date of original issuance of the Debentures, there is more
than an insubstantial risk that: (i) the Trust is, or will be within 90 days of
the date of such opinion, subject to United States federal income tax with
respect to income received or accrued on the Debentures; (ii) interest payable
by the Debenture Issuer on the Debentures is not, or within 90 days of the date
of such opinion, will not be, deductible by the Debenture Issuer, in whole or in
part, for United States federal income tax purposes; or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.

            (b)   Upon the repayment in full at maturity or redemption in whole
or in part of the Debentures (other than following the distribution of the
Debentures to the Holders of the Securities), the proceeds from such repayment
or payment shall concurrently be applied to redeem Pro Rata at the applicable
Redemption Price or Special Redemption Price, as applicable, Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed; provided, however, that holders of such
Securities shall be given not less than 30 nor more than 60 days' notice of such
redemption (other than at the scheduled maturity of the Debentures).

            (c)   If fewer than all the outstanding Securities are to be so
redeemed, the Common Securities and the Capital Securities will be redeemed Pro
Rata and the Capital Securities to be redeemed will be redeemed Pro Rata from
each Holder of Capital Securities.

            (d)   The Trust may not redeem fewer than all the outstanding
Capital Securities unless all accrued and unpaid Distributions have been paid on
all Capital Securities for all quarterly Distribution periods terminating on or
before the date of redemption.

                                      I-7

<PAGE>

            (e)   Redemption or Distribution Procedures.

                  (i)   Notice of any redemption of, or notice of distribution
      of the Debentures in exchange for, the Securities (a
      "Redemption/Distribution Notice") will be given by the Trust by mail to
      each Holder of Securities to be redeemed or exchanged not fewer than 30
      nor more than 60 days before the date fixed for redemption or exchange
      thereof which, in the case of a redemption, will be the date fixed for
      redemption of the Debentures. For purposes of the calculation of the date
      of redemption or exchange and the dates on which notices are given
      pursuant to this paragraph 4(e)(i), a Redemption/Distribution Notice shall
      be deemed to be given on the day such notice is first mailed by
      first-class mail, postage prepaid, to Holders of such Securities. Each
      Redemption/Distribution Notice shall be addressed to the Holders of such
      Securities at the address of each such Holder appearing on the books and
      records of the Trust. No defect in the Redemption/Distribution Notice or
      in the mailing thereof with respect to any Holder shall affect the
      validity of the redemption or exchange proceedings with respect to any
      other Holder.

                  (ii)  If the Securities are to be redeemed and the Trust gives
      a Redemption/ Distribution Notice, which notice may only be issued if the
      Debentures are redeemed as set out in this paragraph 4 (which notice will
      be irrevocable), then, provided that the Institutional Trustee has a
      sufficient amount of cash in connection with the related redemption or
      maturity of the Debentures, the Institutional Trustee will pay the
      relevant Redemption Price or Special Redemption Price, as applicable, to
      the Holders of such Securities by check mailed to the address of each such
      Holder appearing on the books and records of the Trust on the Redemption
      Date. If a Redemption/Distribution Notice shall have been given and funds
      deposited as required then immediately prior to the close of business on
      the date of such deposit Distributions will cease to accrue on the
      Securities so called for redemption and all rights of Holders of such
      Securities so called for redemption will cease, except the right of the
      Holders of such Securities to receive the applicable Redemption Price or
      Special Redemption Price specified in paragraph 4(a), but without interest
      on such Redemption Price or Special Redemption Price. If payment of the
      Redemption Price or Special Redemption Price in respect of any Securities
      is improperly withheld or refused and not paid either by the Trust or by
      the Debenture Issuer as guarantor pursuant to the Guarantee, Distributions
      on such Securities will continue to accrue at the Distribution Rate from
      the original Redemption Date to the actual date of payment, in which case
      the actual payment date will be considered the date fixed for redemption
      for purposes of calculating the Redemption Price or Special Redemption
      Price. In the event of any redemption of the Capital Securities issued by
      the Trust in part, the Trust shall not be required to (i) issue, register
      the transfer of or exchange any Security during a period beginning at the
      opening of business 15 days before any selection for redemption of the
      Capital Securities and ending at the close of business on the earliest
      date on which the relevant notice of redemption is deemed to have been
      given to all Holders of the Capital Securities to be so redeemed or (ii)
      register the transfer of or exchange any Capital Securities so selected
      for redemption, in whole or in part, except for the unredeemed portion of
      any Capital Securities being redeemed in part.

                  (iii) Redemption/Distribution Notices shall be sent by the
      Administrators on behalf of the Trust to (A) in respect of the Capital
      Securities, the Holders thereof and (B) in respect of the Common
      Securities, the Holder thereof.

                  (iv)  Subject to the foregoing and applicable law (including,
      without limitation, United States federal securities laws), and provided
      that the acquiror is not the Holder of the Common Securities or the
      obligor under the Indenture, the Sponsor or any of its

                                      I-8

<PAGE>

      subsidiaries may at any time and from time to time purchase outstanding
      Capital Securities by tender, in the open market or by private agreement.

      5.    Voting Rights - Capital Securities.

            (a)   Except as provided under paragraphs 5(b) and 7 and as
otherwise required by law and the Declaration, the Holders of the Capital
Securities will have no voting rights. The Administrators are required to call a
meeting of the Holders of the Capital Securities if directed to do so by Holders
of at least 10% in liquidation amount of the Capital Securities.

            (b)   Subject to the requirements of obtaining a tax opinion by the
Institutional Trustee in certain circumstances set forth in the last sentence of
this paragraph, the Holders of a Majority in liquidation amount of the Capital
Securities, voting separately as a class, have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including the right to direct the
Institutional Trustee, as holder of the Debentures, to (i) exercise the remedies
available under the Indenture as the holder of the Debentures, (ii) waive any
past default that is waivable under the Indenture, (iii) exercise any right to
rescind or annul a declaration that the principal of all the Debentures shall be
due and payable or (iv) consent on behalf of all the Holders of the Capital
Securities to any amendment, modification or termination of the Indenture or the
Debentures where such consent shall be required; provided, however, that, where
a consent or action under the Indenture would require the consent or act of the
holders of greater than a simple majority in aggregate principal amount of
Debentures (a "Super Majority") affected thereby, the Institutional Trustee may
only give such consent or take such action at the written direction of the
Holders of at least the proportion in liquidation amount of the Capital
Securities outstanding which the relevant Super Majority represents of the
aggregate principal amount of the Debentures outstanding. If the Institutional
Trustee fails to enforce its rights under the Debentures after the Holders of a
Majority in liquidation amount of such Capital Securities have so directed the
Institutional Trustee, to the fullest extent permitted by law, a Holder of the
Capital Securities may institute a legal proceeding directly against the
Debenture Issuer to enforce the Institutional Trustee's rights under the
Debentures without first instituting any legal proceeding against the
Institutional Trustee or any other person or entity. Notwithstanding the
foregoing, if an Event of Default has occurred and is continuing and such event
is attributable to the failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date the interest or principal is payable (or
in the case of redemption, the Redemption Date or the Special Redemption Date,
as applicable), then a Holder of record of the Capital Securities may directly
institute a proceeding for enforcement of payment, on or after the respective
due dates specified in the Debentures, to such Holder directly of the principal
of or interest on the Debentures having an aggregate principal amount equal to
the aggregate liquidation amount of the Capital Securities of such Holder. The
Institutional Trustee shall notify all Holders of the Capital Securities of any
default actually known to the Institutional Trustee with respect to the
Debentures unless (x) such default has been cured prior to the giving of such
notice or (y) the Institutional Trustee determines in good faith that the
withholding of such notice is in the interest of the Holders of such Capital
Securities, except where the default relates to the payment of principal of or
interest on any of the Debentures. Such notice shall state that such Indenture
Event of Default also constitutes an Event of Default hereunder. Except with
respect to directing the time, method and place of conducting a proceeding for a
remedy, the Institutional Trustee shall not take any of the actions described in
clauses (i), (ii) or (iii) above unless the Institutional Trustee has obtained
an opinion of tax counsel to the effect that, as a result of such action, the
Trust will not be classified as other than a grantor trust for United States
federal income tax purposes.

      In the event the consent of the Institutional Trustee, as the holder of
the Debentures, is required under the Indenture with respect to any amendment,
modification or termination of the Indenture, the Institutional Trustee shall
request the direction of the Holders of the Securities with respect to such

                                      I-9

<PAGE>

amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in liquidation
amount of the Securities voting together as a single class; provided, however,
that where a consent under the Indenture would require the consent of a
Super-Majority, the Institutional Trustee may only give such consent at the
direction of the Holders of at least the proportion in liquidation amount of the
Securities outstanding which the relevant Super-Majority represents of the
aggregate principal amount of the Debentures outstanding. The Institutional
Trustee shall not take any such action in accordance with the directions of the
Holders of the Securities unless the Institutional Trustee has obtained an
opinion of tax counsel to the effect that, as a result of such action, the Trust
will not be classified as other than a grantor trust for United States federal
income tax purposes.

      A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Event of Default hereunder. Any required approval or direction of
Holders of the Capital Securities may be given at a separate meeting of Holders
of the Capital Securities convened for such purpose, at a meeting of all of the
Holders of the Securities in the Trust or pursuant to written consent. The
Institutional Trustee will cause a notice of any meeting at which Holders of the
Capital Securities are entitled to vote, or of any matter upon which action by
written consent of such Holders is to be taken, to be mailed to each Holder of
record of the Capital Securities. Each such notice will include a statement
setting forth the following information (i) the date of such meeting or the date
by which such action is to be taken, (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (iii) instructions
for the delivery of proxies or consents. No vote or consent of the Holders of
the Capital Securities will be required for the Trust to redeem and cancel
Capital Securities or to distribute the Debentures in accordance with the
Declaration and the terms of the Securities.

      Notwithstanding that Holders of the Capital Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Capital Securities that are owned by the Sponsor or any Affiliate of the Sponsor
shall not entitle the Holder thereof to vote or consent and shall, for purposes
of such vote or consent, be treated as if such Capital Securities were not
outstanding.

      In no event will Holders of the Capital Securities have the right to vote
to appoint, remove or replace the Administrators, which voting rights are vested
exclusively in the Sponsor as the Holder of all of the Common Securities of the
Trust. Under certain circumstances as more fully described in the Declaration,
Holders of Capital Securities have the right to vote to appoint, remove or
replace the Institutional Trustee.

      6.    Voting Rights - Common Securities.

            (a)   Except as provided under paragraphs 6(b), 6(c) and 7 and as
otherwise required by law and the Declaration, the Common Securities will have
no voting rights.

            (b)   The Holders of the Common Securities are entitled, in
accordance with Article IV of the Declaration, to vote to appoint, remove or
replace any Administrators.

            (c)   Subject to Section 6.7 of the Declaration and only after each
Event of Default (if any) with respect to the Capital Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waiving any past default and its
consequences that is waivable under the Indenture, or (iii) exercising

                                      I-10

<PAGE>

any right to rescind or annul a declaration that the principal of all the
Debentures shall be due and payable; provided, however, that, where a consent or
action under the Indenture would require a Super Majority, the Institutional
Trustee may only give such consent or take such action at the written direction
of the Holders of at least the proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding. Notwithstanding this paragraph
6(c), the Institutional Trustee shall not revoke any action previously
authorized or approved by a vote or consent of the Holders of the Capital
Securities. Other than with respect to directing the time, method and place of
conducting any proceeding for any remedy available to the Institutional Trustee
or the Debenture Trustee as set forth above, the Institutional Trustee shall not
take any action described in (i), (ii) or (iii) above, unless the Institutional
Trustee has obtained an opinion of tax counsel to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust on account of such action. If the Institutional
Trustee fails to enforce its rights under the Declaration to the fullest extent
permitted by law, any Holder of the Common Securities may institute a legal
proceeding directly against any Person to enforce the Institutional Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Institutional Trustee or any other Person.

      Any approval or direction of Holders of the Common Securities may be given
at a separate meeting of Holders of the Common Securities convened for such
purpose, at a meeting of all of the Holders of the Securities in the Trust or
pursuant to written consent. The Administrators will cause a notice of any
meeting at which Holders of the Common Securities are entitled to vote, or of
any matter upon which action by written consent of such Holders is to be taken,
to be mailed to each Holder of the Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.

      No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.

      7.    Amendments to Declaration and Indenture.

            (a)   In addition to any requirements under Section 11.1 of the
Declaration, if any proposed amendment to the Declaration provides for, or the
Institutional Trustee, Sponsor or Administrators otherwise propose to effect,
(i) any action that would adversely affect the powers, preferences or special
rights of the Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the Liquidation of the Trust, other than as described in
Section 7.1 of the Declaration, then the Holders of outstanding Securities,
voting together as a single class, will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of the Holders of at least a Majority in liquidation amount of the
Securities, affected thereby; provided, however, if any amendment or proposal
referred to in clause (i) above would adversely affect only the Capital
Securities or only the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a Majority in liquidation
amount of such class of Securities.

            (b)   In the event the consent of the Institutional Trustee as the
holder of the Debentures is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification, or termination as directed by
a Majority in liquidation amount of the

                                      I-11

<PAGE>

Securities voting together as a single class; provided, however, that where a
consent under the Indenture would require a Super Majority, the Institutional
Trustee may only give such consent at the direction of the Holders of at least
the proportion in liquidation amount of the Securities which the relevant Super
Majority represents of the aggregate principal amount of the Debentures
outstanding.

            (c)   Notwithstanding the foregoing, no amendment or modification
may be made to the Declaration if such amendment or modification would (i) cause
the Trust to be classified for purposes of United States federal income taxation
as other than a grantor trust, (ii) reduce or otherwise adversely affect the
powers of the Institutional Trustee or (iii) cause the Trust to be deemed an
Investment Company which is required to be registered under the Investment
Company Act.

            (d)   Notwithstanding any provision of the Declaration, the right of
any Holder of the Capital Securities to receive payment of distributions and
other payments upon redemption or otherwise, on or after their respective due
dates, or to institute a suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder. For the protection and enforcement of the foregoing
provision, each and every Holder of the Capital Securities shall be entitled to
such relief as can be given either at law or equity.

      8.    Pro Rata. A reference in these terms of the Securities to any
payment, distribution or treatment as being "Pro Rata" shall mean pro rata to
each Holder of the Securities according to the aggregate liquidation amount of
the Securities held by the relevant Holder in relation to the aggregate
liquidation amount of all Securities then outstanding unless, in relation to a
payment, an Event of Default has occurred and is continuing, in which case any
funds available to make such payment shall be paid first to each Holder of the
Capital Securities Pro Rata according to the aggregate liquidation amount of the
Capital Securities held by the relevant Holder relative to the aggregate
liquidation amount of all Capital Securities outstanding, and only after
satisfaction of all amounts owed to the Holders of the Capital Securities, to
each Holder of the Common Securities Pro Rata according to the aggregate
liquidation amount of the Common Securities held by the relevant Holder relative
to the aggregate liquidation amount of all Common Securities outstanding.

      9.    Ranking. The Capital Securities rank pari passu with and payment
thereon shall be made Pro Rata with the Common Securities except that, where an
Event of Default has occurred and is continuing, the rights of Holders of the
Common Securities to receive payment of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights of the
Holders of the Capital Securities with the result that no payment of any
Distribution on, or Redemption Price (or Special Redemption Price) of, any
Common Security, and no other payment on account of redemption, liquidation or
other acquisition of Common Securities, shall be made unless payment in full in
cash of all accumulated and unpaid Distributions on all outstanding Capital
Securities for all distribution periods terminating on or prior thereto, or in
the case of payment of the Redemption Price (or Special Redemption Price) the
full amount of such Redemption Price (or Special Redemption Price) on all
outstanding Capital Securities then called for redemption, shall have been made
or provided for, and all funds immediately available to the Institutional
Trustee shall first be applied to the payment in full in cash of all
Distributions on, or the Redemption Price (or Special Redemption Price) of, the
Capital Securities then due and payable.

      10.   Acceptance of Guarantee and Indenture. Each Holder of the Capital
Securities and the Common Securities, by the acceptance of such Securities,
agrees to the provisions of the Guarantee, including the subordination
provisions therein and to the provisions of the Indenture.

      11.   No Preemptive Rights. The Holders of the Securities shall have no
preemptive or similar rights to subscribe for any additional securities.

                                      I-12

<PAGE>

      12.   Miscellaneous. These terms constitute a part of the Declaration. The
Sponsor will provide a copy of the Declaration, the Guarantee, and the Indenture
to a Holder without charge on written request to the Sponsor at its principal
place of business.

                                      I-13

<PAGE>

                                   EXHIBIT A-1

                      FORM OF CAPITAL SECURITY CERTIFICATE

                           [FORM OF FACE OF SECURITY]

      THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS SECURITY ONLY (A) TO THE SPONSOR OR THE TRUST, (B)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A IN
ACCORDANCE WITH RULE 144A, (D) TO A NON-U.S. PERSON IN AN OFFSHORE TRANSACTION
IN ACCORDANCE WITH RULE 903 OR RULE 904 (AS APPLICABLE) OF REGULATION S UNDER
THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A) OF RULE 501 UNDER THE SECURITIES ACT THAT IS
ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE SPONSOR'S AND
THE TRUST'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM IN ACCORDANCE WITH THE DECLARATION OF TRUST, A COPY
OF WHICH MAY BE OBTAINED FROM THE SPONSOR OR THE TRUST. HEDGING TRANSACTIONS
INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.

      THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES,
REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL
RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") (EACH
A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON
OF ANY PLAN'S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING "PLAN ASSETS" OF
ANY PLAN MAY ACQUIRE OR HOLD THE SECURITIES OR ANY INTEREST THEREIN, UNLESS SUCH
PURCHASER OR HOLDER IS ELIGIBLE FOR EXEMPTIVE RELIEF AVAILABLE UNDER U.S.
DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38,
90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF
THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE
CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THE
SECURITIES OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS
PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN
WITHIN THE

                                     A-1-1

<PAGE>

MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS
APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE
BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT
RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF
THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.

      THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING
A LIQUIDATION AMOUNT OF NOT LESS THAN $100,000.00 (100 SECURITIES) AND MULTIPLES
OF $1,000.00 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SECURITIES IN A BLOCK
HAVING A LIQUIDATION AMOUNT OF LESS THAN $100,000.00 SHALL BE DEEMED TO BE VOID
AND OF NO LEGAL EFFECT WHATSOEVER.

      THE HOLDER OF THIS SECURITY AGREES THAT IT WILL COMPLY WITH THE FOREGOING
RESTRICTIONS.

      IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR
AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY
THE DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS.

      Certificate Number P-1                       4,000 Capital Securities

                                 March 17, 2004

             Certificate Evidencing Floating Rate Capital Securities

                                       of

           City National Bank of New Jersey Capital Statutory Trust II

               (liquidation amount $1,000.00 per Capital Security)

      City National Bank of New Jersey Capital Statutory Trust II, a statutory
trust created under the laws of the State of Connecticut (the "Trust"), hereby
certifies that Hare & Co. (the "Holder"), as the nominee of The Bank of New
York, indenture trustee under the Indenture dated as of March 17, 2004 among
Preferred Term Securities XIII, Ltd., Preferred Term Securities XIII, Inc. and
The Bank of New York, is the registered owner of capital securities of the Trust
representing undivided beneficial interests in the assets of the Trust,
(liquidation amount $1,000.00 per capital security) (the "Capital Securities").
Subject to the Declaration (as defined below), the Capital Securities are
transferable on the books and records of the Trust in person or by a duly
authorized attorney, upon surrender of this Certificate duly endorsed and in
proper form for transfer. The Capital Securities represented hereby are issued
pursuant to, and the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Capital Securities shall in all respects
be subject to, the provisions of the Amended and Restated Declaration of Trust
of the Trust dated as of March 17, 2004, among Edward R. Wright and Vladimir
Gasparec, as Administrators, U.S. Bank National Association, as Institutional
Trustee, City National Bancshares Corporation, as Sponsor, and the holders from
time to time of undivided beneficial interests in the assets of the Trust,
including the designation of the terms of the Capital Securities as set forth in
Annex I to such amended and restated declaration as the same may be amended from
time to time (the "Declaration"). Capitalized terms used herein but not defined
shall have the meaning given them in the Declaration. The Holder is entitled to
the benefits of the Guarantee to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Guarantee, and the Indenture to the
Holder without charge upon written request to the Sponsor at its principal place
of business.

                                     A-1-2

<PAGE>

      Upon receipt of this Security, the Holder is bound by the Declaration and
is entitled to the benefits thereunder.

      By acceptance of this Security, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Capital Securities as evidence of beneficial ownership in the Debentures.

      This Capital Security is governed by, and construed in accordance with,
the laws of the State of Connecticut, without regard to principles of conflict
of laws.

                       Signatures appear on following page

                                     A-1-3

<PAGE>

      IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                         CITY NATIONAL BANK OF NEW JERSEY
                                         CAPITAL STATUTORY TRUST II

                                         By: ___________________________________
                                             Name:
                                             Title: Administrator

                          CERTIFICATE OF AUTHENTICATION

      This is one of the Capital Securities referred to in the within-mentioned
Declaration.

                                         U.S. BANK NATIONAL ASSOCIATION,
                                         as the Institutional Trustee

                                         By: ___________________________________
                                                   Authorized Officer

                                     A-1-4

<PAGE>

                      [FORM OF REVERSE OF CAPITAL SECURITY]

      Distributions payable on each Capital Security will be payable at an
annual rate equal to 3.90% beginning on (and including) the date of original
issuance and ending on (but excluding) the Distribution Payment Date in June
2004 and at an annual rate for each successive period beginning on (and
including) the Distribution Payment Date in June 2004, and each succeeding
Distribution Payment Date, and ending on (but excluding) the next succeeding
Distribution Payment Date (each a "Distribution Period"), equal to 3-Month
LIBOR, determined as described below, plus 2.79% (the "Coupon Rate"), applied to
the stated liquidation amount of $1,000.00 per Capital Security, such rate being
the rate of interest payable on the Debentures to be held by the Institutional
Trustee. Distributions in arrears will bear interest thereon compounded
quarterly at the Distribution Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.

      "3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

      The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.

      All percentages resulting from any calculations on the Capital Securities
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or

                                     A-1-5

<PAGE>

..0987655), and all dollar amounts used in or resulting from such calculation
will be rounded to the nearest cent (with one-half cent being rounded upward)).

      Except as otherwise described below, Distributions on the Capital
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 17, June 17, September 17 and
December 17 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in June 2004. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Indenture Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Capital
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer. The payment of Distributions out of moneys held by the Trust
is guaranteed by the Guarantor pursuant to the Guarantee.

      The Capital Securities shall be redeemable as provided in the Declaration.

                                     A-1-6

<PAGE>

                                   ASSIGNMENT

      FOR VALUE RECEIVED, the undersigned assigns and transfers this Capital
Security Certificate to:

      __________________________________________________________________________

      (Insert assignee's social security or tax identification number) _________

      __________________________________________________________________________

      __________________________________________________________________________

      (Insert address and zip code of assignee) and irrevocably appoints

      __________________________________________________________________________

      agent to transfer this Capital Security Certificate on the books of the
Trust. The agent may substitute another to act for him or her.

      Date: _____________________________

      Signature: ________________________

                        (Sign exactly as your name appears on the other side of
this Capital Security Certificate)

      Signature Guarantee:(1)

-----------------------
(1) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

                                     A-1-7

<PAGE>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

      THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION.

      THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT IN COMPLIANCE WITH SECTION 8.1
OF THE DECLARATION.

      Certificate Number C-1                        124 Common Securities

                                 March 17, 2004

             Certificate Evidencing Floating Rate Common Securities

                                       of

           City National Bank of New Jersey Capital Statutory Trust II

      City National Bank of New Jersey Capital Statutory Trust II, a statutory
trust created under the laws of the State of Connecticut (the "Trust"), hereby
certifies that City National Bancshares Corporation (the "Holder") is the
registered owner of common securities of the Trust representing undivided
beneficial interests in the assets of the Trust (the "Common Securities"). The
Common Securities represented hereby are issued pursuant to, and the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities shall in all respects be subject to, the
provisions of the Amended and Restated Declaration of Trust of the Trust dated
as of March 17, 2004, among Edward R. Wright and Vladimir Gasparec, as
Administrators, U.S. Bank National Association, as Institutional Trustee, City
National Bancshares Corporation, as Sponsor, and the holders from time to time
of undivided beneficial interest in the assets of the Trust including the
designation of the terms of the Common Securities as set forth in Annex I to
such amended and restated declaration, as the same may be amended from time to
time (the "Declaration"). Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is entitled to the
benefits of the Guarantee to the extent provided therein. The Sponsor will
provide a copy of the Declaration, the Guarantee and the Indenture to the Holder
without charge upon written request to the Sponsor at its principal place of
business.

      As set forth in the Declaration, when an Event of Default has occurred and
is continuing, the rights of Holders of Common Securities to payment in respect
of Distributions and payments upon Liquidation, redemption or otherwise are
subordinated to the rights of payment of Holders of the Capital Securities.

      Upon receipt of this Certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.

      By acceptance of this Certificate, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as indebtedness and the
Common Securities as evidence of undivided beneficial ownership in the
Debentures.

      This Common Security is governed by, and construed in accordance with, the
laws of the State of Connecticut, without regard to principles of conflict of
laws.

                                     A-2-1

<PAGE>

      IN WITNESS WHEREOF, the Trust has duly executed this certificate.

                                         CITY NATIONAL BANK OF NEW JERSEY
                                         CAPITAL STATUTORY TRUST II

                                         By: ___________________________________
                                             Name:
                                             Title: Administrator

                                     A-2-2

<PAGE>

                      [FORM OF REVERSE OF COMMON SECURITY]

      Distributions payable on each Common Security will be payable at an annual
rate equal to 3.90% beginning on (and including) the date of original issuance
and ending on (but excluding) the Distribution Payment Date in June 2004 and at
an annual rate for each successive period beginning on (and including) the
Distribution Payment Date in June 2004, and each succeeding Distribution Payment
Date, and ending on (but excluding) the next succeeding Distribution Payment
Date (each a "Distribution Period"), equal to 3-Month LIBOR, determined as
described below, plus 2.79% (the "Coupon Rate"), applied to the stated
liquidation amount of $1,000.00 per Common Security, such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee.
Distributions in arrears will bear interest thereon compounded quarterly at the
Distribution Rate (to the extent permitted by applicable law). The term
"Distributions" as used herein includes cash distributions and any such
compounded distributions unless otherwise noted. A Distribution is payable only
to the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. As used herein, "Determination Date" means the date that is
two London Banking Days (i.e., a business day in which dealings in deposits in
U.S. dollars are transacted in the London interbank market) preceding the
commencement of the relevant Distribution Period. The amount of the Distribution
payable for any Distribution Period will be calculated by applying the
Distribution Rate to the stated liquidation amount outstanding at the
commencement of the Distribution Period on the basis of the actual number of
days in the Distribution Period concerned divided by 360.

      "3-Month LIBOR" as used herein, means the London interbank offered
interest rate for three-month U.S. dollar deposits determined by the Debenture
Trustee in the following order of priority: (i) the rate (expressed as a
percentage per annum) for U.S. dollar deposits having a three-month maturity
that appears on Telerate Page 3750 as of 11:00 a.m. (London time) on the related
Determination Date ("Telerate Page 3750" means the display designated as "Page
3750" on the Dow Jones Telerate Service or such other page as may replace Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying London interbank offered rates for U.S. dollar deposits); (ii) if
such rate cannot be identified on the related Determination Date, the Debenture
Trustee will request the principal London offices of four leading banks in the
London interbank market to provide such banks' offered quotations (expressed as
percentages per annum) to prime banks in the London interbank market for U.S.
dollar deposits having a three-month maturity as of 11:00 a.m. (London time) on
such Determination Date. If at least two quotations are provided, 3-Month LIBOR
will be the arithmetic mean of such quotations; (iii) if fewer than two such
quotations are provided as requested in clause (ii) above, the Debenture Trustee
will request four major New York City banks to provide such banks' offered
quotations (expressed as percentages per annum) to leading European banks for
loans in U.S. dollars as of 11:00 a.m. (London time) on such Determination Date.
If at least two such quotations are provided, 3-Month LIBOR will be the
arithmetic mean of such quotations; and (iv) if fewer than two such quotations
are provided as requested in clause (iii) above, 3-Month LIBOR will be a 3-Month
LIBOR determined with respect to the Distribution Period immediately preceding
such current Distribution Period. If the rate for U.S. dollar deposits having a
three-month maturity that initially appears on Telerate Page 3750 as of 11:00
a.m. (London time) on the related Determination Date is superseded on the
Telerate Page 3750 by a corrected rate by 12:00 noon (London time) on such
Determination Date, then the corrected rate as so substituted on the applicable
page will be the applicable 3-Month LIBOR for such Determination Date.

      The Distribution Rate for any Distribution Period will at no time be
higher than the maximum rate then permitted by New York law as the same may be
modified by United States law.

      All percentages resulting from any calculations on the Common Securities
will be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upward
(e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or

                                     A-2-3

<PAGE>

..0987655), and all dollar amounts used in or resulting from such calculation
will be rounded to the nearest cent (with one-half cent being rounded upward)).

      Except as otherwise described below, Distributions on the Common
Securities will be cumulative, will accrue from the date of original issuance
and will be payable quarterly in arrears on March 17, June 17, September 17 and
December 17 of each year or if any such day is not a Business Day, then the next
succeeding Business Day (each such day, a "Distribution Payment Date"),
commencing on the Distribution Payment Date in June 2004. The Debenture Issuer
has the right under the Indenture to defer payments of interest on the
Debentures, so long as no Indenture Event of Default has occurred and is
continuing, by extending the interest payment period for up to 20 consecutive
quarterly periods (each an "Extension Period") at any time and from time to time
on the Debentures, subject to the conditions described below, during which
Extension Period no interest shall be due and payable. During any Extension
Period, interest will continue to accrue on the Debentures, and interest on such
accrued interest will accrue at an annual rate equal to the Distribution Rate in
effect for each such Extension Period, compounded quarterly from the date such
interest would have been payable were it not for the Extension Period, to the
extent permitted by law (such interest referred to herein as "Additional
Interest"). No Extension Period may end on a date other than a Distribution
Payment Date. At the end of any such Extension Period, the Debenture Issuer
shall pay all interest then accrued and unpaid on the Debentures (together with
Additional Interest thereon); provided, however, that no Extension Period may
extend beyond the Maturity Date. Prior to the termination of any Extension
Period, the Debenture Issuer may further extend such period, provided that such
period together with all such previous and further consecutive extensions
thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the
Maturity Date. Upon the termination of any Extension Period and upon the payment
of all accrued and unpaid interest and Additional Interest, the Debenture Issuer
may commence a new Extension Period, subject to the foregoing requirements. No
interest or Additional Interest shall be due and payable during an Extension
Period, except at the end thereof, but each installment of interest that would
otherwise have been due and payable during such Extension Period shall bear
Additional Interest. During any Extension Period, Distributions on the Common
Securities shall be deferred for a period equal to the Extension Period. If
Distributions are deferred, the Distributions due shall be paid on the date that
the related Extension Period terminates, to Holders of the Securities as they
appear on the books and records of the Trust on the record date immediately
preceding such date. Distributions on the Securities must be paid on the dates
payable (after giving effect to any Extension Period) to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account of the Trust. The Trust's funds available for Distribution to the
Holders of the Securities will be limited to payments received from the
Debenture Issuer.

      The Common Securities shall be redeemable as provided in the Declaration.

                                     A-2-4

<PAGE>

                                   ASSIGNMENT

      FOR VALUE RECEIVED, the undersigned assigns and transfers this Common
Security Certificate to:

      __________________________________________________________________________

      (Insert assignee's social security or tax identification number) _________

      __________________________________________________________________________

      __________________________________________________________________________

      (Insert address and zip code of assignee) and irrevocably appoints

      __________________________________________________________________________

                  ________________________________________________________ agent
                  to transfer this Common Security Certificate on the books of
                  the Trust. The agent may substitute another to act for him or
                  her.

                  Date: _____________________________

                  Signature: ________________________

                  (Sign exactly as your name appears on the other side of this
                  Common Security Certificate)

                  Signature: ________________________

                  (Sign exactly as your name appears on the other side of this
                  Common Security Certificate)

      Signature Guarantee(2)

-------------------------
(2) Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union, meeting the
requirements of the Security registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Security
registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.

                                     A-2-5

<PAGE>

                                    EXHIBIT B

                          SPECIMEN OF INITIAL DEBENTURE

                              (See Document No. 16)

                                       B-1

<PAGE>

                                    EXHIBIT C

                               PLACEMENT AGREEMENT

                              (See Document No. 1)

                                       C-1
<PAGE>

                      CITY NATIONAL BANCSHARES CORPORATION

                            4,000 CAPITAL SECURITIES

                        FLOATING RATE CAPITAL SECURITIES

               (LIQUIDATION AMOUNT $1,000.00 PER CAPITAL SECURITY)

                               PLACEMENT AGREEMENT

                              --------------------

                                                                   March 8, 2004

FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee  38117

Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York  10019

Ladies and Gentlemen:

      City National Bancshares Corporation, a New Jersey corporation (the
"Company"), and its financing subsidiary, City National Bank of New Jersey
Capital Statutory Trust II, a Connecticut statutory trust (the "Trust," and
hereinafter together with the Company, the "Offerors"), hereby confirm their
agreement (this "Agreement") with you as placement agents (the "Placement
Agents"), as follows:

SECTION 1. ISSUANCE AND SALE OF SECURITIES.

      1.1. INTRODUCTION. The Offerors propose to issue and sell at the Closing
(as defined in Section 2.3.1 hereof) 4,000 of the Trust's Floating Rate Capital
Securities, with a liquidation amount of $1,000.00 per capital security (the
"Capital Securities"), to Preferred Term Securities XIII, Ltd., a company with
limited liability established under the laws of the Cayman Islands (the
"Purchaser") pursuant to the terms of a Subscription Agreement entered into, or
to be entered into on or prior to the Closing Date (as defined in Section 2.3.1
hereof), between the Offerors and the Purchaser (the "Subscription Agreement"),
the form of which is attached hereto as Exhibit A and incorporated herein by
this reference.

      1.2. OPERATIVE AGREEMENTS. The Capital Securities shall be fully and
unconditionally guaranteed on a subordinated basis by the Company with respect
to distributions and amounts payable upon liquidation, redemption or repayment
(the "Guarantee") pursuant and subject to the Guarantee Agreement (the
"Guarantee Agreement"), to be dated as of the Closing Date and executed and
delivered by the Company and U.S. Bank National Association ("U.S. Bank"), as
trustee (the "Guarantee Trustee"), for the benefit from time to time of the
holders of the Capital Securities. The entire proceeds from the sale by the
Trust to the holders of the Capital Securities shall be combined with the entire
proceeds from
<PAGE>
the sale by the Trust to the Company of its common securities (the "Common
Securities"), and shall be used by the Trust to purchase $4,124,000.00 in
principal amount of the Floating Rate Junior Subordinated Deferrable Interest
Debentures (the "Debentures") of the Company. The Capital Securities and the
Common Securities for the Trust shall be issued pursuant to an Amended and
Restated Declaration of Trust among U.S. Bank, as institutional trustee (the
"Institutional Trustee"), the Administrators named therein, and the Company, to
be dated as of the Closing Date and in substantially the form heretofore
delivered to the Placement Agents (the "Trust Agreement"). The Debentures shall
be issued pursuant to an Indenture (the "Indenture"), to be dated as of the
Closing Date, between the Company and U.S. Bank, as indenture trustee (the
"Indenture Trustee"). The documents identified in this Section 1.2 and in
Section 1.1 are referred to herein as the "Operative Documents."

      1.3. RIGHTS OF PURCHASER. The Capital Securities shall be offered and sold
by the Trust directly to the Purchaser without registration of any of the
Capital Securities, the Debentures or the Guarantee under the Securities Act of
1933, as amended (the "Securities Act"), or any other applicable securities laws
in reliance upon exemptions from the registration requirements of the Securities
Act and other applicable securities laws. The Offerors agree that this Agreement
shall be incorporated by reference into the Subscription Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under this Agreement and shall be entitled to enforce obligations
of the Offerors under this Agreement as fully as if the Purchaser were a party
to this Agreement. The Offerors and the Placement Agents have entered into this
Agreement to set forth their understanding as to their relationship and their
respective rights, duties and obligations.

      1.4. LEGENDS. Upon original issuance thereof, and until such time as the
same is no longer required under the applicable requirements of the Securities
Act, the Capital Securities and Debentures certificates shall each contain a
legend as required pursuant to any of the Operative Documents.

SECTION 2. PURCHASE OF CAPITAL SECURITIES.

      2.1. EXCLUSIVE RIGHTS; PURCHASE PRICE. From the date hereof until the
Closing Date (which date may be extended by mutual agreement of the Offerors and
the Placement Agents), the Offerors hereby grant to the Placement Agents the
exclusive right to arrange for the sale of the Capital Securities to the
Purchaser at a purchase price of $1,000.00 per Capital Security.

      2.2. SUBSCRIPTION AGREEMENT. The Offerors hereby agree to evidence their
acceptance of the subscription by countersigning a copy of the Subscription
Agreement and returning the same to the Placement Agents.

      2.3. CLOSING AND DELIVERY OF PAYMENT.

            2.3.1. CLOSING; CLOSING DATE. The sale and purchase of the Capital
Securities by the Offerors to the Purchaser shall take place at a closing (the
"Closing") at the offices of Lewis, Rice & Fingersh, L.C., at 10:00 a.m. (St.
Louis time) on March 17, 2004, or such other business day as may be agreed upon
by the Offerors and the Placement Agents (the "Closing Date"); provided,
however, that in no event shall the Closing Date occur later than March 31, 2004
unless consented to by the Purchaser. Payment by the Purchaser shall be payable
in the manner set forth in the Subscription Agreement and shall be made prior to
or on the Closing Date.

            2.3.2. DELIVERY. The certificate for the Capital Securities shall be
in definitive form, registered in the name of the Purchaser and in the aggregate
amount of the Capital Securities purchased by the Purchaser.

                                       2
<PAGE>
            2.3.3. TRANSFER AGENT. The Offerors shall deposit the certificate
representing the Capital Securities with the Institutional Trustee or other
appropriate party prior to the Closing Date.

      2.4. PLACEMENT AGENTS' FEES AND EXPENSES.

            2.4.1. PLACEMENT AGENTS' COMPENSATION. Because the proceeds from the
sale of the Capital Securities shall be used to purchase the Debentures from the
Company, the Company shall pay an aggregate of $30.00 for each $1,000.00 of
principal amount of Debentures sold to the Trust (excluding the Debentures
related to the Common Securities purchased by the Company). Of this amount,
$15.00 for each $1,000.00 of principal amount of Debentures shall be payable to
FTN Financial Capital Markets and $15.00 for each $1,000.00 of principal amount
of Debentures shall be payable to Keefe, Bruyette & Woods, Inc. Such amount
shall be delivered to the Trustee or such other person designated by the
Placement Agents on the Closing Date and shall be allocated between and paid to
the respective Placement Agents as directed by the Placement Agents.

            2.4.2. COSTS AND EXPENSES. Whether or not this Agreement is
terminated or the sale of the Capital Securities is consummated, the Company
hereby covenants and agrees that it shall pay or cause to be paid (directly or
by reimbursement) all reasonable costs and expenses incident to the performance
of the obligations of the Offerors under this Agreement, including all fees,
expenses and disbursements of counsel and accountants for the Offerors; all
reasonable expenses incurred by the Offerors incident to the preparation,
execution and delivery of the Trust Agreement, the Indenture, and the Guarantee;
and all other reasonable costs and expenses incident to the performance of the
obligations of the Company hereunder and under the Trust Agreement.

      2.5. FAILURE TO CLOSE. If any of the conditions to the Closing specified
in this Agreement shall not have been fulfilled to the satisfaction of the
Placement Agents or if the Closing shall not have occurred on or before 10:00
a.m. (St. Louis time) on March 31, 2004, then each party hereto, notwithstanding
anything to the contrary in this Agreement, shall be relieved of all further
obligations under this Agreement without thereby waiving any rights it may have
by reason of such nonfulfillment or failure; provided, however, that the
obligations of the parties under Sections 2.4.2, 7.5 and 9 shall not be so
relieved and shall continue in full force and effect.

SECTION 3. CLOSING CONDITIONS. The obligations of the Purchaser and the
Placement Agents on the Closing Date shall be subject to the accuracy, at and as
of the Closing Date, of the representations and warranties of the Offerors
contained in this Agreement, to the accuracy, at and as of the Closing Date, of
the statements of the Offerors made in any certificates pursuant to this
Agreement, to the performance by the Offerors of their respective obligations
under this Agreement, to compliance, at and as of the Closing Date, by the
Offerors with their respective agreements herein contained, and to the following
further conditions:

      3.1. OPINIONS OF COUNSEL. On the Closing Date, the Placement Agents shall
have received the following favorable opinions, each dated as of the Closing
Date: (a) from McCarter & English LLP, counsel for the Offerors and addressed to
the Purchaser and the Placement Agents in substantially the form set forth on
Exhibit B-1 attached hereto and incorporated herein by this reference, (b) from
Shipman & Goodwin LLP, special Connecticut counsel to the Offerors and addressed
to the Purchaser, the Placement Agents and the Offerors, in substantially the
form set forth on Exhibit B-2 attached hereto and incorporated herein by this
reference and (c) from Lewis, Rice & Fingersh, L.C., special tax counsel to the
Offerors, and addressed to the Placement Agents and the Offerors, in
substantially the form set forth on Exhibit B-3 attached hereto and incorporated
herein by this reference, subject to the receipt by Lewis, Rice & Fingersh, L.C.
of a representation letter from the Company in the form set forth in Exhibit B-3
completed in a manner reasonably satisfactory to Lewis, Rice & Fingersh, L.C.
(collectively, the "Offerors' Counsel Opinions"). In rendering the Offerors'
Counsel Opinions, counsel to the Offerors

                                       3
<PAGE>
may rely as to factual matters upon certificates or other documents furnished by
officers, directors and trustees of the Offerors (copies of which shall be
delivered to the Placement Agents and the Purchaser) and by government
officials, and upon such other documents as counsel to the Offerors may, in
their reasonable opinion, deem appropriate as a basis for the Offerors' Counsel
Opinions. Counsel to the Offerors may specify the jurisdictions in which they
are admitted to practice and that they are not admitted to practice in any other
jurisdiction and are not experts in the law of any other jurisdiction. If the
Offerors' counsel is not admitted to practice in the State of New York, the
opinion of Offerors' counsel may assume, for purposes of the opinion, that the
laws of the State of New York are substantively identical, in all respects
material to the opinion, to the internal laws of the state in which such counsel
is admitted to practice. Such Offerors' Counsel Opinions shall not state that
they are to be governed or qualified by, or that they are otherwise subject to,
any treatise, written policy or other document relating to legal opinions,
including, without limitation, the Legal Opinion Accord of the ABA Section of
Business Law (1991).

      3.2. OFFICER'S CERTIFICATE. At the Closing Date, the Purchaser and the
Placement Agents shall have received certificates from the Chief Executive
Officer of the Company, dated as of the Closing Date, stating that (i) the
representations and warranties of the Offerors set forth in Section 5 hereof are
true and correct as of the Closing Date and that the Offerors have complied with
all agreements and satisfied all conditions on their part to be performed or
satisfied at or prior to the Closing Date, (ii) since the date of this Agreement
the Offerors have not incurred any liability or obligation, direct or
contingent, or entered into any material transactions, other than in the
ordinary course of business, which is material to the Offerors, and (iii)
covering such other matters as the Placement Agents may reasonably request.

      3.3. ADMINISTRATOR'S CERTIFICATE. At the Closing Date, the Purchaser and
the Placement Agents shall have received a certificate of one or more
Administrators of the Trust, dated as of the Closing Date, stating that the
representations and warranties of the Trust set forth in Section 5 are true and
correct as of the Closing Date and that the Trust has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Date.

      3.4. PURCHASE PERMITTED BY APPLICABLE LAWS; LEGAL INVESTMENT. The purchase
of and payment for the Capital Securities as described in this Agreement and
pursuant to the Subscription Agreement shall (a) not be prohibited by any
applicable law or governmental regulation, (b) not subject the Purchaser or the
Placement Agents to any penalty or, in the reasonable judgment of the Purchaser
and the Placement Agents, other onerous conditions under or pursuant to any
applicable law or governmental regulation, and (c) be permitted by the laws and
regulations of the jurisdictions to which the Purchaser and the Placement Agents
are subject.

      3.5. CONSENTS AND PERMITS. The Company and the Trust shall have received
all consents, permits and other authorizations, and made all such filings and
declarations, as may be required from any person or entity pursuant to any law,
statute, regulation or rule (federal, state, local and foreign), or pursuant to
any agreement, order or decree to which the Company or the Trust is a party or
to which either is subject, in connection with the transactions contemplated by
this Agreement.

      3.6. SALE OF PURCHASER SECURITIES. The Purchaser shall have sold
securities issued by the Purchaser in an amount such that the net proceeds of
such sale shall be (i) available on the Closing Date and (ii) in an amount
sufficient to purchase the Capital Securities and all other capital or similar
securities contemplated in agreements similar to this Agreement and the
Subscription Agreement.

      3.7. INFORMATION. Prior to or on the Closing Date, the Offerors shall have
furnished to the Placement Agents such further information, certificates,
opinions and documents addressed to the Purchaser and the Placement Agents,
which the Placement Agents may reasonably request, including, without
limitation, a complete set of the Operative Documents or any other documents or
certificates

                                       4
<PAGE>
required by this Section 3; and all proceedings taken by the Offerors in
connection with the issuance, offer and sale of the Capital Securities as herein
contemplated shall be reasonably satisfactory in form and substance to the
Placement Agents.

      If any condition specified in this Section 3 shall not have been fulfilled
when and as required in this Agreement, or if any of the opinions or
certificates mentioned above or elsewhere in this Agreement shall not be
reasonably satisfactory in form and substance to the Placement Agents, this
Agreement may be terminated by the Placement Agents by notice to the Offerors at
any time at or prior to the Closing Date. Notice of such termination shall be
given to the Offerors in writing or by telephone or facsimile confirmed in
writing.

SECTION 4. CONDITIONS TO THE OFFERORS' OBLIGATIONS. The obligations of the
Offerors to sell the Capital Securities to the Purchaser and consummate the
transactions contemplated by this Agreement shall be subject to the accuracy, at
and as of the Closing Date, of the representations and warranties of the
Placement Agents contained in this Agreement and to the following further
conditions:

      4.1. EXECUTED AGREEMENT. The Offerors shall have received from the
Placement Agents an executed copy of this Agreement.

      4.2. FULFILLMENT OF OTHER OBLIGATIONS. The Placement Agents shall have
fulfilled all of their other obligations and duties required to be fulfilled
under this Agreement prior to or at the Closing.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS. Except as set forth
on the Disclosure Schedule (as defined in Section 11.1) attached hereto, if any,
the Offerors jointly and severally represent and warrant to the Placement Agents
and the Purchaser as of the date hereof and as of the Closing Date as follows:

      5.1. SECURITIES LAW MATTERS.

            (A) Neither the Company nor the Trust, nor any of their "Affiliates"
(as defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on any of their behalf has, directly or indirectly,
made offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration under the Securities Act
of any of the Capital Securities, the Guarantee or the Debentures (collectively,
the "Securities") or any other securities to be issued, or which may be issued,
by the Purchaser.

            (B) Neither the Company nor the Trust, nor any of their Affiliates,
nor any person acting on its or their behalf has (i) other than the Placement
Agents, offered for sale or solicited offers to purchase the Securities, (ii)
engaged or will engage, in any "directed selling efforts" within the meaning of
Regulation S under the Securities Act ("Regulation S") with respect to the
Securities, or (iii) engaged in any form of offering, general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of any of the Securities.

            (C) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.

            (D) Neither the Company nor the Trust is or, after giving effect to
the offering and sale of the Capital Securities and the consummation of the
transactions described in this Agreement, will be an "investment company" or an
entity "controlled" by an "investment company," in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), without regard to Section 3(c) of the Investment
Company Act.

                                       5
<PAGE>
            (E) Neither the Company nor the Trust has paid or agreed to pay to
any person or entity (other than the Placement Agents) any compensation for
soliciting another to purchase any of the Securities.

      5.2. ORGANIZATION, STANDING AND QUALIFICATION OF THE TRUST. The Trust has
been duly created and is validly existing in good standing as a statutory trust
under the Connecticut Statutory Trust Act (the "Statutory Trust Act") with the
power and authority to own property and to conduct the business it transacts and
proposes to transact and to enter into and perform its obligations under the
Operative Documents. The Trust is duly qualified to transact business as a
foreign entity and is in good standing in each jurisdiction in which such
qualification is necessary, except where the failure to so qualify or be in good
standing would not have a material adverse effect on the Trust. The Trust is not
a party to or otherwise bound by any agreement other than the Operative
Documents. The Trust is and will, under current law, be classified for federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation.

      5.3. TRUST AGREEMENT. The Trust Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and delivered by
the Company and the Administrators of the Trust, and, assuming due
authorization, execution and delivery by the Institutional Trustee, will be a
valid and binding obligation of the Company and such Administrators, enforceable
against them in accordance with its terms, subject to (a) applicable bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation and other laws
relating to or affecting creditors' rights generally, and (b) general principles
of equity (regardless of whether considered and applied in a proceeding in
equity or at law) ("Bankruptcy and Equity"). Each of the Administrators of the
Trust is an employee or a director of the Company or of a financial institution
subsidiary of the Company and has been duly authorized by the Company to execute
and deliver the Trust Agreement.

      5.4. GUARANTEE AGREEMENT AND THE INDENTURE. Each of the Guarantee and the
Indenture has been duly authorized by the Company and, on the Closing Date will
have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Guarantee Trustee, in the case of
the Guarantee, and by the Indenture Trustee, in the case of the Indenture, will
be a valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to Bankruptcy and Equity.

      5.5. CAPITAL SECURITIES AND COMMON SECURITIES. The Capital Securities and
the Common Securities have been duly authorized by the Trust Agreement and, when
issued and delivered against payment therefor on the Closing Date to the
Purchaser, in the case of the Capital Securities, and to the Company, in the
case of the Common Securities, will be validly issued and represent undivided
beneficial interests in the assets of the Trust. None of the Capital Securities
or the Common Securities is subject to preemptive or other similar rights. On
the Closing Date, all of the issued and outstanding Common Securities will be
directly owned by the Company free and clear of any pledge, security interest,
claim, lien or other encumbrance.

      5.6. DEBENTURES. The Debentures have been duly authorized by the Company
and, at the Closing Date, will have been duly executed and delivered to the
Indenture Trustee for authentication in accordance with the Indenture, and, when
authenticated in the manner provided for in the Indenture and delivered against
payment therefor by the Trust, will constitute valid and binding obligations of
the Company entitled to the benefits of the Indenture enforceable against the
Company in accordance with their terms, subject to Bankruptcy and Equity.

      5.7. POWER AND AUTHORITY. This Agreement has been duly authorized,
executed and delivered by the Company and the Trust and constitutes the valid
and binding obligation of the Company and the

                                       6
<PAGE>
Trust, enforceable against the Company and the Trust in accordance with its
terms, subject to Bankruptcy and Equity.

      5.8. NO DEFAULTS. The Trust is not in violation of the Trust Agreement or,
to the knowledge of the Administrators, any provision of the Statutory Trust
Act. The execution, delivery and performance by the Company or the Trust of this
Agreement or the Operative Documents to which it is a party, and the
consummation of the transactions contemplated herein or therein and the use of
the proceeds therefrom, will not conflict with or constitute a breach of, or a
default under, or result in the creation or imposition of any lien, charge or
other encumbrance upon any property or assets of the Trust, the Company or any
of the Company's Subsidiaries (as defined in Section 5.11 hereof) pursuant to
any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Trust, the Company or any of its Subsidiaries is a party
or by which it or any of them may be bound, or to which any of the property or
assets of any of them is subject, except for a conflict, breach, default, lien,
charge or encumbrance which could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect nor will such action result in any
violation of the Trust Agreement or the Statutory Trust Act or require the
consent, approval, authorization or order of any court or governmental agency or
body. As used herein, the term "Material Adverse Effect" means any one or more
effects that individually or in the aggregate are material and adverse to the
Offeror's ability to consummate the transactions contemplated herein or in the
Operative Documents or any one or more effects that individually or in the
aggregate are material and adverse to the condition (financial or otherwise),
earnings, affairs, business, prospects or results of operations of the Company
and its Subsidiaries taken as whole, whether or not occurring in the ordinary
course of business.

      5.9. ORGANIZATION, STANDING AND QUALIFICATION OF THE COMPANY. The Company
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of New Jersey, with all requisite corporate power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of the Company
to be so qualified would not, singly or in the aggregate, have a Material
Adverse Effect.

      5.10. SUBSIDIARIES OF THE COMPANY. Each of the Company's significant
subsidiaries (as defined in Section 1-02(w) of Regulation S-X to the Securities
Act (the "Significant Subsidiaries")) is listed in Exhibit C attached hereto and
incorporated herein by this reference. Each Significant Subsidiary has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction in which it is chartered or organized, with all requisite power and
authority to own its properties and conduct the business it transacts and
proposes to transact, and is duly qualified to transact business and is in good
standing as a foreign entity in each jurisdiction where the nature of its
activities requires such qualification, except where the failure of any such
Significant Subsidiary to be so qualified would not, singly or in the aggregate,
have a Material Adverse Effect. All of the issued and outstanding shares of
capital stock of the Significant Subsidiaries (a) have been duly authorized and
are validly issued, (b) are fully paid and nonassessable, and (c) are wholly
owned, directly or indirectly, by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, restriction upon voting or
transfer, preemptive rights, claim, equity or other defect.

      5.11. PERMITS. The Company and each of its subsidiaries (as defined in
Section 1-02(x) of Regulation S-X to the Securities Act) (the "Subsidiaries")
have all requisite power and authority, and all necessary authorizations,
approvals, orders, licenses, certificates and permits of and from regulatory or
governmental officials, bodies and tribunals, to own or lease their respective
properties and to conduct their respective businesses as now being conducted,
except such authorizations, approvals, orders, licenses, certificates and
permits which, if not obtained and maintained, would not, singly or in the

                                       7
<PAGE>
aggregate, have a Material Adverse Effect, and neither the Company nor any of
its Subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such authorizations, approvals, orders,
licenses, certificates or permits which, singly or in the aggregate, if the
failure to be so licensed or approved is the subject of an unfavorable decision,
ruling or finding, would, singly or in the aggregate, have a Material Adverse
Effect; and the Company and its Subsidiaries are in compliance with all
applicable laws, rules, regulations and orders and consents, the violation of
which would, singly or in the aggregate, have a Material Adverse Effect.

      5.12. CONFLICTS, AUTHORIZATIONS AND APPROVALS. Neither the Company nor any
of its Subsidiaries is in violation of its respective articles or certificate of
incorporation, charter or by-laws or similar organizational documents or in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which either the Company or any
of its Subsidiaries is a party, or by which it or any of them may be bound or to
which any of the property or assets of the Company or any of its Subsidiaries is
subject, the effect of which violation or default in performance or observance
would have, singly or in the aggregate, a Material Adverse Effect.

      5.13. HOLDING COMPANY REGISTRATION AND DEPOSIT INSURANCE. The Company is
duly registered (i) as a bank holding company or financial holding company under
the Bank Holding Company Act of 1956, as amended, and the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve") or (ii)
as a savings and loan holding company under the Home Owners' Loan Act of 1933,
as amended, and the regulations of the Office of Thrift Supervision (the "OTS"),
and the deposit accounts of the Company's Subsidiary depository institutions are
insured by the Federal Deposit Insurance Corporation ("FDIC") to the fullest
extent permitted by law and the rules and regulations of the FDIC, and no
proceedings for the termination of such insurance are pending or threatened.

      5.14. FINANCIAL STATEMENTS.

            (A) The consolidated balance sheets of the Company and all of its
Subsidiaries as of December 31, 2003 and December 31, 2002 and related
consolidated income statements and statements of changes in shareholders' equity
for the 3 years ended December 31, 2003 together with the notes thereto, copies
of each of which have been provided to the Placement Agents (together, the
"Financial Statements"), have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
disclosed therein) and fairly present in all material respects the financial
position and the results of operations and changes in shareholders' equity of
the Company and all of its Subsidiaries as of the dates and for the periods
indicated. The books and records of the Company and all of its Subsidiaries have
been, and are being, maintained in all material respects in accordance with
generally accepted accounting principles and any other applicable legal and
accounting requirements and reflect only actual transactions.

            (B) The information in the Company's most recently filed (i) FR Y-9C
filed with the Federal Reserve if the Company is a bank holding company, (ii) FR
Y-9SP filed with the Federal Reserve if the Company is a small bank holding
company or (iii) H-(b)11 filed with the OTS if the Company is a savings and loan
holding company (the "Regulatory Report"), previously provided to the Placement
Agents fairly presents in all material respects the financial position of the
Company and, where applicable, all of its Subsidiaries as of the end of the
period represented by such Regulatory Report.

            (C) Since the respective dates of the Financial Statements and the
Regulatory Report, there has been no material adverse change or development with
respect to the financial condition or earnings of the Company and all of its
Subsidiaries, taken as a whole.

                                       8
<PAGE>
            (D) The accountants of the Company who certified the Financial
Statements are independent public accountants of the Company and its
Subsidiaries within the meaning of the Securities Act and the rules and
regulations thereunder.

      5.15. REGULATORY ENFORCEMENT MATTERS. Neither the Company nor any of its
Subsidiaries is subject or is party to, or has received any notice or advice
that any of them may become subject or party to, any investigation with respect
to, any cease-and-desist order, agreement, consent agreement, memorandum of
understanding or other regulatory enforcement action, proceeding or order with
or by, or is a party to any commitment letter or similar undertaking to, or is
subject to any directive by, or has been since January 1, 2001, a recipient of
any supervisory letter from, or since January 1, 2001, has adopted any board
resolutions at the request of, any Regulatory Agency (as defined below) that
currently restricts in any material respect the conduct of their business or
that in any material manner relates to their capital adequacy, their credit
policies, their ability or authority to pay dividends or make distributions to
their shareholders or make payments of principal or interest on their debt
obligations, their management or their business (each, a "Regulatory
Agreement"), nor has the Company or any of its Subsidiaries been advised since
January 1, 2001, by any Regulatory Agency that it is considering issuing or
requesting any such Regulatory Agreement. There is no material unresolved
violation, criticism or exception by any Regulatory Agency with respect to any
report or statement relating to any examinations of the Company or any of its
Subsidiaries. As used herein, the term "Regulatory Agency" means any federal or
state agency charged with the supervision or regulation of depository
institutions, bank, financial or savings and loan holding companies, or engaged
in the insurance of depository institution deposits, or any court,
administrative agency or commission or other governmental agency, authority or
instrumentality having supervisory or regulatory authority with respect to the
Company or any of its Subsidiaries. Neither the Company nor any of the
Subsidiaries is currently unable to pay dividends or make distributions to its
shareholders with respect to any class of its equity securities, or prohibited
from paying principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise, and, in the reasonable
judgment of the Company's management, neither the Company nor any of the
Subsidiaries will be unable in the foreseeable future to pay dividends or make
distributions with respect to any class of equity securities, or be prohibited
from paying principal or interest on its debt obligations, due to a restriction
or limitation, whether by statute, contract or otherwise.

      5.16. NO MATERIAL CHANGE. Since December 31, 2003, there has been no
material adverse change or development with respect to the condition (financial
or otherwise), earnings, affairs, business, prospects or results of operations
of the Company or its Subsidiaries on a consolidated basis, whether or not
arising in the ordinary course of business.

      5.17. NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its
Subsidiaries has any material liability, whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due,
including any liability for taxes (and there is no past or present fact,
situation, circumstance, condition or other basis for any present or future
action, suit, proceeding, hearing, charge, complaint, claim or demand against
the Company or its Subsidiaries giving rise to any such liability), except (i)
for liabilities set forth in the Financial Statements and (ii) normal
fluctuation in the amount of the liabilities referred to in clause (i) above
occurring in the ordinary course of business of the Company and all of its
Subsidiaries since the date of the most recent balance sheet included in the
Financial Statements.

      5.18. LITIGATION. No charge, investigation, action, suit or proceeding is
pending or, to the knowledge of the Offerors, threatened, against or affecting
the Company or its Subsidiaries or any of their respective properties before or
by any courts or any regulatory, administrative or governmental official,
commission, board, agency or other authority or body, or any arbitrator, wherein
an unfavorable decision, ruling or finding could have, singly or in the
aggregate, a Material Adverse Effect.

                                       9
<PAGE>
      5.19. DEFERRAL OF INTEREST PAYMENTS ON DEBENTURES. The Company has no
present intention to exercise its option to defer payments of interest on the
Debentures as provided in the Indenture. The Company believes that the
likelihood that it would exercise its right to defer payments of interest on the
Debentures as provided in the Indenture at any time during which the Debentures
are outstanding is remote because of the restrictions that would be imposed on
the Company's ability to declare or pay dividends or distributions on, or to
redeem, purchase, acquire or make a liquidation payment with respect to, any of
the Company's capital stock and on the Company's ability to make any payments of
principal, interest or premium on, or repay, repurchase or redeem, any of its
debt securities that rank pari passu in all respects with, or junior in interest
to, the Debentures.

SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENTS. Each
Placement Agent represents and warrants to the Offerors as to itself (but not as
to the other Placement Agent) as follows:

      6.1. ORGANIZATION, STANDING AND QUALIFICATION.

            (A) FTN Financial Capital Markets is a division of First Tennessee
Bank National Association, a national banking association duly organized,
validly existing and in good standing under the laws of the United States, with
full power and authority to own, lease and operate its properties and conduct
its business as currently being conducted. FTN Financial Capital Markets is duly
qualified to transact business as a foreign corporation and is in good standing
in each other jurisdiction in which it owns or leases property or conducts its
business so as to require such qualification and in which the failure to so
qualify would, individually or in the aggregate, have a material adverse effect
on the condition (financial or otherwise), earnings, business, prospects or
results of operations of FTN Financial Capital Markets.

            (B) Keefe, Bruyette & Woods, Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York,
with full power and authority to own, lease and operate its properties and
conduct its business as currently being conducted. Keefe, Bruyette & Woods, Inc.
is duly qualified to transact business as a foreign corporation and is in good
standing in each other jurisdiction in which it owns or leases property or
conducts its business so as to require such qualification and in which the
failure to so qualify would, individually or in the aggregate, have a material
adverse effect on the condition (financial or otherwise), earnings, business,
prospects or results of operations of Keefe, Bruyette & Woods, Inc.

      6.2. POWER AND AUTHORITY. The Placement Agent has all requisite power and
authority to enter into this Agreement, and this Agreement has been duly and
validly authorized, executed and delivered by the Placement Agent and
constitutes the legal, valid and binding agreement of the Placement Agent,
enforceable against the Placement Agent in accordance with its terms, subject to
Bankruptcy and Equity and except as any indemnification or contribution
provisions thereof may be limited under applicable securities laws.

      6.3. GENERAL SOLICITATION. In the case of the offer and sale of the
Capital Securities, no form of general solicitation or general advertising was
used by the Placement Agent or its representatives including, but not limited
to, advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. Neither the Placement Agent nor its
representatives have engaged or will engage in any "directed selling efforts"
within the meaning of Regulation S with respect to the Capital Securities.

      6.4. PURCHASER. The Placement Agent has made such reasonable inquiry as is
necessary to determine that the Purchaser is acquiring the Capital Securities
for its own account, that the Purchaser does not intend to distribute the
Capital Securities in contravention of the Securities Act or any other

                                       10
<PAGE>
applicable securities laws, and that the Purchaser is not a "U.S. person" as
that term is defined under Rule 902 of the Securities Act.

      6.5. QUALIFIED PURCHASERS. The Placement Agent has not offered or sold and
will not arrange for the offer or sale of the Capital Securities except (i) in
an offshore transaction complying with Rule 903 of Regulation S, or (ii) to
those the Placement Agent reasonably believes are "accredited investors" (as
defined in Rule 501 of Regulation D), or (iii) in any other manner that does not
require registration of the Capital Securities under the Securities Act. In
connection with each such sale, the Placement Agent has taken or will take
reasonable steps to ensure that the Purchaser is aware that (a) such sale is
being made in reliance on an exemption under the Securities Act and (b) future
transfers of the Capital Securities will not be made except in compliance with
applicable securities laws.

      6.6. OFFERING CIRCULARS. Neither the Placement Agent nor its
representatives will include any non-public information about the Company, the
Trust or any of their affiliates in any registration statement, prospectus,
offering circular or private placement memorandum used in connection with any
purchase of Capital Securities without the prior written consent of the Trust
and the Company.

SECTION 7. COVENANTS OF THE OFFERORS. The Offerors covenant and agree with the
Placement Agents and the Purchaser as follows:

      7.1. COMPLIANCE WITH REPRESENTATIONS AND WARRANTIES. During the period
from the date of this Agreement to the Closing Date, the Offerors shall use
their best efforts and take all action necessary or appropriate to cause their
representations and warranties contained in Section 5 hereof to be true as of
the Closing Date, after giving effect to the transactions contemplated by this
Agreement, as if made on and as of the Closing Date.

      7.2. SALE AND REGISTRATION OF SECURITIES. The Offerors and their
Affiliates shall not nor shall any of them permit any person acting on their
behalf (other than the Placement Agents), to directly or indirectly (i) sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) that would or could be integrated
with the sale of the Capital Securities in a manner that would require the
registration under the Securities Act of the Securities or (ii) make offers or
sales of any such Security, or solicit offers to buy any such Security, under
circumstances that would require the registration of any of such Securities
under the Securities Act.

      7.3. USE OF PROCEEDS. The Trust shall use the proceeds from the sale of
the Capital Securities to purchase the Debentures from the Company.

      7.4. INVESTMENT COMPANY. The Offerors shall not engage, or permit any
Subsidiary to engage, in any activity which would cause it or any Subsidiary to
be an "investment company" under the provisions of the Investment Company Act.

      7.5. REIMBURSEMENT OF EXPENSES. If the sale of the Capital Securities
provided for herein is not consummated (i) because any condition set forth in
Section 3 hereof is not satisfied, or (ii) because of any refusal, inability or
failure on the part of the Company or the Trust to perform any agreement herein
or comply with any provision hereof other than by reason of a breach by the
Placement Agents, the Company shall reimburse the Placement Agents upon demand
for all of their pro rata share of out-of-pocket expenses (including reasonable
fees and disbursements of counsel) in an amount not to exceed $50,000.00 that
shall have been incurred by them in connection with the proposed purchase and
sale of the Capital Securities. Notwithstanding the foregoing, the Company shall
have no obligation to reimburse the Placement Agents for their out-of-pocket
expenses if the sale of the Capital Securities fails to occur because the
condition set forth in Section 3.6 is not satisfied or because either of the
Placement Agents fails to fulfill a condition set forth in Section 4.

                                       11
<PAGE>
      7.6. DIRECTED SELLING EFFORTS, SOLICITATION AND ADVERTISING. In connection
with any offer or sale of any of the Securities, the Offerors shall not, nor
shall either of them permit any of their Affiliates or any person acting on
their behalf, other than the Placement Agents, to, (i) engage in any "directed
selling efforts" within the meaning of Regulation S, or (ii) engage in any form
of general solicitation or general advertising (as defined in Regulation D).

      7.7. COMPLIANCE WITH RULE 144A(D)(4) UNDER THE SECURITIES ACT. So long as
any of the Securities are outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act, the Offerors will, during
any period in which they are not subject to and in compliance with Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or the Offerors are not exempt from such reporting requirements pursuant to and
in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each holder
of such restricted securities and to each prospective purchaser (as designated
by such holder) of such restricted securities, upon the request of such holder
or prospective purchaser in connection with any proposed transfer, any
information required to be provided by Rule 144A(d)(4) under the Securities Act,
if applicable. This covenant is intended to be for the benefit of the holders,
and the prospective purchasers designated by such holders, from time to time of
such restricted securities. The information provided by the Offerors pursuant to
this Section 7.7 will not, at the date thereof, contain any untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

      7.8. QUARTERLY REPORTS. Within 50 days of the end of each calendar year
quarter and within 100 days of the end of each calendar year during which the
Debentures are issued and outstanding, the Offerors shall submit to The Bank of
New York a completed quarterly report in the form attached hereto as Exhibit D.
The Offerors acknowledge and agree that The Bank of New York and its successors
and assigns is a third party beneficiary of this Section 7.8.

SECTION 8. COVENANTS OF THE PLACEMENT AGENTS. The Placement Agents covenant and
agree with the Offerors that, during the period from the date of this Agreement
to the Closing Date, the Placement Agents shall use their best efforts and take
all action necessary or appropriate to cause their representations and
warranties contained in Section 6 to be true as of Closing Date, after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of the Closing Date. The Placement Agents further covenant and agree not to
engage in hedging transactions with respect to the Capital Securities unless
such transactions are conducted in compliance with the Securities Act.

SECTION 9. INDEMNIFICATION.

      9.1. INDEMNIFICATION OBLIGATION. The Offerors shall jointly and severally
indemnify and hold harmless the Placement Agents and the Purchaser and each of
their respective agents, employees, officers and directors and each person that
controls either of the Placement Agents or the Purchaser within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, and agents,
employees, officers and directors or any such controlling person of either of
the Placement Agents or the Purchaser (each such person or entity, an
"Indemnified Party") from and against any and all losses, claims, damages,
judgments, liabilities or expenses, joint or several, to which such Indemnified
Party may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Offerors), insofar as such losses, claims, damages,
judgments, liabilities or expenses (or actions in respect thereof) arise out of,
or are based upon, or relate to, in whole or in part, (a) any untrue statement
or alleged untrue statement of a material fact contained in any information
(whether written or oral) or documents executed in favor of, furnished or made
available to the Placement Agents or the Purchaser by the Offerors, or (b) any
omission or alleged omission to state in any

                                       12
<PAGE>
information (whether written or oral) or documents executed in favor of,
furnished or made available to the Placement Agents or the Purchaser by the
Offerors a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Indemnified Party
for any legal and other expenses as such expenses are reasonably incurred by
such Indemnified Party in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, judgments, liability,
expense or action described in this Section 9.1. In addition to their other
obligations under this Section 9, the Offerors hereby agree that, as an interim
measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of, or based upon, or related to the matters
described above in this Section 9.1, they shall reimburse each Indemnified Party
on a quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the possibility
that such payments might later be held to have been improper by a court of
competent jurisdiction. To the extent that any such interim reimbursement
payment is so held to have been improper, each Indemnified Party shall promptly
return such amounts to the Offerors together with interest, determined on the
basis of the prime rate (or other commercial lending rate for borrowers of the
highest credit standing) announced from time to time by First Tennessee Bank
National Association (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an Indemnified Party within 30 days of a request for
reimbursement shall bear interest at the Prime Rate from the date of such
request.

      9.2. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by an
Indemnified Party under this Section 9 of notice of the commencement of any
action, such Indemnified Party shall, if a claim in respect thereof is to be
made against the Offerors under this Section 9, notify the Offerors in writing
of the commencement thereof; but, subject to Section 9.4, the omission to so
notify the Offerors shall not relieve them from any liability pursuant to
Section 9.1 which the Offerors may have to any Indemnified Party unless and to
the extent that the Offerors did not otherwise learn of such action and such
failure by the Indemnified Party results in the forfeiture by the Offerors of
substantial rights and defenses. In case any such action is brought against any
Indemnified Party and such Indemnified Party seeks or intends to seek indemnity
from the Offerors, the Offerors shall be entitled to participate in, and, to the
extent that they may wish, to assume the defense thereof with counsel reasonably
satisfactory to such Indemnified Party; provided, however, if the defendants in
any such action include both the Indemnified Party and the Offerors and the
Indemnified Party shall have reasonably concluded that there may be a conflict
between the positions of the Offerors and the Indemnified Party in conducting
the defense of any such action or that there may be legal defenses available to
it and/or other Indemnified Parties which are different from or additional to
those available to the Offerors, the Indemnified Party shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party.
Upon receipt of notice from the Offerors to such Indemnified Party of their
election to so assume the defense of such action and approval by the Indemnified
Party of counsel, the Offerors shall not be liable to such Indemnified Party
under this Section 9 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof unless (i) the
Indemnified Party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso in the preceding
sentence (it being understood, however, that the Offerors shall not be liable
for the expenses of more than one separate counsel representing the Indemnified
Parties who are parties to such action), or (ii) the Offerors shall not have
employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified Party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel of such
Indemnified Party shall be at the expense of the Offerors.

      9.3. CONTRIBUTION. If the indemnification provided for in this Section 9
is required by its terms, but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an Indemnified Party under Section 9.1
in respect of any losses, claims, damages, liabilities or expenses

                                       13
<PAGE>
referred to herein or therein, then the Offerors shall contribute to the amount
paid or payable by such Indemnified Party as a result of any losses, claims,
damages, judgments, liabilities or expenses referred to herein (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Offerors, on the one hand, and the Indemnified Party, on the other hand, from
the offering of such Capital Securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Offerors, on the one hand, and the
Placement Agents, on the other hand, in connection with the statements or
omissions or inaccuracies in the representations and warranties herein or other
breaches which resulted in such losses, claims, damages, judgments, liabilities
or expenses, as well as any other relevant equitable considerations. The
respective relative benefits received by the Offerors, on the one hand, and the
Placement Agents, on the other hand, shall be deemed to be in the same
proportion, in the case of the Offerors, as the total price paid to the Offerors
for the Capital Securities sold by the Offerors to the Purchaser (net of the
compensation paid to the Placement Agents hereunder, but before deducting
expenses), and in the case of the Placement Agents, as the compensation received
by them, bears to the total of such amounts paid to the Offerors and received by
the Placement Agents as compensation. The relative fault of the Offerors and the
Placement Agents shall be determined by reference to, among other things,
whether the untrue statement or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact or the inaccurate or the
alleged inaccurate representation and/or warranty relates to information
supplied by the Offerors or the Placement Agents and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The provisions set forth in Section 9.2 with respect
to notice of commencement of any action shall apply if a claim for contribution
is made under this Section 9.3; provided, however, that no additional notice
shall be required with respect to any action for which notice has been given
under Section 9.2 for purposes of indemnification. The Offerors and the
Placement Agents agree that it would not be just and equitable if contribution
pursuant to this Section 9.3 were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in this Section 9.3. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages, judgments,
liabilities or expenses referred to in this Section 9.3 shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such action or claim. In no event shall the liability of the
Placement Agents hereunder be greater in amount than the dollar amount of the
compensation (net of payment of all expenses) received by the Placement Agents
upon the sale of the Capital Securities giving rise to such obligation. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not found guilty of such fraudulent misrepresentation.

      9.4. ADDITIONAL REMEDIES. The indemnity and contribution agreements
contained in this Section 9 are in addition to any liability that the Offerors
may otherwise have to any Indemnified Party.

      9.5. ADDITIONAL INDEMNIFICATION. The Company shall indemnify and hold
harmless the Trust against all loss, liability, claim, damage and expense
whatsoever, as due from the Trust under Sections 9.1 through 9.4 hereof.

SECTION 10. RIGHTS AND RESPONSIBILITIES OF PLACEMENT AGENTS.

      10.1. RELIANCE. In performing their duties under this Agreement, the
Placement Agents shall be entitled to rely upon any notice, signature or writing
which they shall in good faith believe to be genuine and to be signed or
presented by a proper party or parties. The Placement Agents may rely upon any
opinions or certificates or other documents delivered by the Offerors or their
counsel or designees to either the Placement Agents or the Purchaser.

                                       14
<PAGE>
      10.2. RIGHTS OF PLACEMENT AGENTS. In connection with the performance of
their duties under this Agreement, the Placement Agents shall not be liable for
any error of judgment or any action taken or omitted to be taken unless the
Placement Agents were grossly negligent or engaged in willful misconduct in
connection with such performance or non-performance. No provision of this
Agreement shall require the Placement Agents to expend or risk their own funds
or otherwise incur any financial liability on behalf of the Purchaser in
connection with the performance of any of their duties hereunder. The Placement
Agents shall be under no obligation to exercise any of the rights or powers
vested in them by this Agreement.

SECTION 11. MISCELLANEOUS.

      11.1. DISCLOSURE SCHEDULE. The term "Disclosure Schedule," as used herein,
means the schedule, if any, attached to this Agreement that sets forth items the
disclosure of which is necessary or appropriate as an exception to one or more
representations or warranties contained in Section 5 hereof; provided, that any
item set forth in the Disclosure Schedule as an exception to a representation or
warranty shall be deemed an admission by the Offerors that such item represents
an exception, fact, event or circumstance that is reasonably likely to result in
a Material Adverse Effect. The Disclosure Schedule shall be arranged in
paragraphs corresponding to the section numbers contained in Section 5. Nothing
in the Disclosure Schedule shall be deemed adequate to disclose an exception to
a representation or warranty made herein unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
immediately preceding sentence, the mere listing (or inclusion of a copy) of a
document or other item in the Disclosure Schedule shall not be deemed adequate
to disclose an exception to a representation or warranty made herein unless the
representation or warranty has to do with the existence of the document or other
item itself. Information provided by the Company in response to any due
diligence questionnaire shall not be deemed part of the Disclosure Schedule and
shall not be deemed to be an exception to one or more representations or
warranties contained in Section 5 hereof unless such information is specifically
included on the Disclosure Schedule in accordance with the provisions of this
Section 11.1.

      11.2. LEGAL EXPENSES. At Closing, the Placement Agents shall provide a
credit for the Offerors' transaction-related legal expenses in the amount of
$10,000.00.

      11.3. NON-DISCLOSURE. Except as required by applicable law, including
without limitation securities laws and regulations promulgated thereunder, (i)
the Offerors shall not, and will cause their advisors and representatives not
to, issue any press release or other public statement regarding the transactions
contemplated by this Agreement or the Operative Documents prior to or on the
Closing Date and (ii) following the Closing Date, the Offerors shall not include
in any press release, other public statement or other communication regarding
the transactions contemplated by this Agreement or the Operative Documents, any
reference to the Placement Agents, U.S. Bank, the Purchaser, the term "PreTS" or
any derivations thereof, or the terms and conditions of this Agreement or the
Operative Documents. Notwithstanding anything to the contrary, the Offerors may
(1) consult any tax advisor regarding U.S. federal income tax treatment or tax
structure of the transaction contemplated under this Agreement and the Operative
Documents and (2) disclose to any and all persons, without limitation of any
kind, the U.S. Federal income tax structure (in each case, within the meaning of
Treasury Regulation Section 1.6011-4) of the transaction contemplated under this
Agreement and the Operative Documents and all materials of any kind (including
opinions or other tax analyses) that are provided to you relating to such tax
treatment and tax structure. For this purpose, "tax structure" is limited to any
facts relevant to the U.S. federal income tax treatment of the transaction and
does not include information relating to identity of the parties.

                                       15
<PAGE>
      11.4. NOTICES. Prior to the Closing, and thereafter with respect to
matters pertaining to this Agreement only, all notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier or overnight air courier guaranteeing next
day delivery:

         if to the Placement Agents, to:

               FTN Financial Capital Markets
               845 Crossover Lane, Suite 150
               Memphis, Tennessee  38117
               Telecopier:  901-435-4706
               Telephone:  800-456-5460
               Attention:  James D. Wingett

                       and

               Keefe, Bruyette & Woods, Inc.
               787 7th Avenue
               4th Floor
               New York, New York  10019
               Telecopier:  212-403-2000
               Telephone:  212-403-1004
               Attention:  Mitchell Kleinman, General Counsel

         with a copy to:

               Lewis, Rice & Fingersh, L.C.
               500 North Broadway, Suite 2000
               St. Louis, Missouri  63102
               Telecopier:  314-241-6056
               Telephone:  314-444-7600
               Attention:  Thomas C. Erb, Esq.

                       and

               Sidley Austin Brown & Wood LLP
               787 7th Avenue
               New York, New York  10019
               Telecopier:  212-839-5599
               Telephone:  212-839-5300
               Attention:  Renwick Martin, Esq.

         if to the Offerors, to:

               City National Bancshares Corporation
               900 Broad Street
               Newark, New Jersey  07102
               Telecopier:  973-624-5754
               Telephone:  973-624-0865 Ext. 644
               Attention:  Edward R. Wright

                                       16
<PAGE>
         with a copy to:

               McCarter & English LLP
               Four Gateway Center
               100 Mulberry Street
               Newark, New Jersey  07102
               Telecopier:  973-639-2057
               Telephone:  973-622-4444
               Attention:  Todd M. Poland, Esq.

      All such notices and communications shall be deemed to have been duly
given (i) at the time delivered by hand, if personally delivered, (ii) five
business days after being deposited in the mail, postage prepaid, if mailed,
(iii) when answered back, if telexed, (iv) the next business day after being
telecopied, or (v) the next business day after timely delivery to a courier, if
sent by overnight air courier guaranteeing next day delivery. From and after the
Closing, the foregoing notice provisions shall be superseded by any notice
provisions of the Operative Documents under which notice is given. The Placement
Agents, the Company, and their respective counsel, may change their respective
notice addresses from time to time by written notice to all of the foregoing
persons.

      11.5. PARTIES IN INTEREST, SUCCESSORS AND ASSIGNS. Except as expressly set
forth herein, this Agreement is made solely for the benefit of the Placement
Agents, the Purchaser and the Offerors and any person controlling the Placement
Agents, the Purchaser or the Offerors and their respective successors and
assigns; and no other person shall acquire or have any right under or by virtue
of this Agreement. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of each of the parties.

      11.6. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.

      11.7. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

      11.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAWS PERTAINING TO CONFLICTS OF
LAWS) OF THE STATE OF NEW YORK.

      11.9. ENTIRE AGREEMENT. This Agreement, together with the Operative
Documents and the other documents delivered in connection with the transactions
contemplated by this Agreement, is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement, together with the Operative Documents and the other
documents delivered in connection with the transaction contemplated by this
Agreement, supersedes all prior agreements and understandings between the
parties with respect to such subject matter.

      11.10. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired or affected, it
being intended that all of the

                                       17
<PAGE>
Placement Agents' and the Purchaser's rights and privileges shall be enforceable
to the fullest extent permitted by law.

      11.11. SURVIVAL. The Placement Agents and the Offerors, respectively,
agree that the representations, warranties and agreements made by each of them
in this Agreement and in any certificate or other instrument delivered pursuant
hereto shall remain in full force and effect and shall survive the delivery of,
and payment for, the Capital Securities.

                     Signatures appear on the following page

                                       18
<PAGE>
      If this Agreement is satisfactory to you, please so indicate by signing
the acceptance of this Agreement and deliver such counterpart to the Offerors
whereupon this Agreement will become binding between us in accordance with its
terms.

                                  Very truly yours,

                                  CITY NATIONAL BANCSHARES CORPORATION

                                  By:
                                     -------------------------------------------
                                  Name:
                                       -----------------------------------------
                                  Title:
                                        ----------------------------------------

                                  CITY NATIONAL BANK OF NEW JERSEY CAPITAL
                                  STATUTORY TRUST II

                                  By:
                                     -------------------------------------------
                                  Name:
                                       -----------------------------------------
                                  Title:  Administrator

CONFIRMED AND ACCEPTED,
as of the date first set forth above

FTN FINANCIAL CAPITAL MARKETS,
A DIVISION OF FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
AS A PLACEMENT AGENT

By:
   --------------------------------------------------------------------
Name:
     ------------------------------------------------------------------
Title:
      -----------------------------------------------------------------

KEEFE, BRUYETTE & WOODS, INC.,
A NEW YORK CORPORATION, AS A PLACEMENT AGENT

By:
   --------------------------------------------------------------------
Name:
     ------------------------------------------------------------------
Title:
      -----------------------------------------------------------------

                                       19
<PAGE>
                                    EXHIBIT A

                         FORM OF SUBSCRIPTION AGREEMENT

           CITY NATIONAL BANK OF NEW JERSEY CAPITAL STATUTORY TRUST II
                      CITY NATIONAL BANCSHARES CORPORATION

                             SUBSCRIPTION AGREEMENT

                                 MARCH 17, 2004

      THIS SUBSCRIPTION AGREEMENT (this "Agreement") made among City National
Bank of New Jersey Capital Statutory Trust II (the "Trust"), a statutory trust
created under the Connecticut Statutory Trust Act (Chapter 615 of Title 34 of
the Connecticut General Statutes, Section 500, et seq.), City National
Bancshares Corporation, a New Jersey corporation, with its principal offices
located at 900 Broad Street, Newark, New Jersey 07102 (the "Company" and,
collectively with the Trust, the "Offerors"), and Preferred Term Securities
XIII, Ltd. (the "Purchaser").

                                    RECITALS:

      A. The Trust desires to issue 4,000 of its Floating Rate Capital
Securities (the "Capital Securities"), liquidation amount $1,000.00 per Capital
Security, representing an undivided beneficial interest in the assets of the
Trust (the "Offering"), to be issued pursuant to an Amended and Restated
Declaration of Trust (the "Declaration") by and among the Company, U.S. Bank
National Association ("U.S. Bank"), the administrators named therein, and the
holders (as defined therein), which Capital Securities are to be guaranteed by
the Company with respect to distributions and payments upon liquidation,
redemption and otherwise pursuant to the terms of a Guarantee Agreement between
the Company and U.S. Bank, as trustee (the "Guarantee"); and

      B. The proceeds from the sale of the Capital Securities will be combined
with the proceeds from the sale by the Trust to the Company of its common
securities, and will be used by the Trust to purchase an equivalent amount of
Floating Rate Junior Subordinated Deferrable Interest Debentures of the Company
(the "Debentures") to be issued by the Company pursuant to an indenture to be
executed by the Company and U.S. Bank, as trustee (the "Indenture"); and

      C. In consideration of the premises and the mutual representations and
covenants hereinafter set forth, the parties hereto agree as follows:

                                   ARTICLE I

                     PURCHASE AND SALE OF CAPITAL SECURITIES

      1.1. Upon the execution of this Agreement, the Purchaser hereby agrees to
purchase from the Trust 4,000 Capital Securities at a price equal to $1,000.00
per Capital Security (the "Purchase Price") and the Trust agrees to sell such
Capital Securities to the Purchaser for said Purchase Price. The rights and
preferences of the Capital Securities are set forth in the Declaration. The
Purchase Price is payable in immediately available funds on March 17, 2004, or
such other business day as may be designated by the Purchaser, but in no event
later than March 31, 2004 (the "Closing Date"). The Offerors shall provide the
Purchaser wire transfer instructions no later than 1 day following the date
hereof.

      1.2. The certificate for the Capital Securities shall be delivered by the
Trust on the Closing Date to the Purchaser or its designee.

                                      A-1
<PAGE>
      1.3. The Placement Agreement, dated March 8, 2004 (the "Placement
Agreement"), among the Offerors and the Placement Agents identified therein
includes certain representations and warranties, covenants and conditions to
closing and certain other matters governing the Offering. The Placement
Agreement is hereby incorporated by reference into this Agreement and the
Purchaser shall be entitled to each of the benefits of the Placement Agents and
the Purchaser under the Placement Agreement and shall be entitled to enforce the
obligations of the Offerors under such Placement Agreement as fully as if the
Purchaser were a party to such Placement Agreement.

                                   ARTICLE II

                REPRESENTATIONS AND WARRANTIES OF PURCHASER

      2.1. The Purchaser understands and acknowledges that neither the Capital
Securities, the Debentures nor the Guarantee have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or any other
applicable securities law, are being offered for sale by the Trust in
transactions not requiring registration under the Securities Act, and may not be
offered, sold, pledged or otherwise transferred by the Purchaser except in
compliance with the registration requirements of the Securities Act or any other
applicable securities laws, pursuant to an exemption therefrom or in a
transaction not subject thereto.

      2.2. The Purchaser represents, warrants and certifies that (i) it is not a
"U.S. person" as such term is defined in Rule 902 under the Securities Act, (ii)
it is not acquiring the Capital Securities for the account or benefit of any
such U.S. person, (iii) the offer and sale of Capital Securities to the
Purchaser constitutes an "offshore transaction" under Regulation S of the
Securities Act, and (iv) it will not engage in hedging transactions with regard
to the Capital Securities unless such transactions are conducted in compliance
with the Securities Act and the Purchaser agrees to the legends and transfer
restrictions set forth on the Capital Securities certificate.

      2.3. The Purchaser represents and warrants that it is purchasing the
Capital Securities for its own account, for investment, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of the Securities Act or other applicable securities laws, subject to any
requirement of law that the disposition of its property be at all times within
its control and subject to its ability to resell such Capital Securities
pursuant to an effective registration statement under the Securities Act or
under Rule 144A or any other exemption from registration available under the
Securities Act or any other applicable Securities law.

      2.4. The Purchaser represents and warrants that it has full power and
authority to execute and deliver this Agreement, to make the representations and
warranties specified herein, and to consummate the transactions contemplated
herein and it has full right and power to subscribe for Capital Securities and
perform its obligations pursuant to this Agreement.

      2.5. The Purchaser, a Cayman Islands Company whose business includes
issuance of certain notes and acquiring the Capital Securities and other similar
securities, represents and warrants that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of purchasing the Capital Securities, has had the opportunity to ask
questions of, and receive answers and request additional information from, the
Offerors and is aware that it may be required to bear the economic risk of an
investment in the Capital Securities.

      2.6. The Purchaser represents and warrants that no filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any governmental body, agency or court having jurisdiction over the
Purchaser, other than those that have been made or obtained, is necessary or

                                      A-2
<PAGE>
required for the performance by the Purchaser of its obligations under this
Agreement or to consummate the transactions contemplated herein.

      2.7. The Purchaser represents and warrants that this Agreement has been
duly authorized, executed and delivered by the Purchaser.

      2.8. The Purchaser represents and warrants that (i) the Purchaser is not
in violation or default of any term of its Memorandum of Association or Articles
of Association, of any provision of any mortgage, indenture, contract,
agreement, instrument or contract to which it is a party or by which it is bound
or of any judgment, decree, order, writ or, to its knowledge, any statute, rule
or regulation applicable to the Purchaser which would prevent the Purchaser from
performing any material obligation set forth in this Agreement; and (ii) the
execution, delivery and performance of and compliance with this Agreement, and
the consummation of the transactions contemplated herein, will not, with or
without the passage of time or giving of notice, result in any such material
violation, or be in conflict with or constitute a default under any such term,
or the suspension, revocation, impairment, forfeiture or non-renewal of any
permit, license, authorization or approval applicable to the Purchaser, its
business or operations or any of its assets or properties which would prevent
the Purchaser from performing any material obligations set forth in this
Agreement.

      2.9. The Purchaser represents and warrants that the Purchaser is an
exempted company with limited liability duly incorporated, validly existing and
in good standing under the laws of the jurisdiction where it is organized, with
full power and authority to perform its obligations under this Agreement.

      2.10. The Purchaser understands and acknowledges that the Company will
rely upon the truth and accuracy of the foregoing acknowledgments,
representations, warranties and agreements and agrees that, if any of the
acknowledgments, representations, warranties or agreements deemed to have been
made by it by its purchase of the Capital Securities are no longer accurate, it
shall promptly notify the Company.

      2.11. The Purchaser understands that no public market exists for any of
the Capital Securities, and that it is unlikely that a public market will ever
exist for the Capital Securities.

                                   ARTICLE III

                                  MISCELLANEOUS

      3.1. Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, international courier or delivered by hand against written
receipt therefor, or by facsimile transmission and confirmed by telephone, to
the following addresses, or such other address as may be furnished to the other
parties as herein provided:

            To the Offerors:    City National Bancshares Corporation
                                900 Broad Street
                                Newark, New Jersey  07102
                                Attention:  Edward R. Wright
                                Fax: 973-624-5754

            To the Purchaser:   Preferred Term Securities XIII, Ltd.
                                c/o Maples Finance Limited
                                P.O. Box 1093 GT
                                Queensgate House
                                South Church Street

                                      A-3
<PAGE>
                                George Town, Grand Cayman
                                Cayman Islands
                                Attention:  The Directors
                                Fax: 345-945-7100

            Unless otherwise expressly provided herein, notices shall be deemed
to have been given on the date of mailing, except notice of change of address,
which shall be deemed to have been given when received.

      3.2. This Agreement shall not be changed, modified or amended except by a
writing signed by the parties to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by the party to be charged.

      3.3. Upon the execution and delivery of this Agreement by the Purchaser,
this Agreement shall become a binding obligation of the Purchaser with respect
to the purchase of Capital Securities as herein provided.

      3.4. NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY
OF THE PARTIES HERETO, THE PARTIES EXPRESSLY AGREE THAT ALL THE TERMS AND
PROVISIONS HEREOF SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

      3.5. The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this Agreement.

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

      3.7. In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that all of the Offerors' and the Purchaser's rights and privileges
shall be enforceable to the fullest extent permitted by law.

                  Signatures appear on the following page

                                      A-4
<PAGE>
      IN WITNESS WHEREOF, I have set my hand the day and year first written
above.

PREFERRED TERM SECURITIES XIII, LTD.

By:
   -------------------------------------
Print Name:
           -----------------------------
Title:
      ----------------------------------

      IN WITNESS WHEREOF, this Agreement is agreed to and accepted as of the day
and year first written above.

                                    CITY NATIONAL BANCSHARES CORPORATION

                                    By:
                                            ------------------------------------
                                    Name:
                                            ------------------------------------
                                    Title:
                                            ------------------------------------

                                    CITY NATIONAL BANK OF NEW JERSEY
                                    CAPITAL STATUTORY TRUST II

                                    By:
                                            ------------------------------------
                                    Name:
                                            ------------------------------------
                                    Title:  Administrator

                                      A-5
<PAGE>
                                   EXHIBIT B-1

                         FORM OF COMPANY COUNSEL OPINION

                                 March 17, 2004

Preferred Term Securities XIII, Ltd.      FTN Financial Capital Markets
c/o Maples Finance Limited                845 Crossover Lane, Suite 150
P. O. Box 1093 GT                         Memphis, Tennessee  38117
Queensgate House
South Church Street                       Keefe, Bruyette & Woods, Inc.
George Town, Grand Cayman                 787 7th Avenue
Cayman Islands                            4th Floor
                                          New York, New York  10019

Ladies and Gentlemen:

      We have acted as counsel to City National Bancshares Corporation (the
"Company"), a New Jersey corporation in connection with a certain Placement
Agreement, dated March 8, 2004, (the "Placement Agreement"), between the Company
and City National Bank of New Jersey Capital Statutory Trust II (the "Trust"),
on one hand, and FTN Financial Capital Markets and Keefe, Bruyette & Woods, Inc.
(the "Placement Agents"), on the other hand. Pursuant to the Placement
Agreement, and subject to the terms and conditions stated therein, the Trust
will issue and sell to Preferred Term Securities XIII, Ltd. (the "Purchaser"),
$4,000,000.00 aggregate principal amount of Floating Rate Capital Securities
(liquidation amount $1,000.00 per capital security) (the "Capital Securities").

      Capitalized terms used herein and not otherwise defined shall have the
same meanings ascribed to them in the Placement Agreement.

      The law covered by the opinions expressed herein is limited to the law of
the United States of America and of the State of New Jersey.

      We have made such investigations of law as, in our judgment, were
necessary to render the following opinions. We have also reviewed (a) the
Company's Articles of Incorporation, as amended, and its By-Laws, as amended;
and (b) such corporate documents, records, information and certificates of the
Company and the Subsidiaries, certificates of public officials or government
authorities and other documents as we have deemed necessary or appropriate as a
basis for the opinions hereinafter expressed. As to certain facts material to
our opinions, we have relied, with your permission, upon statements,
certificates or representations, including those delivered or made in connection
with the above-referenced transaction, of officers and other representatives of
the Company and the Subsidiaries and the Trust.

      As used herein, the phrases "to the best of our knowledge" or "known to
us" or other similar phrases mean the actual knowledge of the attorneys who have
had active involvement in the transactions described above or who have prepared
or signed this opinion letter, or who otherwise have devoted substantial
attention to legal matters for the Company.

      Based upon and subject to the foregoing and the further qualifications set
forth below, we are of the opinion as of the date hereof that:

                                     B-1-1
<PAGE>
      1. The Company is validly existing and in good standing under the laws of
the State of New Jersey and is duly registered as a bank holding company under
the Bank Holding Company Act of 1956, as amended. Each of the Significant
Subsidiaries is validly existing and in good standing under the laws of its
jurisdiction of organization. Each of the Company and the Significant
Subsidiaries has full corporate power and authority to own or lease its
properties and to conduct its business as such business is currently conducted
in all material respects. To the best of our knowledge, all outstanding shares
of capital stock of the Significant Subsidiaries have been duly authorized and
validly issued, and are fully paid and nonassessable except to the extent such
shares may be deemed assessable under 12 U.S.C. Section 1831o or 12 U.S.C.
Section 55, and are owned of record and beneficially, directly or indirectly, by
the Company.

      2. The issuance, sale and delivery of the Debentures in accordance with
the terms and conditions of the Placement Agreement and the Operative Documents
have been duly authorized by all necessary actions of the Company. The issuance,
sale and delivery of the Debentures by the Company and the issuance, sale and
delivery of the Capital Securities and the Common Securities by the Trust do not
give rise to any preemptive or other rights to subscribe for or to purchase any
shares of capital stock or equity securities of the Company or the Significant
Subsidiaries pursuant to the corporate Articles of Incorporation or Charter,
By-Laws or other governing documents of the Company or the Significant
Subsidiaries, or, to the best of our knowledge, any agreement or other
instrument to which either the Company or the Subsidiaries is a party or by
which the Company or the Significant Subsidiaries may be bound.

      3. The Company has all requisite corporate power to enter into and perform
its obligations under the Placement Agreement and the Subscription Agreement,
and the Placement Agreement and the Subscription Agreement have been duly and
validly authorized, executed and delivered by the Company and constitute the
legal, valid and binding obligations of the Company enforceable in accordance
with their terms, except as the enforcement thereof may be limited by general
principles of equity and by bankruptcy or other laws affecting creditors' rights
generally, and except as the indemnification and contribution provisions thereof
may be limited under applicable laws and certain remedies may not be available
in the case of a non-material breach.

      4. Each of the Indenture, the Trust Agreement and the Guarantee Agreement
has been duly authorized, executed and delivered by the Company, and is a valid
and legally binding obligation of the Company enforceable in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
receivership, moratorium and other laws affecting the rights and remedies of
creditors generally and of general principles of equity.

      5. The Debentures have been duly authorized, executed and delivered by the
Company, are entitled to the benefits of the Indenture and are legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other laws affecting the rights and
remedies of creditors generally and of general principles of equity.

      6. To the best of our knowledge, neither the Company, the Trust, nor any
of the Subsidiaries is in breach or violation of, or default under, with or
without notice or lapse of time or both, its Articles of Incorporation or
Charter, By-Laws or other governing documents (including without limitation, the
Trust Agreement). The execution, delivery and performance of the Placement
Agreement and the Operative Documents and the consummation of the transactions
contemplated by the Placement Agreement and the Operative Documents do not and
will not (i) result in the creation or imposition of any material lien, claim,
charge, encumbrance or restriction upon any property or assets of the Company or
the Subsidiaries, or (ii) conflict with, constitute a material breach or
violation of, or constitute a material default under,

                                     B-1-2
<PAGE>
with or without notice or lapse of time or both, any of the terms, provisions or
conditions of (A) the Articles of Incorporation or Charter, By-Laws or other
governing documents of the Company or the Subsidiaries, or (B) to the best of
our knowledge, any material contract, indenture, mortgage, deed of trust, loan
or credit agreement, note, lease, franchise, license or any other agreement or
instrument to which the Company or the Subsidiaries is a party or by which any
of them or any of their respective properties may be bound or (C) any order,
decree, judgment, franchise, license, permit, rule or regulation of any court,
arbitrator, government, or governmental agency or instrumentality, domestic or
foreign, known to us having jurisdiction over the Company or the Subsidiaries or
any of their respective properties which, in the case of each of (i) or (ii)
above, is material to the Company and the Subsidiaries on a consolidated basis.

      7. Except for filings, registrations or qualifications that may be
required by applicable securities laws, no authorization, approval, consent or
order of, or filing, registration or qualification with, any person (including,
without limitation, any court, governmental body or authority) is required under
the laws of the State of New Jersey in connection with the transactions
contemplated by the Placement Agreement and the Operative Documents in
connection with the offer and sale of the Capital Securities as contemplated by
the Placement Agreement and the Operative Documents.

      8. To the best of our knowledge (i) no action, suit or proceeding at law
or in equity is pending or threatened to which the Company, the Trust or the
Subsidiaries are or may be a party, and (ii) no action, suit or proceeding is
pending or threatened against or affecting the Company, the Trust or the
Subsidiaries or any of their properties, before or by any court or governmental
official, commission, board or other administrative agency, authority or body,
or any arbitrator, wherein an unfavorable decision, ruling or finding could
reasonably be expected to have a material adverse effect on the consummation of
the transactions contemplated by the Placement Agreement and the Operative
Documents or the issuance and sale of the Capital Securities as contemplated
therein or the condition (financial or otherwise), earnings, affairs, business,
or results of operations of the Company, the Trust and the Subsidiaries on a
consolidated basis.

      9. Assuming the truth and accuracy of the representations and warranties
of the Placement Agents in the Placement Agreement and the Purchaser in the
Subscription Agreement, it is not necessary in connection with the offering,
sale and delivery of the Capital Securities, the Debentures and the Guarantee
Agreement (or the Guarantee) to register the same under the Securities Act of
1933, as amended, under the circumstances contemplated in the Placement
Agreement and the Subscription Agreement.

      10. Neither the Company nor the Trust is or after giving effect to the
offering and sale of the Capital Securities and the consummation of the
transactions described in the Placement Agreement will be, an "investment
company" or an entity "controlled" by an "investment company," in each case
within the meaning of the Investment Company Act of 1940, as amended, without
regard to Section 3(c) of such Act.

      The opinion expressed in the first two sentences of numbered paragraph 1
of this opinion is based solely upon certain certificates and confirmations
issued by the applicable governmental officer or authority with respect to each
of the Company and the Significant Subsidiaries.

      With respect to the foregoing opinions, since no member of this firm is
actively engaged in the practice of law in the States of Connecticut or New
York, we do not express any opinions as to the laws of such states and have (i)
relied, with your approval, upon the opinion of Shipman & Goodwin LLP with
respect to matters of Connecticut law and (ii) assumed, with your approval and
without rendering any

                                     B-1-3
<PAGE>
opinion to such effect, that the laws of the State of New York, in all respects
material to this opinion, are substantively identical to the laws of the State
of New Jersey, without regard to conflict of law provisions.

      The opinions expressed herein are rendered to you solely pursuant to
Section 3.1(a) of the Placement Agreement. As such, they may be relied upon by
you only and may not be used or relied upon by any other person for any purpose
whatsoever without our prior written consent.

                                    Very truly yours,

                                     B-1-4
<PAGE>
                                   EXHIBIT B-2

                       FORM OF CONNECTICUT COUNSEL OPINION

TO THE PARTIES LISTED
ON SCHEDULE I HERETO

Ladies and Gentlemen:

      We have acted as special counsel in the State of Connecticut (the "State")
for City National Bank of New Jersey Capital Statutory Trust II (the "Trust"), a
Connecticut statutory trust formed pursuant to the Amended and Restated
Declaration of Trust (the "Trust Agreement") dated as of the date hereof, among
City National Bancshares Corporation, a New Jersey corporation (the "Sponsor"),
U.S. Bank National Association, a national banking association ("U.S. Bank"), in
its capacity as Institutional Trustee (the "Institutional Trustee"), and Edward
R. Wright and Vladimir Gasparec, each, an individual, (each, an "Administrator")
in connection with the issuance by the Trust to the Holders (as defined in the
Trust Agreement) of its capital securities (the "Capital Securities") pursuant
to the Placement Agreement dated as of March 8, 2004 (the "Placement
Agreement"), the issuance by the Trust to the Sponsor of its Common Securities,
pursuant to the Trust Agreement and the acquisition by the Trust from the
Sponsor of Debentures, issued pursuant to the Indenture dated as of the date
hereof (the "Indenture").

      The Institutional Trustee has requested that we deliver this opinion to
you in accordance with Section 3.1(b) of the Placement Agreement. Capitalized
terms not otherwise defined herein shall have the meanings specified in, or
defined by reference in or set forth in the Operative Documents (as defined
below).

      Our representation of the Trust has been as special counsel for the
limited purposes stated above. As to all matters of fact (including factual
conclusions and characterizations and descriptions of purpose, intention or
other state of mind), we have relied, with your permission, entirely upon (i)
the representations and warranties of the parties set forth in the Operative
Documents and (ii) certificates delivered to us by the management of U.S. Bank,
and have assumed, with your permission, without independent inquiry, the
accuracy of those representations, warranties and certificates.

      We have examined the following documents to which the Trust is a party,
each of which is dated the date hereof, unless otherwise noted:

                  (i)     the Trust Agreement;

                  (ii)    the Placement Agreement;

                  (iii)   the Subscription Agreement;

                  (iv)    the Certificate of Common Securities;

                  (v)     the Certificate of Capital Securities;

                  (vi)    the Guarantee Agreement;

                  (vii)   the Certificate of Trust filed with the Secretary of
                          State of the State of Connecticut dated March 4, 2004;
                          and

                                     B-2-1
<PAGE>
                  (viii)  a Certificate of Legal Existence for the Trust
                          obtained from the Secretary of State of the State of
                          Connecticut dated March 17, 2004 (the "Certificate of
                          Legal Existence").

      The documents referenced in subparagraphs (i) through (vii) above are
hereinafter referred to collectively as the "Operative Documents."

      We have also examined originals, or copies, certified or otherwise
identified to our satisfaction, of such other corporate and public records and
agreements, instruments, certificates and other documents as we have deemed
necessary or appropriate for the purposes of rendering this opinion. For
purposes of our opinion rendered in paragraph 1 below, with respect to the legal
existence of the Trust, our opinion relies entirely upon and is limited by the
Certificate of Legal Existence, which is attached hereto as Exhibit A.

      We have assumed, with your permission, the genuineness of all signatures
(other than those on behalf of U.S. Bank, the Guarantee Trustee, Indenture
Trustee, Institutional Trustee and the Trust), the conformity of the originals
of all documents reviewed by us as copies, the authenticity and completeness of
all original documents reviewed by us in original or copy form and the legal
competence of each individual executing any document.

      When an opinion set forth below is given to the best of our knowledge, or
to our knowledge, or with reference to matters of which we are aware or which
are known to us, or with another similar qualification, the relevant knowledge
or awareness is limited to the actual knowledge or awareness of the individual
lawyers in the firm who have participated directly and substantively in the
specific transactions to which this opinion relates and without any special or
additional investigation undertaken for the purposes of this opinion except as
indicated herein.

      For the purposes of this opinion we have made such examination of law as
we have deemed necessary. The opinions expressed below are limited solely to the
internal substantive laws of the State (as applied by courts located in the
State without regard to choice of law) and we express no opinion as to the laws
of any other jurisdiction. To the extent to which this opinion deals with
matters governed by or relating to the laws of any other state or jurisdiction,
we have assumed, with your permission, that the Operative Documents are governed
by the internal substantive laws of the State.

      We express no opinion as to (i) the effect of suretyship defenses, or
defenses in the nature thereof, with respect to the obligations of any
applicable guarantor, joint obligor, surety, accommodation party, or other
secondary obligor or any provisions of the Trust Agreement with respect to
indemnification or contribution and (ii) the accuracy or completeness of any
exhibits or schedules to the Operative Documents. No opinion is given herein as
to the choice of law or internal substantive rules of law that any court or
other tribunal may apply to the transactions contemplated by the Operative
Documents. No opinion is expressed herein as to the application or effect of
federal securities laws or as to the securities or so-called "Blue Sky" laws of
Connecticut or of any other state or other jurisdiction.

      Our opinion, with your permission, is further subject to the following
exceptions, qualifications and assumptions:

            (a) We have assumed without any independent investigation that (i)
      each party to the Operative Documents, other than U.S. Bank, the Guarantee
      Trustee, Indenture Trustee, Institutional Trustee and the Trust, as
      applicable, at all times relevant thereto, is validly existing and in good
      standing under the laws of the jurisdiction in which it is organized, and
      is qualified to do business and in good standing under the laws of each
      jurisdiction where such qualification is required generally or necessary
      in order for such party to enforce its rights under such Operative

                                     B-2-2
<PAGE>
      Documents, (ii) each party to the Operative Documents, at all times
      relevant thereto, had and has the full power, authority and legal right
      under its certificate of incorporation, partnership agreement, by-laws,
      and other governing organizational documents, and the applicable
      corporate, partnership, or other enterprise legislation and other
      applicable laws, as the case may be (other than U.S. Bank, the Guarantee
      Trustee, Indenture Trustee, Institutional Trustee or the Trust) to
      execute, deliver and to perform its obligations under, the Operative
      Documents, and (iii) each party to the Operative Documents other than U.S.
      Bank, the Guarantee Trustee, Indenture Trustee, Institutional Trustee or
      the Trust has duly executed and delivered each of such agreements and
      instruments to which it is a party and that the execution and delivery of
      such agreements and instruments and the transactions contemplated thereby
      have been duly authorized by proper corporate or other organizational
      proceedings as to each such party.

            (b) We have assumed without any independent investigation (i) that
      the Institutional Trustee, the Sponsor and the Administrators have
      received the agreed to and stated consideration for the incurrence of the
      obligations applicable to it under the Trust Agreement and each of the
      other Operative Documents, (ii) that each of the Operative Documents
      (other than the Trust Agreement) is a valid, binding and enforceable
      obligation of each party thereto other than the Trust, U.S. Bank and the
      Institutional Trustee, as applicable; and, for the purposes of this
      opinion letter, we herein also assume that each of the Operative Documents
      (other than the Trust Agreement) constitutes a valid, binding and
      enforceable obligation of U.S. Bank, the Guarantee Trustee and the
      Indenture Trustee, as applicable under Connecticut and federal law (as to
      which such matters we are delivering to you a separate opinion letter on
      this date, which is subject to the assumptions, qualifications and
      limitations set forth therein).

            (c) The enforcement of any obligations of U.S. Bank, the Sponsor and
      the Administrators, as applicable, under the Trust Agreement and the
      obligations of the Trust under the other Operative Documents may be
      limited by the receivership, conservatorship and supervisory powers of
      depository institution regulatory agencies generally, as well as by
      bankruptcy, insolvency, reorganization, moratorium, marshaling or other
      laws and rules of law affecting the enforcement generally of creditors'
      rights and remedies (including such as may deny giving effect to waivers
      of debtors' or guarantors' rights); and we express no opinion as to the
      status under any fraudulent conveyance laws or fraudulent transfer laws of
      any of the obligations of U.S. Bank, the Sponsor, the Administrators or
      the Trust under any of the Operative Documents.

            (d) We express no opinion as to the enforceability of any particular
      provision of the Trust Agreement or the other Operative Documents relating
      to remedies after default.

            (e) We express no opinion as the availability of any specific or
      equitable relief of any kind.

            (f) The enforcement of any rights may in all cases be subject to an
      implied duty of good faith and fair dealing and to general principles of
      equity (regardless of whether such enforceability is considered in a
      proceeding at law or in equity).

            (g) We express no opinion as to the enforceability of any particular
      provision of any of the Operative Documents relating to (i) waivers of
      rights to object to jurisdiction or venue, or consents to jurisdiction or
      venue, (ii) waivers of rights to (or methods of) service of process, or
      rights to trial by jury, or other rights or benefits bestowed by operation
      of law, (iii) waivers of any applicable defenses, setoffs, recoupments, or
      counterclaims, (iv) waivers or variations of provisions which are not
      capable of waiver or variation under Sections 1-102, 9-602, 9-603 or other
      provisions of the Uniform Commercial Code ("UCC") of the State, (v) the
      grant of powers

                                     B-2-3
<PAGE>
      of attorney to any person or entity, or (vi) exculpation or exoneration
      clauses, indemnity clauses, and clauses relating to releases or waivers of
      unmatured claims or rights.

            (h) We have made no examination of, and no opinion is given herein
      as to the Trustee's or the Trust's title to or other ownership rights in,
      or the existence of any liens, charges or encumbrances on, or adverse
      claims against, any asset or property held by the Institutional Trustee or
      the Trust. We express no opinion as to the creation, validity, attachment,
      perfection or priority of any mortgage, security interest or lien in any
      asset or property held by the Institutional Trustee or the Trust.

            (i) We express no opinion as to the effect of events occurring,
      circumstances arising, or changes of law becoming effective or occurring,
      after the date hereof on the matters addressed in this opinion letter, and
      we assume no responsibility to inform you of additional or changed facts,
      or changes in law, of which we may become aware.

            (j) We express no opinion as to any requirement that any party to
      the Operative Documents (or any other persons or entities purportedly
      entitled to the benefits thereof) qualify or register to do business in
      any jurisdiction in order to be able to enforce its rights thereunder or
      obtain the benefits thereof.

      Based upon the foregoing and subject to the limitations and qualifications
set forth herein, we are of the opinion that:

      1. The Trust has been duly formed and is validly existing as a statutory
trust under the Connecticut Statutory Trust Act, Chapter 615 of Title 34 of the
Connecticut General Statutes, Section 500, et seq. (the "Act").

      2. The Trust Agreement constitutes a valid and binding obligation of U.S.
Bank and the Institutional Trustee enforceable against U.S. Bank and the
Institutional Trustee in accordance with the terms thereof.

      3. The Trust Agreement constitutes a valid and binding obligation of the
Sponsor and the Administrators, enforceable against the Sponsor and the
Administrators in accordance with its terms.

      4. The Trust has the requisite trust power and authority to (a) execute
and deliver, and to perform its obligations under, the Operative Documents, and
(b) perform its obligations under such Operative Documents.

      5. Each of the Operative Documents to which the Trust is a party
constitutes a valid and binding obligation of the Trust, enforceable against the
Trust in accordance with the terms thereof.

      6. The Capital Securities have been duly authorized by the Trust under the
Trust Agreement, and the Capital Securities, when duly executed and delivered to
the Holders in accordance with the Trust Agreement, the Placement Agreement and
the Subscription Agreement, will be validly issued, fully paid and nonassessable
and will evidence undivided beneficial interests in the assets of the Trust and
will be entitled to the benefits of the Trust Agreement.

      7. The Common Securities have been duly authorized by the Trust Agreement,
and the Common Securities, when duly executed and delivered to the Company in
accordance with the Trust Agreement, the Placement Agreement and the
Subscription Agreement and delivered and paid for in accordance therewith, will
be validly issued, fully paid and nonassessable (subject to Section 9.1(b) of
the Trust Agreement which provides that the Holders of Common Securities are
liable for debts and

                                     B-2-4
<PAGE>
obligations of the Trust to the extent such debts and obligations are not
satisfied out of the Trust's assets) and will evidence undivided beneficial
interests in the assets of the Trust and will be entitled to the benefits of the
Trust Agreement.

      8. Neither the execution, delivery or performance by the Trust of the
Operative Documents, the consummation by the Trust of the transactions
contemplated thereby, nor compliance by the Trust with any of the terms and
provisions thereof, (a) violates the Trust Agreement, or, to the best of our
knowledge, contravenes or will contravene any provision of, or constitutes a
default under, or results in any breach of, or results in the creation of any
lien (other than as permitted under the Operative Documents) upon property of
the Trust under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement, license or other
agreement or instrument, in each case known to us, to which it is a party or by
which it is bound or (b) violates any applicable State law governing the Trust,
or, to the best of our knowledge, any judgment or order of any court or other
tribunal, in each case known to us, applicable to or binding on it.

      9. No consent, approval, order or authorization of, giving of notice to,
or registration with, or taking of any other action in respect of, any State
governmental authority regulating the Trust is required for the execution,
delivery, validity or performance of, or the carrying out by, the Trust of any
of the transactions contemplated by the Operative Documents, other than any such
consent, approval, order, authorization, registration, notice or action as has
been duly obtained, given or taken.

      10. The Holders, as the beneficial holders of the Capital Securities, will
be entitled to the same limitation of personal liability extended to
shareholders of domestic corporations organized under the laws of the State.

      11. Under the Trust Agreement, the issuance of the Capital Securities is
not subject to preemptive rights.

      12. Assuming that the Trust will not be taxable as a corporation for
federal income tax purposes, but rather will be classified for such purposes as
a grantor trust under Subpart E, Part I of Subchapter J of the Internal Revenue
Code of 1986, as amended, the Trust will not be subject to any tax, fee or other
government charge under the laws of the State of Connecticut or any political
subdivision thereof.

      This opinion is rendered solely for the benefit of those institutions
listed on Schedule I hereto and their successors and assigns in connection with
the transactions contemplated by the Operative Documents and may not be used or
relied upon by any other person or for any other purpose.

                                    Very truly yours,

                                    SHIPMAN & GOODWIN LLP

                                     B-2-5
<PAGE>
                                    SCHEDULE I

      U.S. Bank National Association

      FTN Financial Capital Markets

      Keefe, Bruyette & Woods, Inc.

      Preferred Term Securities XIII, Ltd.

      Preferred Term Securities XIII, Inc.

      Lewis, Rice & Fingersh, L.C.

      City National Bancshares Corporation

      McCarter & English LLP

                                     B-2-6
<PAGE>
                            EXHIBIT A TO EXHIBIT B-2

                         CERTIFICATE OF LEGAL EXISTENCE

                                 (See Tab No. 6)

                                     B-2-7
<PAGE>
                                   EXHIBIT B-3

                           FORM OF TAX COUNSEL OPINION

City National Bancshares Corporation
900 Broad Street
Newark, New Jersey  07102

City National Bank of New Jersey Capital Statutory Trust II
c/o City National Bancshares Corporation
900 Broad Street
Newark, New Jersey  07102

FTN Financial Capital Markets
845 Crossover Lane, Suite 150
Memphis, Tennessee 38117

Keefe, Bruyette & Woods, Inc.
787 7th Avenue
4th Floor
New York, New York  10019

Ladies and Gentlemen:

      We have acted as special tax counsel to City National Bancshares
Corporation and to City National Bank of New Jersey Capital Statutory Trust II
in connection with the proposed issuance of (i) Floating Rate Capital
Securities, liquidation amount $1,000.00 per Capital Security (the "Capital
Securities") of City National Bank of New Jersey Capital Statutory Trust II, a
statutory business trust created under the laws of Connecticut (the "Trust"),
pursuant to the terms of the Amended and Restated Declaration of Trust dated as
of the date hereof by City National Bancshares Corporation, a New Jersey
corporation (the "Company"), U.S. Bank National Association, as institutional
trustee, and Edward R. Wright and Vladimir Gasparec, as Administrators (the
"Trust Agreement"), (ii) Junior Subordinated Deferrable Interest Debentures (the
"Corresponding Debentures") of the Company issued pursuant to the terms of an
Indenture dated as of the date hereof from the Company to U.S. Bank National
Association, as trustee (the "Indenture"), which Debentures are to be sold by
the Company to the Trust, and (iii) the Guarantee Agreement of the Company with
respect to the Capital Securities dated as of the date hereof (the "Guarantee")
between the Company and U.S. Bank National Association, as guarantee trustee.
The Capital Securities and the Corresponding Debentures are to be issued as
contemplated by the Offering Circular (the "Offering Circular") dated March 9,
2004 prepared by Preferred Term Securities XIII, Ltd., an entity formed under
the Companies Law of the Cayman Islands, and Preferred Term Securities XIII,
Inc., a Delaware corporation.

      We have examined originals or copies, certified or otherwise identified to
our satisfaction, of documents, corporate records and other instruments as we
have deemed necessary or appropriate for purposes of this opinion including (i)
the Offering Circular, (ii) the Indenture, (iii) the form of the Corresponding
Debentures attached as an exhibit to the Indenture, (iv) the Trust Agreement,
(v) the Guarantee, and (vi) the form of Capital Securities Certificate attached
as an exhibit to the Trust Agreement (collectively the "Documents").
Furthermore, we have relied upon certain representations made by the Company and
upon the opinion of Shipman & Goodwin LLP as to certain matters of Connecticut
law. In such examination, we have assumed the authenticity of all documents
submitted to

                                     B-3-1
<PAGE>
us as originals, the conformity to original documents of all documents submitted
to us as certified or photostatic copies, the authenticity of the originals of
such latter documents, the genuineness of all signatures and the correctness of
all representations made therein. We have further assumed that there are no
agreements or understandings contemplated therein other than those contained in
the Documents.

      Based upon the foregoing, and assuming (i) that the final Documents will
be substantially identical to the forms examined, (ii) full compliance with all
the terms of the final Documents, and (iii) the accuracy of representations made
by the Company and delivered to us, we are of the opinion that:

      (a)   The Corresponding Debentures will be classified as indebtedness of
            the Company for U.S. federal income tax purposes.

      (b)   The Trust will be characterized as a grantor trust and not as an
            association taxable as a corporation for U.S. federal income tax
            purposes.

      The opinions expressed above are based on existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing Treasury
regulations, published interpretations by the Internal Revenue Service of the
Code and such Treasury regulations, and existing court decisions, any of which
could be changed at any time. Any such changes may or may not be retroactively
applied, and may result in federal income tax consequences that differ from
those reflected in the opinions set forth above. We note that there is no
authority directly on point dealing with securities such as the Capital
Securities or with transactions of the type described herein, and that the
authorities on which this opinion is based are subject to various
interpretations. Further, you should be aware that opinions of counsel have no
official status and are not binding on the Internal Revenue Service or the
courts. Accordingly, we can provide no assurance that the interpretation of the
federal income tax laws set forth in our opinions will prevail if challenged by
the IRS in an administrative or judicial proceeding.

      We have also assumed that each transaction contemplated herein will be
carried out strictly in accordance with the Documents. Any variance in the facts
may result in Federal income tax consequences that differ from those reflected
in the opinions set forth above.

      Additionally, we undertake no obligation to update this opinion in the
event there is either a change in the legal authorities, in the facts (including
the taking of any action by any party to any of the transactions described in
the Documents relating to such transactions) or in the Documents on which this
opinion is based, or an inaccuracy in any of the representations upon which we
have relied in rendering this opinion.

      We express no opinion with respect to any matter not specifically
addressed by the foregoing opinions, including state or local tax consequences,
or any federal, state, or local issue not specifically referred to and discussed
above including, without limitation, the effect on the matters covered by this
opinion of the laws of any other jurisdiction.

      This letter is delivered for the benefit of the specified addressees and
may not be relied upon by any other person. No portion of this letter may be
quoted or otherwise referred to in any document or delivered to any other person
or entity without the express written consent of Lewis, Rice & Fingersh, L.C.
This opinion letter is rendered as of the date set forth above.

                                    Very truly yours,

                                    LEWIS, RICE & FINGERSH, L.C.

                                     B-3-2
<PAGE>
Lewis, Rice & Fingersh, L.C.
500 N. Broadway, Suite 2000
St. Louis, Missouri  63102
Attention:  Lawrence H. Weltman, Esq.

      RE:   REPRESENTATIONS CONCERNING THE ISSUANCE OF JUNIOR SUBORDINATED
            DEFERRABLE INTEREST DEBENTURES (THE "DEBENTURES") TO CITY NATIONAL
            BANK OF NEW JERSEY CAPITAL STATUTORY TRUST II (THE "TRUST") AND SALE
            OF TRUST SECURITIES (THE "TRUST SECURITIES") OF THE TRUST

Ladies and Gentlemen:

      In accordance with your request, City National Bancshares Corporation (the
"Company") hereby makes the following representations in connection with the
preparation of your opinion letter as to the United States federal income tax
consequences of the issuance by the Company of the Debentures to the Trust and
the sale of the Trust Securities.

      Company hereby represents that:

      1. The sole assets of the Trust will be the Debentures, any interest paid
on the Debentures to the extent not distributed, proceeds of the Debentures, or
any of the foregoing.

      2. The Company intends to use the net proceeds from the sale of the
Debentures for general corporate purposes.

      3. The Trust was not formed to conduct any trade or business and is not
authorized to conduct any trade or business. The Trust exists for the exclusive
purposes of (i) issuing and selling the Trust Securities, (ii) using the
proceeds from the sale of Trust Securities to acquire the Debentures, and (iii)
engaging only in activities necessary or incidental thereto.

      4. The Trust was formed to facilitate direct investment in the assets of
the Trust, and the existence of multiple classes of ownership is incidental to
that purpose. There is no intent to provide holders of such interests in the
Trust with diverse interests in the assets of the Trust.

      5. The Company intends to create a debtor-creditor relationship between
the Company, as debtor, and the Trust, as a creditor, upon the issuance and sale
of the Debentures to the Trust by the Company. The Company will (i) record and
at all times continue to reflect the Debentures as indebtedness on its separate
books and records for financial accounting purposes, and (ii) treat the
Debentures as indebtedness for all United States tax purposes.

      6. During each year, the Trust's income will consist solely of payments
made by the Company with respect to the Debentures. Such payments will not be
derived from the active conduct of a financial business by the Trust. Both the
Company's obligation to make such payments and the measurement of the amounts
payable by the Company are defined by the terms of the Debentures. Neither the
Company's obligation to make such payments nor the measurement of the amounts
payable by the Company is dependent on income or profits of Company or any
affiliate of the Company.

      7. The Company expects that it will be able to make, and will make, timely
payment of amounts identified by the Debentures as principal and interest in
accordance with the terms of the Debentures with available capital or
accumulated earnings.

                                     B-3-3
<PAGE>
      8. The Company presently has no intention to defer interest payments on
the Debentures, and it considers the likelihood of such a deferral to be remote
because, if it were to exercise its right to defer payments of interest with
respect to the Debentures, it would not be permitted to declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any capital stock of the Company or any
affiliate of the Company (other than payments of dividends or distributions to
the Company) or make any payment of principal of or interest or premium, if any,
on or repay, repurchase, or redeem any debt securities of the Company or any
affiliate of the Company that rank pari passu in all respects with or junior in
interest to the Debentures, in each case subject to limited exceptions stated in
Section 2.11 of the Indenture to be entered into in connection with the issuance
of the Debentures.

      9. Immediately after the issuance of the Debentures, the debt-to-equity
ratio of the Company (as determined for financial accounting purposes, but
excluding deposit liabilities from the Company's debt) will be within standard
depository institution industry norms and, in any event, will be no higher than
four to one (4 : 1).

      10. To the best of our knowledge, the Company is currently in compliance
with all federal, state, and local capital requirements, except to the extent
that failure to comply with any such requirements would not have a material
adverse effect on the Company and its affiliates.

      11. The Company will not issue any class of common stock or preferred
stock senior to the Debentures during their term.

      12. The Internal Revenue Service has not challenged the interest deduction
on any class of the Company's subordinated debt in the last ten (10) years on
the basis that such debt constitutes equity for federal income tax purposes.

      The above representations are accurate as of the date below and will
continue to be accurate through the issuance of the Trust Securities, unless you
are otherwise notified by us in writing. The undersigned understands that you
will rely on the foregoing in connection with rendering certain legal opinions,
and possesses the authority to make the representations set forth in this letter
on behalf of the Company.

                                    Very truly yours,

                                    CITY NATIONAL BANCSHARES CORPORATION

Date: March 12, 2004                By:
                                             -----------------------------------

                                     Title:
                                             -----------------------------------

                                     B-3-4
<PAGE>
                                    EXHIBIT C

                            SIGNIFICANT SUBSIDIARIES

City National Bank of New Jersey

                                      C-1
<PAGE>
                                    EXHIBIT D

                            FORM OF QUARTERLY REPORT

Preferred Term Securities XIII, Ltd.
c/o The Bank of New York
Collateralized Debt Obligation Group
101 Barclay Street, 8E
New York, New York  10286
Attention:  Franco B. Talavera
CDO Relationship Manager

BANK HOLDING COMPANY
As of [March 31, June 30, September 30 or December 31], 20__

<TABLE>
<S>                                                                   <C>
Tier 1 to Risk Weighted Assets                                        _________%

Ratio of Double Leverage                                              _________%

Non-Performing Assets to Loans and OREO                               _________%

Ratio of Reserves to Non-Performing Loans                             _________%

Ratio of Net Charge-Offs to Loans                                     _________%

Return on Average Assets (annualized)**                               _________%

Net Interest Margin (annualized)**                                    _________%

Efficiency Ratio                                                      _________%

Ratio of Loans to Assets                                              _________%

Ratio of Loans to Deposits                                            _________%

Total Assets                                                          $_________

Year to Date Income                                                   $_________
</TABLE>

-------------------

*    A table describing the quarterly report calculation procedures is provided
     on page D-2

**   To annualize Return on Average Assets and Net Interest Margin do the
     following:

     1st Quarter-multiply income statement item by 4, then divide by balance
     sheet item(s)

     2nd Quarter-multiply income statement item by 2,then divide by balance
     sheet item(s)

     3rd Quarter-divide income statement item by 3, then multiply by 4, then
     divide by balance sheet item(s)

     4th Quarter-should already be an annual number

     NO ADJUSTMENT SHOULD BE MADE TO BALANCE SHEET ITEMS

                                      D-1
<PAGE>
                              Financial Definitions

<TABLE>
<CAPTION>
                         Corresponding FRY-9C or LP Line Items
Report Item              with Line Item corresponding Schedules          Description of Calculation
-----------              --------------------------------------          --------------------------
<S>                      <C>                                             <C>
"Tier 1 Capital" to Risk BHCK7206                                        Tier 1 Risk Ratio:  Core Capital (Tier 1)/ Risk-Adjusted
Weighted Assets          Schedule HC-R                                   Assets

Ratio of Double Leverage (BHCP0365)/(BHCP3210)                           Total equity investments in subsidiaries divided by the
                         Schedule PC in the LP                           total equity capital. This field is calculated at the
                                                                         parent company level. "Subsidiaries" include bank, bank
                                                                         holding company, and nonbank subsidiaries.

Non-Performing Assets to (BHCK5525-BHCK3506+BHCK5526-BHCK3507+BHCK2744)/ Total Nonperforming Assets (NPLs+Foreclosed Real
Loans and OREO           (BHCK2122+BHCK2744)Schedules HC-C, HC-M & HC-N  Estate+Other Nonaccrual & Repossessed Assets)/ Total Loans
                                                                         + Foreclosed Real Estate

Ratio of Reserves to     (BHCK3123+BHCK3128)/(BHCK5525-BHCK3506+         Total Loan Loss and Allocated Transfer Risk Reserves/ Total
Non-Performing Loans     BHCK5526-BHCK3507)Schedules HC & HC-N           Nonperforming Loans (Nonaccrual + Restructured)

Ratio of Net Charge-Offs (BHCK4635-BHCK4605)/(BHCK3516)                  Net charge offs for the period as a percentage of average
to Loans                 Schedules HI-B & HC-K                           loans.

Return on Assets         (BHCK4340/BHCK3368)                             Net Income as a percentage of Assets.
                         Schedules HI & HC-K

Net Interest Margin      (BHCK4519)/(BHCK3515+BHCK3365+BHCK3516+BHCK3401 (Net Interest Income Fully Taxable Equivalent, if available
                         +BHCKB985)Schedules HI Memorandum and HC-K       / Average Earning Assets)

Efficiency Ratio         (BHCK4093)/(BHCK4519+BHCK4079)                  (Noninterest Expense)/ (Net  Interest Income Fully Taxable
                         Schedule HI                                     Equivalent, if available, plus Noninterest Income)

Ratio of Loans to Assets (BHCKB528+BHCK5369)/BHCK2170)                   Total Loans & Leases (Net of Unearned Income & Gross of
                         Schedule HC                                     Reserve)/ Total Assets

Ratio of Loans to        (BHCKB528+BHCK5369)/(BHDM6631+BHDM6636+BHFN6631 Total Loans & Leases (Net of Unearned Income & Gross of
Deposits                 +BHFN6636)Schedule HC                           Reserve)/Total Deposits (Includes Domestic and Foreign
                                                                         Deposits)

Total Assets             (BHCK2170)                                      The sum of total assets. Includes cash and balances due
                         Schedule HC                                     from depository institutions; securities; federal funds
                                                                         sold and securities purchased under agreements to
                                                                         resell; loans and lease financing receivables; trading
                                                                         assets; premises and fixed assets; other real estate
                                                                         owned; investments in unconsolidated subsidiaries and
                                                                         associated companies; customer's liability on
                                                                         acceptances outstanding; intangible assets; and other
                                                                         assets.

Net Income               (BHCK4300)                                      The sum of income (loss) before extraordinary items and
                         Schedule HI                                     other adjustments and extraordinary items; and other
                                                                         adjustments, net of income taxes.
</TABLE>

                          D-2<PAGE>
                                                                   EXHIBIT 10.28

                                MERGER AGREEMENT

                            DATED AS OF MARCH 3, 2004

                                  BY AND AMONG

                          WELLCARE HEALTH PLANS, INC.,

                          ZEPHYR ACQUISITION SUB, INC.,

                          HARMONY HEALTH SYSTEMS, INC.,

                                       AND

                         THE OTHER PARTIES NAMED HEREIN
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ARTICLE I DEFINITIONS                                                          1
         1.1      Definitions                                                  1
         1.2      Other Defined Terms                                         11
         1.3      Accounting Principles                                       11
         1.4      Construction                                                12
ARTICLE II THE MERGER                                                         12
         2.1      The Merger                                                  12
         2.2      Effect of the Merger                                        12
         2.3      Charter and Bylaws                                          13
         2.4      Directors and Officers                                      13
         2.5      Effect on Capital Stock                                     13
         2.6      Pre-Closing Distributions                                   13
         2.7      Adjustment of Purchase Price                                14
         2.8      Disputes Regarding the IBNR Adjustment                      14
         2.9      Time and Place of Closing                                   15
        2.10      Exchange of Certificates                                    15
        2.11      Cancellation of Options                                     16
ARTICLE III REPRESENTATIONS AND WARRANTIES                                    16
         3.1      General Statement                                           16
         3.2      Representations and Warranties of Purchaser                 17
         3.3      Representations and Warranties of Sellers and the Company   18
         3.4      Individual Representations and Warranties of Sellers        36

ARTICLE IV CONDUCT PRIOR TO THE CLOSING                                       37
         4.1      General                                                     37
         4.2      The Company's and Sellers' Obligations                      37
         4.3      Purchaser's Obligations                                     43
         4.4      Joint Obligations                                           43
ARTICLE V CONDITIONS TO CLOSING                                               43
         5.1      Conditions to the Company's and Sellers' Obligations        43
         5.2      Conditions to Purchaser's Obligations                       44
ARTICLE VI CLOSING                                                            45
         6.1      Form of Documents                                           45
         6.2      Purchaser's Deliveries                                      45
</TABLE>

                                       i
<PAGE>
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
         6.3      Sellers' Deliveries                                         46
ARTICLE VII POST-CLOSING AGREEMENTS                                           48
         7.1      Post-Closing Agreements                                     48
         7.2      Use of Trademarks                                           48
         7.3      Third Party Claims                                          48
         7.4      Medical Claims                                              48
ARTICLE VIII OTHER AGREEMENTS                                                 49
         8.1      Confidentiality                                             49
         8.2      Publicity                                                   49
         8.3      Employee Matters                                            49
         8.4      Further Assurances                                          50
ARTICLE IX INDEMNIFICATION                                                    50
         9.1      Indemnification of the Purchaser                            50
         9.2      Limitation on the Purchaser's Indemnification Rights        51
         9.3      Indemnification of the Equityholders                        52
         9.4      Limitation on the Equityholders' Indemnification Rights     52
         9.5      Cooperation                                                 52
         9.6      Third Party Claims                                          52
         9.7      No Contribution                                             54
ARTICLE X EFFECT OF TERMINATION                                               54
        10.1      Right to Terminate                                          54
        10.2      Certain Effects of Termination                              55
        10.3      Remedies                                                    55
        10.4      Termination Fee                                             56
ARTICLE XI STOCKHOLDERS' COMMITTEE                                            56
        11.1      Appointment of Stockholders' Committee                      56
        11.2      Authority                                                   57
        11.3      Reliance                                                    58
        11.4      Indemnification of Purchaser and Its Affiliates             59
        11.5      Indemnification of Stockholders' Committee                  59
ARTICLE XII MISCELLANEOUS                                                     59
        12.1      Notices                                                     59
        12.2      Expenses; Transfer Taxes                                    61
        12.3      Entire Agreement                                            61
        12.4      Non-Waiver                                                  61
        12.5      Counterparts                                                62
</TABLE>

                                       ii
<PAGE>
<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
        12.6      Severability                                                62
        12.7      Applicable Law                                              62
        12.8      Binding Effect; Benefit                                     62
        12.9      Assignability                                               62
        12.10     Rule of Construction                                        62
        12.11     Waiver of Trial by Jury                                     62
        12.12     Consent to Jurisdiction                                     62
        12.13     Amendments                                                  63
        12.14     Headings                                                    63
</TABLE>

                          TABLE OF EXHIBITS AND ANNEXES

Exhibit A-1  -  Form of Certificate of Merger
Exhibit A-2  -  Form of Plan of Merger
Exhibit B    -  Form of Escrow Agreement
Exhibit C    -  Form of Stockholder Release
Exhibit D    -  Form of Restrictive Covenant Agreement for Certain Equityholders
Annex A      -  Certain Employees

                                      iii
<PAGE>
                                MERGER AGREEMENT

      This MERGER AGREEMENT (This "AGREEMENT") is made as of March 3, 2004,
among WellCare Health Plans, Inc., a Delaware corporation ("PURCHASER"), Zephyr
Acquisition Sub, Inc., a New Jersey corporation ("MERGER SUB"), Harmony Health
Systems, Inc., a New Jersey corporation (the "COMPANY"), and each of the
stockholders and option holders of the Company listed on the signature pages to
this Agreement under the caption "Principal Stockholders" (individually a
"PRINCIPAL STOCKHOLDER" and collectively the "PRINCIPAL STOCKHOLDERS").

                                    RECITALS

      A. The Principal Stockholders collectively own a majority of the
outstanding Shares (as defined herein) of the Company.

      B. Merger Sub is an indirect wholly-owned subsidiary of Purchaser.

      C. The Company is a holding company that owns all of the outstanding
shares of capital stock of each of Harmony Health Plan of Illinois, Inc., an
Illinois corporation ("HMO SUBSIDIARY"), and Harmony Health Management, Inc., a
New Jersey corporation ("MANAGEMENT SUBSIDIARY" and, together with HMO
Subsidiary, the "SUBSIDIARIES"). The Subsidiaries are engaged in the business of
operating a Medicaid managed care organization in the states of Illinois and
Indiana, and providing certain related services (the "BUSINESS").

      D. The boards of directors of Purchaser, Merger Sub and the Company have
each approved this Agreement and the transactions contemplated hereby and have
determined that it is in the best interests of their respective stockholders for
Merger Sub to merge with and into the Company (the "MERGER") upon the terms and
subject to the conditions set forth in this Agreement.

      E. Concurrently with the execution of this Agreement and as an inducement
to Purchaser and Merger Sub to enter into this Agreement, certain of the
Principal Stockholders have on the date hereof entered into a voting agreement
(each, a "VOTING AGREEMENT" and collectively the "VOTING AGREEMENTS") to, among
other things, vote the Shares owned by such Persons to approve the Merger and
against any competing proposals.

                                   AGREEMENTS

      Therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      1.1 Definitions. For purposes of this Agreement, the following terms have
the meanings set forth below.
<PAGE>
      "2003 AUDITED FINANCIAL STATEMENTS" means (1) the statutory basis balance
sheet as of December 31, 2003 and the related statements of income - statutory
basis, changes in surplus - statutory basis and cash flows - statutory basis for
the year ended December 31, 2003, including the notes thereto, of HMO
Subsidiary, audited by the Company Accountants and prepared in accordance with
SAP, and (2) the consolidated balance sheet, consolidated statement of income
and retained earnings, consolidated statement of stockholders' equity,
consolidated statement of cash flows and notes to financial statements of the
Company and the Subsidiaries as of and for the year ended December 31, 2003,
audited by the Company Accountants and prepared in accordance with GAAP.

      "2003 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS" means the consolidated
balance sheet, consolidated statement of income and retained earnings,
consolidated statement of stockholders' equity, consolidated statement of cash
flows and notes to financial statements of the Company and the Subsidiaries as
of and for the year ended December 31, 2003, prepared by the Company in
accordance with GAAP.

      "2003 UNAUDITED FINANCIAL STATEMENTS" means the 2003 Unaudited
Consolidated Financial Statements and the 2003 Unaudited HMO Financial
Statements.

      "2003 UNAUDITED HMO FINANCIAL STATEMENTS" means the statutory basis
balance sheet as of December 31, 2003 and the related statements of income -
statutory basis, changes in surplus - statutory basis and cash flows - statutory
basis for the year ended December 31, 2003, including the notes thereto, of HMO
Subsidiary, prepared by the Company in accordance with SAP.

      "ACCOUNTS RECEIVABLE" means all of the Company's and the Subsidiaries'
accounts receivable, notes receivable, negotiable instruments and chattel paper.

      "ACQUISITION PROPOSAL" means any inquiry, proposal or offer, whether oral
or written, relating to a Competing Transaction.

      "AFFILIATE" with respect to any Person means any other Person who directly
or indirectly Controls, is Controlled by, or is under common Control with such
Person including in the case of any Person who is an individual, his or her
spouse, any of his or her descendants (lineal or adopted) or ancestors, and any
of their spouses.

      "AGGREGATE CLOSING AMOUNT" means $57,400,000 minus (1) the aggregate
amount of Pre-Closing Distributions, if any, and (2) the amount required at
Closing to discharge in full the Transaction Expenses.

      "ARBITRATING ACCOUNTANTS" means the Chicago, Illinois office of
PriceWaterhouseCoopers or, if such accounting firm is unable or unwilling to
serve as Arbitrating Accountants, the accounting firm selected by Purchaser and
the Stockholders' Committee pursuant to Section 2.8.1.

      "BASKET" means $350,000.

                                        2
<PAGE>
      "BENEFIT PLAN" means each Plan, Multiemployer Plan, Welfare Plan and Other
Benefit Plan described in the Disclosure Schedule.

      "BUSINESS DAY" means a day other than Saturday, Sunday or any day on which
banks located in the State of Florida are authorized or obligated to close.

      "CERCLA" means Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.

      "CERTIFICATE OF MERGER" means a certificate of merger in the form of
Exhibit A attached hereto.

      "CLAIMS" means all options, proxies, voting trusts, voting agreements,
judgments, pledges, charges, escrows, rights of first refusal or first offer,
mortgages, indentures, claims, transfer restrictions, liens, equities, security
interests and other encumbrances of every kind and nature whatsoever, whether
arising by agreement, operation of law or otherwise.

      "CLOSING" means the consummation of the transactions contemplated by this
Agreement.

      "CLOSING DATE" means the date on which the Closing occurs.

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

      "COMMON SHARES" means the Company's Common Stock, no par value per share.

      "COMPANY ACCOUNTANTS" means Ernst & Young LLP.

      "COMPANY GROUP" means the Company and the Subsidiaries, collectively.

      "COMPETING TRANSACTION" means any or all of the following, other than the
Excluded Transactions: (1) a sale, transfer or other disposition of all or a
substantial portion of the Company's assets in a single transaction or a series
of related transactions; (2) a sale, transfer or assignment of more than 50% of
the outstanding Shares (including by means of a merger); and (3) a public
announcement of a proposal, plan, intention or agreement to do any of the
foregoing.

      "CONSOLIDATED AUDITED FINANCIAL STATEMENTS" means consolidated balance
sheets, consolidated statements of income and retained earnings, consolidated
statements of stockholders' equity, consolidated statements of cash flows and
notes to financial statements (together with any supplementary information
thereto) of the Company and the Subsidiaries as of and for the years ended
December 31, 2002 and December 31, 2001, prepared in accordance with GAAP and
audited by the Company Accountants.

      "CONTRACT" means any contract, agreement, arrangement, understanding or
instrument, whether oral or written.

      "CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through ownership of securities, by contract or otherwise.

                                        3
<PAGE>
      "CORPORATION CODE" means the New Jersey Business Corporation Act, as
amended.

      "DAMAGES" means all actions, lawsuits, proceedings, hearings,
investigations, charges, complaints, Third Party Claims, demands, injunctions,
judgments, orders, decrees, rulings, dues, liabilities, obligations, Taxes,
liens, assessments, levies, losses, fines, penalties, damages, costs, fees and
expenses, including reasonable attorneys', accountants', investigators', and
experts' fees and expenses incurred in investigating or defending any of the
foregoing.

      "DELIVERY DATE" means the date on which the IBNR Certificate has been
delivered to the Stockholders' Committee.

      "DESIGNATED CONTRACTS" means all of the Contracts listed or required to be
listed in Schedule 3.3.21 of the Disclosure Schedule.

      "DISCLOSURE SCHEDULE" means the schedules delivered by the Company to
Purchaser concurrently herewith and identified by the parties as the Disclosure
Schedule.

      "DISPUTE" means any dispute regarding the calculation of the IBNR
Adjustment.

      "DISPUTE NOTICE" means a written notice of a Dispute presented to the
Purchaser within the Dispute Period.

      "DISPUTE PERIOD" means the period beginning on the Delivery Date and
ending at 5:00 p.m., Eastern time, on the date 30 days after the Delivery Date.

      "DOI" means, together, the Illinois Department of Insurance and the
Indiana Department of Insurance.

      "EFFECTIVE TIME" means such time as the Certificate of Merger is duly
filed with the New Jersey Secretary of State, or such other time as Purchaser
and the Company shall agree in writing should be specified in the Certificate of
Merger.

      "ENVIRONMENTAL CLAIM" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any Person alleging potential liability (including potential liability
for enforcement, investigation costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or resulting
from: (1) the presence or Release into the environment of any Hazardous
Substance at any location, whether or not owned by the Company; or (2)
circumstances forming the basis of any violation or alleged violation of any
Environmental Law; or (3) any and all claims by any Person seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Substances.

      "ENVIRONMENTAL LAWS" means all federal, state or local statutes, laws,
rules, ordinances, codes, rule of common law, regulations, judgments and orders
in effect on the Closing Date and relating to protection of human health or the
environment (including ambient air, surface water, ground water, drinking water,
wildlife, plants, land surface or subsurface strata), including laws

                                        4
<PAGE>
and regulations relating to Releases or threatened Releases of Hazardous
Substances, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances.

      "ENVIRONMENTAL PERMITS" means all environmental, health and safety
permits, licenses, registrations, and governmental approvals and authorizations.

      "EQUITYHOLDERS" means, collectively, all holders of Shares and/or Options
as of the date of this Agreement.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

      "ERISA AFFILIATE" means any affiliate of the Company as determined under
Code section 414(b), (c), (m) or (o).

      "ESCROW AGENT" means such national banking association or other Person as
may be selected by Purchaser and the Company to serve as Escrow Agent under the
Escrow Agreement.

      "ESCROW AGREEMENT" means an Escrow Agreement in the form of Exhibit B
attached hereto (with such changes thereto as may be required by the Escrow
Agent).

      "ESCROW AMOUNT" means $8,000,000.

      "ESCROW BALANCE" means any portion of the Escrow Amount to be released to
the Stockholders' Committee for the benefit of the Equityholders upon the
expiration of the Escrow Agreement pursuant to the provisions thereof.

      "EXCLUDED TRANSACTION" means the transactions described in this Agreement
or any other transaction with Purchaser.

      "EXTENDED REPRESENTATIONS AND WARRANTIES" means the representations and
warranties contained in Section 3.4 (Individual Representations and Warranties
of the Principal Stockholders).

      "FINANCIAL STATEMENT DATE" means December 31, 2002.

      "FINANCIAL STATEMENTS" means the 2003 Unaudited Financial Statements, the
Consolidated Audited Financial Statements and the HMO Audited Financial
Statements.

      "FIRPTA" means the Foreign Investment in Real Property Tax Act, as
amended.

      "GAAP" means generally accepted accounting principles.

      "GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any state thereof, any foreign
country or any domestic or foreign state, county, city or other political
subdivision, and shall include all self regulatory organizations and insurance
and

                                        5
<PAGE>
health care authorities. The foregoing shall include, but shall not be limited
to, DOI, the IDPA and the IFSSA.

      "HAZARDOUS SUBSTANCES" means: (1) any petroleum or petroleum products,
radioactive materials, asbestos in any form, mold, mildew, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
containing regulated levels of polychlorinated biphenyls (PCBs) and radon gas;
and (2) any chemicals, materials or substances which are now or ever have been
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," or other words of
similar import, under any Environmental Law.

      "HIPAA" means the Health Insurance Portability and Accountability Act of
1996.

      "HMO" means health maintenance organization.

      "HMO AUDITED FINANCIAL STATEMENTS" means statements of admitted assets,
liabilities and surplus - statutory basis and the related statements of income -
statutory basis, changes in surplus - statutory basis and cash flows - statutory
basis of HMO Subsidiary as of and for the years ended December 31, 2002 and
December 31, 2001, including the notes thereto, prepared in accordance with SAP
and audited by the Company Accountants.

      "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

      "IBNR" means claims incurred but not reported.

      "IBNR ADJUSTMENT" means the positive or negative amount calculated as (1)
the amount of reserves for Medical Claims, as shown on the line item titled
"Claims payable" or comparable line item(s) on the balance sheet of HMO
Subsidiary as of December 31, 2003 included as part of the 2003 Unaudited
Consolidated Financial Statements, minus (2) actual Medical Claims as of
December 31, 2003, as re-calculated following the Closing pursuant to Section
2.7.

      "IBNR CERTIFICATE" means a certificate prepared by Purchaser, setting
forth Purchaser's calculation of the IBNR Adjustment.

      "IDPA" means the Illinois Department of Public Aid, or any successor
agency.

      "IFSSA" means the Indiana Family and Social Services Administration, or
any successor agency.

      "INDEBTEDNESS" of any Person means all obligations of such Person (1) for
borrowed money evidenced by notes, bonds, debentures or similar instruments, (2)
for the deferred purchase price of goods or services (other than Provider
claims, rent payments and trade payables or accruals incurred in the ordinary
course of business), (3) under capital leases, and (4) in the nature of
guarantees of the obligations described in clauses (1) through (3) above of any
other Person.

                                        6
<PAGE>
      "INDEMNIFICATION CAP" means (1) in the case of claims for indemnification
by the Purchaser Indemnitees under Section 9.1, the Escrow Amount and any
earnings thereon pursuant to the Escrow Agreement, and (2) in the case of claims
for indemnification by the Equityholders under Section 9.3, $8,000,000.

      "INDEMNIFIED PARTY" means, with respect to a particular matter, a Person
who is entitled to indemnification from another party hereto pursuant to ARTICLE
IX.

      "INDEMNIFYING PARTY" means, with respect to a particular matter, a party
hereto who is required to provide indemnification under ARTICLE IX to another
Person.

      "INTELLECTUAL PROPERTY" means all of the Company's and the Subsidiaries'
intellectual property rights, including all patents, trademarks, service marks,
copyrights, designs, Internet domain names and web sites, trade or business
names, trade dress and slogans (and all registrations of, and all applications
for registration of, any of the foregoing), Software, and all goodwill
associated with such intellectual property rights.

      "INTELLECTUAL PROPERTY LICENSES" means all agreements (other than
agreements with respect to Software that have been purchased "off the shelf")
between the Company or either of the Subsidiaries, on the one hand, and any
Person, on the other hand, granting any right to use or practice any rights
under any of the Intellectual Property owned either by the Company or either of
the Subsidiaries or by any other Person.

      "INTERIM FINANCIAL STATEMENT DATE" means December 31, 2003.

      "IRS" means the Internal Revenue Service.

      "KNOWLEDGE OF THE COMPANY" means (1) the actual knowledge of the directors
and officers of the Company and/or the Subsidiaries, and (2) the knowledge of
facts that such directors and officers should have after due inquiry of any
employees of and advisors to the Company and/or the Subsidiaries who have
principal responsibility for the matter in question or are otherwise likely to
have information relevant to the matter, or after due examination of any
documents, correspondence or other items contained in the files of the Company
or the Subsidiaries.

      "LAW" means any law, statute, order, decree, consent decree, judgment,
rule, regulation, ordinance or other pronouncement having the effect of law,
whether in the United States, any foreign country, or any domestic or foreign
state, county, city or other political subdivision or of any Governmental or
Regulatory Authority.

      "LEASED REAL ESTATE" means all real property leased or subleased by the
Company or either of the Subsidiaries.

      "LIABILITIES" means all Indebtedness, obligations and other liabilities of
the Company or either of the Subsidiaries of any nature whatsoever, whether
direct or indirect, matured or unmatured, absolute, accrued, contingent (or
based on any contingency), known or unknown, fixed or otherwise, or whether due
or to become due.

                                        7
<PAGE>
      "LIBOR RATE" means the variable rate of interest published in The Wall
Street Journal on December 31, 2004 (or, if the rate is not so published on such
date, the most recent date of publication of such rate as of December 31, 2004)
as the one-month London Interbank Offered Rate under the heading "Money Rates"
(or such other heading as may be used at such time).

      "MATERIAL ACCOUNTING CHANGES" means a material change in the method of
calculation of any of the financial covenants, restrictions or standards used in
the Financial Statements.

      "MATERIAL ADVERSE EFFECT" means any event, occurrence, circumstance,
change or other matter that, individually or in the aggregate with any other
events, occurrences, circumstances, changes or other matters, has, or is
reasonably likely to have, a material adverse effect on (1) the business,
operations (including results of operations), assets, liabilities, financial
condition, membership, Provider relationships or prospects of the Company or
either of the Subsidiaries (including, without limitation, any matter involving
greater than $500,000 in amount other than Medical Claims), or (2) the ability
of any party hereto to consummate the Merger or any of the other transactions
contemplated hereby.

      "MEDICAID" means the applicable provision of Title XIX of the Social
Security Act of the United States, as amended, and the regulations promulgated
thereunder and the state Laws implementing the Medicaid program.

      "MEDICAL CLAIMS" means any and all medical claim liabilities of HMO
Subsidiary for services to Members, including, without limitation, IBNR.

      "MEMBER" means an individual enrolled in any of HMO Subsidiary's health
plans.

      "MULTIEMPLOYER PLAN" means any multiemployer plan as defined in Section
3(37) of ERISA.

      "NAIC" means the National Association of Insurance Commissioners.

      "NET CLOSING AMOUNT" means the Aggregate Closing Amount less the Escrow
Amount.

      "OPTIONS" means options to purchase Common Shares under the Company's 1996
Stock Option Plan.

      "OTHER BENEFIT PLAN" means any bonus, deferred compensation, stock
purchase, stock option, stock appreciation rights, phantom stock rights,
severance, salary continuation, vacation, sick leave, fringe benefit, incentive,
insurance, welfare or similar plan or arrangement other than a Plan,
Multiemployer Plan and Welfare Plan.

      "OUTSTANDING COMPANY SHARES" means the aggregate number of (1) Shares
outstanding immediately prior to the Effective Time and (2) Shares subject to
issuance upon exercise under Options outstanding immediately prior to the
Effective Time (prior to giving effect to the cancellation of Options pursuant
to Section 2.11).

      "PBGC" means the Pension Benefit Guaranty Corporation.

                                        8
<PAGE>
      "PER SHARE ESCROW AMOUNT" means an amount equal to the Escrow Balance
divided by the Outstanding Company Shares.

      "PER SHARE NET CLOSING AMOUNT" means an amount equal to the Net Closing
Amount divided by the Outstanding Company Shares.

      "PERMITS" means all licenses, permits, franchises, authorizations,
registrations, certificates of authority and government approvals other than the
Environmental Permits.

      "PERMITTED LIENS" means all (1) statutory liens for Taxes not yet due; (2)
statutory liens of landlords, carriers, warehousemen, mechanics and materialmen
incurred in the ordinary course of business for sums not yet due; and (3) liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security.

      "PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, bank, trust company, trust or other entity,
whether or not legal entities, or any governmental entity, agency or political
subdivision.

      "PLAN" means any employee pension benefit plan as defined in Section 3(2)
of ERISA.

      "PRE-CLOSING DISTRIBUTIONS" means the gross amount of any and all
payments, whether of cash or other assets or property, to any Equityholders on
account of capital stock of the Company, in any form whatsoever, including
dividends, distributions, redemptions, exchanges, reclassifications or otherwise
(without giving effect to any deductions or withholdings from any such payments
on account of Taxes, including any withholding, payroll, employment or similar
Taxes).

      "PREFERRED SHARES" means the Company's Series A Preferred Stock, $.01 par
value per share.

      "PROPRIETARY SOFTWARE" means Software which is owned by the Company or
either of the Subsidiaries.

      "PROVIDER" means any physician, hospital, pharmacy or other health care
professional, facility or supplier that has contracted with the Company or
either of the Subsidiaries to provide services, prescription drugs or supplies
to Members.

      "PROVIDER AGREEMENTS" means each of the contracts of the Company or either
of the Subsidiaries with a Provider.

      "PURCHASE PRICE" means the aggregate merger consideration payable by
Purchaser under this Agreement.

      "PURCHASER ACCOUNTANTS" means Deloitte & Touche LLP.

                                        9
<PAGE>

      "PURCHASER INDEMNITEES" means Purchaser and its Affiliates, and their
respective directors, managers, officers, members, shareholders, partners,
agents, representatives, successors and assigns.

      "REGULATORY STATEMENTS" means the HMO Subsidiary's quarterly and annual
reports as filed with DOI for the periods ended December 31, 2002, March 31,
2003, June 30, 2003, September 30, 2003 and December 31, 2003.

      "RELATED PARTIES" means the Company's and the Subsidiaries' respective
present and former directors, managers, officers, members, stockholders,
partners, and their respective Affiliates.

      "RELEASE" means any release, spill, emission, emptying, leaking,
injection, deposit, disposal, discharge, dispersal, leaching, pumping, pouring,
or migration into the atmosphere, soil, surface water, groundwater or property.

      "REPRESENTATIVES" means, with respect to any Person, any director,
officer, employee, agent, lender, partner or representative, including any
accountant, consultant, attorney or financial advisor, of such Person.

      "RETURNS" means all returns, declarations, reports, statements and other
documents required to be filed in respect of Taxes.

      "SAP" means statutory accounting principles, including but not limited to
the accounting standards as codified by the NAIC, as may be modified by
applicable Laws of the States of Illinois or Indiana.

      "SECURITIES ACT" means the Securities Act of 1933, as amended.

      "SHARES" means, collectively, the Common Shares and Preferred Shares.

      "SOFTWARE" means any and all: (1) computer programs, including any and all
software implementation of algorithms, models and methodologies whether in
source code or object code; (2) databases and computations, including any and
all data and collections of data; (3) all documentation, including user manuals
and training materials, relating to any of the foregoing; and (4) the content
and information contained in any Web site.

      "STOCKHOLDER RELEASE" means a release in the form of Exhibit C attached
hereto.

      "STOCKHOLDERS' COMMITTEE" means the Equityholders' attorneys-in-fact and
agents in connection with the execution and performance of this Agreement.

      "SUBSIDIARY" means either one of the Subsidiaries.

      "SURVIVAL DATE" means (1) for claims made based on an alleged breach of
the Extended Representations and Warranties, the date on which the applicable
statute of limitations would bar such claim, (2) for claims made based on an
alleged breach of Sections 7.2 (Use of Trademarks)

                                       10
<PAGE>
or 8.1 (confidentiality), the date on which such covenants expire as set forth
in such sections, and (3) for all other claims, the date that is 12 months after
the Closing Date.

      "SURVIVING CORPORATION" means the Company as the surviving corporation
after the consummation of the Merger.

      "TAXES" means all federal, state, local, foreign and other income, sales,
use, ad valorem, transfer or other taxes, fees, assessments or charges of any
kind, together with any interest and any penalties with respect thereto.

      "THIRD PARTY CLAIM" means any action, lawsuit, proceeding, investigation,
hearing, or like matter which is asserted or overtly threatened by a Person
other than the parties hereto, their successors and permitted assigns, against
any Indemnified Party or to which any Indemnified Party is subject.

      "TRANSACTION EXPENSES" means all of the Company's and the Principal
Stockholders' expenses incurred in connection with the preparation, execution
and consummation of this Agreement, the Closing and the transactions
contemplated hereby, including attorneys', accountants' and other advisors' fees
and expenses payable by the Company or the Principal Stockholders which have not
been paid as of the Closing.

      "WELFARE PLAN" means any employee welfare benefit plan as defined in
Section 3(1) of ERISA.

      "WORKING CAPITAL" means the positive or negative number calculated as (1)
the assets of the Company (on a standalone basis) which are treated under GAAP
as current assets minus (2) the liabilities of the Company (on a standalone
basis) which are treated under GAAP as current liabilities.

      1.2 Other Defined Terms. The following terms are defined in this Agreement
in the Sections referenced below:

<TABLE>
<CAPTION>
                            TERM                         SECTION
                            ----                         -------
<S>                                           <C>
              Agreement                       Introductory Paragraph
              Business                        Recital C
              Company                         Introductory Paragraph
              HMO Subsidiary                  Recital C
              Management Subsidiary           Recital C
              Merger                          Recital D
              Merger Sub                      Introductory Paragraph
              Principal Stockholder(s)        Introductory Paragraph
              Purchaser                       Introductory Paragraph
              Subsidiaries                    Recital C
              Voting Agreement(s)             Recital E
</TABLE>

      1.3 Accounting Principles. The classification, character and amount of all
assets, liabilities, capital accounts and reserves and of all items of income
and expense to be determined,

                                       11
<PAGE>
and any consolidation or other accounting computations to be made, and the
interpretation of any definition containing any financial term, pursuant to this
Agreement shall be determined and made in accordance with GAAP or SAP, as
applicable; provided, however, that if during the period beginning as of the
date of this Agreement and continuing through the Closing Date any changes in
GAAP or SAP, as applicable, are hereafter required or permitted and are adopted
by the Company with the agreement of the Company Accountants and such changes
result in one or more Material Accounting Changes, the parties hereto agree to
enter into negotiations, in good faith, in order to amend such provisions in a
credit neutral manner so as to reflect equitably such changes with the desired
result that the criteria for evaluating the Company's financial condition shall
be the same after such changes as if such changes had not been made; provided,
further, that no Material Accounting Change shall be given effect in such
calculations until such provisions are amended in a manner reasonably
satisfactory to Purchaser and the Company. If such amendment is entered into,
all references in this Agreement to GAAP or SAP shall mean GAAP or SAP as of the
date of such amendment together with any changes in GAAP or SAP after the date
hereof which are not Material Accounting Changes. All references to "dollars" or
"$" in this Agreement shall mean United States dollars.

      1.4 Construction. Unless the context of this Agreement otherwise requires,
(a) words of any gender include each other gender, (b) words using the singular
or plural number also include the plural or singular number, respectively, (c)
references to Sections and Articles refer to the applicable Sections and
Articles of this Agreement, (d) the words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation," and (e) the
predicate of any noun or pronoun shall be the immediately preceding prior noun.

                                   ARTICLE II
                                   THE MERGER

      2.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Corporation Code, Merger Sub shall be
merged with and into the Company at the Effective Time. Following the Effective
Time, the separate corporate existence of Merger Sub shall cease and the Company
shall continue as the Surviving Corporation. At the election of Purchaser, any
direct or indirect wholly owned subsidiary of Purchaser may be substituted for
Merger Sub as a constituent corporation in the Merger. In such event, the
parties agree to execute an appropriate amendment to this Agreement in order to
reflect the foregoing.

      2.2 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the Corporation Code. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.

                                       12
<PAGE>
      2.3 Charter and Bylaws.

            2.3.1 At the Effective Time, the Certificate of Incorporation of
Merger Sub shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by the Corporation Code and
such Certificate of Incorporation, except that the name of the corporation set
forth therein shall be changed to the name of the Company.

            2.3.2 At the Effective Time, the Bylaws of Merger Sub shall be the
Bylaws of the Surviving Corporation until thereafter amended.

      2.4 Directors and Officers. The directors of Merger Sub immediately prior
to the Effective Time shall be the directors of the Surviving Corporation until
the earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be. The officers of Merger Sub
immediately prior to the Effective Time and such other persons as Purchaser
shall designate shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.

      2.5 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of the
outstanding capital of the Company or Merger Sub:

            2.5.1 Each issued and outstanding share of common stock of Merger
Sub shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation.

            2.5.2 Each Share that is held in the treasury of the Company shall
automatically be canceled and returned and shall cease to exist and no
consideration shall be delivered in exchange therefor.

            2.5.3 Each Outstanding Company Share (other than Shares to be
canceled in accordance with Section 2.5.2) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Outstanding Company Share shall
cease to have any rights with respect thereto, except the right to receive (a)
an amount of cash per Outstanding Company Share equal to the Per Share Net
Closing Amount, and (b) a conditional amount of cash per Outstanding Company
Share equal to the Per Share Escrow Amount.

      2.6 Pre-Closing Distributions. The Company shall, prior to the Closing
Date, make Pre-Closing Distributions to the Equityholders in such amount or
amounts as may be designated in writing by Purchaser at any time or from time to
time prior to the Closing Date, subject in each case to the consent of the
Company, which approval shall not be unreasonably withheld or delayed. Any such
Pre-Closing Distributions shall be distributed to the Equityholders promptly
(and in any event within five Business Days or prior to the Closing Date,
whichever occurs sooner) after Purchaser designates any such amount. Any such
Pre-Closing Distributions shall be paid pro-rata to all Equityholders on a
fully-diluted basis, as though all holders of Options were the holders of the
number of Shares issuable upon exercise in full of their Options (including any
unvested portion thereof). Any such Pre-Closing Distributions made to the

                                       13
<PAGE>
holders of Options will be considered compensation income to the holders of such
Options, and shall occur prior to the payments to the holders of Options set
forth in Section 2.11. The Company shall withhold from all amounts payable
pursuant to this 2.6 all applicable Taxes, including any withholding, payroll,
employment or similar Taxes.

      2.7 Adjustment of Purchase Price. Following the Closing, the Purchase
Price shall be adjusted based on the amount of the IBNR Adjustment, if any, as
provided in this Section 2.7. The Company shall, on or prior to December 31,
2004, re-calculate the Medical Claims as of December 31, 2003, giving effect to
the experience of HMO Subsidiary with such Medical Claims after such date and
through such date of calculation, based upon the books and records of HMO
Subsidiary and actual operating and financial information currently available at
the time of such calculation. The Purchaser shall cause the Surviving
Corporation to pay such Medical Claims consistent with industry practice and in
compliance with the terms of the applicable Provider Agreement and the
requirements of any applicable Laws. For purposes of this Section 2.7, (a)
consistent with GAAP, any regulatory penalties incurred as a result of the
operation of HMO Subsidiary following the Closing Date shall not be included in
the calculation of Medical Claims, and (b) any remaining IBNR as of the time of
the re-calculation of Medical Claims pursuant hereto shall not be included in
the calculation of Medical Claims. By no later than December 31, 2004, Purchaser
shall deliver to the Stockholders' Committee the IBNR Certificate. Any increase
in the Purchase Price as a result of the IBNR Adjustment, together with interest
on the IBNR Adjustment as set forth below, shall be paid by the Purchaser to the
Stockholders' Committee on behalf of the Equityholders within five Business Days
following the final determination of the IBNR Adjustment pursuant to Section
2.8. Any decrease in the Purchase Price as a result of the IBNR Adjustment,
together with interest on the IBNR Adjustment as set forth below, shall be paid
by the Escrow Agent out of the Escrow Amount to Purchaser within five Business
Days following the final determination of the IBNR Adjustment pursuant to
Section 2.8, in accordance with the terms of the Escrow Agreement. Interest on
the IBNR Adjustment shall accrue at a rate per annum equal to the LIBOR Rate
plus 21/2%, calculated based on the period from the Closing Date through and
including the date of the final determination of the IBNR Adjustment pursuant to
Section 2.8, and shall be paid together with the increase or decrease, as
applicable, to the Purchase Price resulting from the IBNR Adjustment pursuant to
this Section 2.7.

      2.8 Disputes Regarding the IBNR Adjustment. Disputes with respect to the
IBNR Adjustment shall be resolved as follows:

            2.8.1 The Stockholders' Committee shall have the Dispute Period to
bring a Dispute, but only on the basis that the IBNR Adjustment is inaccurate.
If the Stockholders' Committee does not give a Dispute Notice, the IBNR
Adjustment, as set forth in the IBNR Certificate as delivered by Purchaser,
shall be deemed to have been accepted and agreed to by the Stockholders'
Committee, and shall be final and binding upon the parties hereto. If the
Stockholders' Committee has a Dispute, the Stockholders' Committee shall give
Purchaser a Dispute Notice within the Dispute Period, setting forth in
reasonable detail the elements and amounts with which it disagrees. In the event
any such Dispute, as described in the Dispute Notice, applies only to a portion
of the IBNR Adjustment, any undisputed portion of the IBNR Adjustment (together
with interest thereon as set forth in Section 2.7) shall be paid by Purchaser or
the Escrow Agent, as applicable, within five Business Days following the
delivery of such

                                       14
<PAGE>
Dispute Notice. Within 30 days after delivery of such Dispute Notice, Purchaser
and the Stockholders' Committee shall attempt to resolve such Dispute and agree
in writing upon the final calculation and amount of the IBNR Adjustment.

            2.8.2 If Purchaser and the Stockholders' Committee are unable to
resolve any Dispute within the 30 day period after Purchaser's receipt of a
Dispute Notice, the Stockholders' Committee and Purchaser shall jointly engage
the Arbitrating Accountants as arbitrator, so long as the Arbitrating
Accountants has not performed accounting, tax or auditing services for
Purchaser, the Company or any of their respective Affiliates during the
then-prior three year period. The Purchaser and the Stockholders' Committee
shall each pay the Arbitrating Accountants one-half of the retainer or initial
fee required, subject to reimbursement based on the determination of the
Arbitrating Accountants pursuant to the last sentence of this Section 2.8.2. If
the Arbitrating Accountants is unable or unwilling to serve as Arbitrating
Accountants, the Arbitrating Accountants shall be a nationally recognized
accounting firm selected promptly by agreement of Purchaser and the
Stockholders' Committee or, if they are unable to agree, by lot conducted
jointly by the Company Accountants and the Purchaser Accountants. In connection
with the resolution of any Dispute, the Arbitrating Accountants shall have
access to all documents, records, work papers, facilities and personnel it deems
necessary to perform its function as arbitrator. The Arbitrating Accountants'
function shall be to calculate the IBNR Adjustment, based upon the applicable
requirements of this Agreement. The Arbitrating Accountants shall allow
Purchaser and the Stockholders' Committee to present their respective positions
regarding the Dispute. The Arbitrating Accountants may, at its discretion,
conduct a conference concerning the Dispute, at which conference each party
shall have the right to present additional documents, materials and other
information and to have present its advisors, counsel and accountants. In
connection with such process, there shall be no other hearings or any oral
examinations, testimony, depositions, discovery or other similar proceedings.
The Arbitrating Accountants shall promptly, and in any event within 60 days
after the date of its appointment, render its decision on the question in
writing and finalize the IBNR Adjustment. Such written determination shall be
final and binding upon the parties hereto, and judgment may be entered on the
award. The Arbitrating Accountants shall determine the proportion of its fees
and expenses to be paid by each of the Stockholders' Committee and Purchaser,
based primarily on the degree to which the Arbitrating Accountants has accepted
the positions of the respective parties.

      2.9 Time and Place of Closing. The Closing shall be at 10:00 a.m., at the
offices of Greenberg Traurig, LLP, 77 West Wacker, Suite 2500, Chicago, Illinois
60601 within five Business Days after the satisfaction or waiver of all of the
conditions to the obligations of the parties set forth in ARTICLE V, or on such
other date, or at such other time or place, as shall be mutually agreed upon by
the Company and Purchaser. Subject to the provisions of this Agreement, on or
promptly after the Closing Date, the parties shall file the Certificate of
Merger executed in accordance with the relevant provisions of the Corporation
Code and shall make all other filings or recordings required under the
Corporation Code.

      2.10 Exchange of Certificates. At the Closing, (a) the Stockholders'
Committee shall deliver to Purchaser certificates evidencing the Shares held by
the Principal Stockholders duly endorsed in blank, or accompanied by valid stock
powers duly executed in blank, and (b) Purchaser shall deliver (i) to the
Stockholders' Committee for the benefit of the Equityholders, by wire transfer
of immediately available funds to such bank account as the Stockholders'

                                       15
<PAGE>
Committee shall specify by written notice to Purchaser delivered before the
Closing Date, the Net Closing Amount, and (ii) to the Escrow Agent the Escrow
Amount, which shall secure the payment of the Principal Stockholders'
indemnification obligations hereunder and which shall be held in escrow and
disbursed in accordance with the terms of the Escrow Agreement. No interest will
be paid or accrued on any sums payable to holders of certificates representing
Shares. Until surrendered in accordance with the provisions of this Section
2.10, each stock certificate representing a Share shall represent for all
purposes only the right to receive the merger consideration described in Section
2.5, without interest. Other than the payments to the Stockholders' Committee of
the Net Closing Amount and to the Escrow Agent of the Escrow Amount pursuant to
this Section 2.10, and the payment to the Stockholders' Committee of the IBNR
Adjustment pursuant to Section 2.7, if applicable, Purchaser shall have no
liability or obligation whatsoever with respect to the payment to Equityholders
for such Equityholders' allocated share of the Net Closing Amount, the Escrow
Amount or the IBNR Adjustment.

      2.11 Cancellation of Options.

            2.11.1 Prior to the Closing, the Company's Board of Directors shall
adopt appropriate resolutions and the Company shall take all other actions
necessary or appropriate to provide for (a) the cancellation, effective at the
Closing, of all Options, whether vested or unvested, without any payment
therefor except as otherwise provided herein, and (b) the termination and
cancellation, effective at the Closing, of the Company's 1996 Stock Option Plan.
In consideration of the cancellation of each Option, as of the Effective Time
the holder thereof shall be entitled (subject to such holder having first
executed and delivered a Stockholder Release) to receive, subject to the
reduction in the cash payments specified in Section 2.11.2, (i) an amount of
cash per Share subject to such Option equal to (A) the Per Share Closing Amount
minus (B) the exercise price per Share applicable to such Option, (ii) a
conditional amount of cash per Share subject to such Option equal to the Per
Share Escrow Amount, and (iii) a conditional amount of cash per Share subject to
such Option equal to (A) the increase, if any, in the Purchase Price as a result
of the IBNR Adjustment divided by (B) the Outstanding Company Shares.

            2.11.2 The Company and/or Purchaser, as applicable, shall withhold
from all amounts payable pursuant to 2.11.1 all applicable Taxes, including any
withholding, payroll, employment or similar Taxes, in the amounts and in the
manner as Purchaser directs. The Company shall, prior to the Closing, prepare
and deliver to Purchaser a schedule setting forth the amounts payable at the
Closing to the holders of Options under this Section 2.11 (giving effect to all
Taxes required to be withheld from such payments). The Company and the
Stockholders' Committee shall provide Purchaser with such information as it may
reasonably require in order to calculate any such Taxes.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

      3.1 General Statement. The parties make the representations and warranties
to each other which are set forth in this ARTICLE III. All such representations
and warranties and all representations and warranties which are set forth
elsewhere in this Agreement and in any financial statement, exhibit, certificate
or other document delivered by a party hereto to any other

                                       16
<PAGE>
party pursuant to this Agreement or in connection herewith shall survive the
Closing (and none shall merge into any instrument of conveyance), regardless of
any investigation or lack of investigation by any of the parties to this
Agreement. No specific representation or warranty shall limit the generality or
applicability of a more general representation or warranty. All representations
and warranties of the Company and the Principal Stockholders are made subject to
the exceptions noted in the Disclosure Schedule. Each section of the Disclosure
Schedule shall be numbered to correspond to the subsection of Section 3.3 or 3.4
to which such section relates.

      3.2 Representations and Warranties of Purchaser. Purchaser represents and
warrants to the Company and the Equityholders as follows:

            3.2.1 Organization, Existence and Good Standing. Each of Purchaser
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the Laws of its state of incorporation.

            3.2.2 Power and Authority. Each of Purchaser and Merger Sub has the
corporate power and authority to execute, deliver and perform this Agreement and
each of the documents and instruments required to be entered into pursuant to
this Agreement, and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by Purchaser and Merger Sub of
this Agreement and each of the documents and instruments required to be entered
into pursuant to this Agreement, and the consummation by Purchaser and Merger
Sub of the transactions contemplated hereby and thereby, has been duly and
validly authorized by all necessary corporate action and such authorization has
not been withdrawn or amended in any manner. In this regard, the requisite
approval of the Purchaser's Board of Directors was obtained at a Board of
Directors' meeting held on February 27, 2004.

            3.2.3 Enforceability. Assuming due and valid authorization,
execution and delivery of this Agreement by the Company and the Principal
Stockholders, this Agreement is or will be the legal, valid and binding
obligations of Purchaser and Merger Sub, enforceable against Purchaser and
Merger Sub in accordance with its terms, except that (a) such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws, now or hereafter in effect, affecting creditors' rights
generally, and (b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.

            3.2.4 Consents. No consent, authorization, order or approval of, or
filing or registration with, any Governmental or Regulatory Authority is
required for or in connection with the consummation by Purchaser or Merger Sub
of the transactions contemplated hereby, other than (a) such filings as may be
required under the HSR Act and (b) such Permits as may be required from any
Governmental or Regulatory Authority under the Laws of any state.

            3.2.5 Conflicts Under Constituent Documents or Laws. Neither the
execution and delivery of this Agreement by Purchaser or Merger Sub, nor the
consummation by Purchaser or Merger Sub of the transactions contemplated hereby,
will conflict with or result in a breach of any of the terms, conditions or
provisions of its Certificate of Incorporation or by-laws, or of any statute or
administrative regulation, or of any order, writ, injunction, judgment or decree
of any

                                       17
<PAGE>
Governmental or Regulatory Authority or of any arbitration award to which
Purchaser or Merger Sub is a party or by which Purchaser or Merger Sub is bound.

            3.2.6 Conflicts Under Contracts. Except as set forth in Schedule
3.2.6, neither Purchaser nor Merger Sub is a party to, or bound by, any
unexpired, undischarged or unsatisfied Contract the terms of which performance
by Purchaser or Merger Sub according to the terms of this Agreement will be a
default or an event of acceleration, or grounds for termination, modification or
cancellation, or whereby timely performance by Purchaser or Merger Sub according
to the terms of this Agreement may be prohibited, prevented or delayed.

            3.2.7 Brokers. Neither Purchaser nor any of its Affiliates has dealt
with any Person who is entitled to a broker's commission, finder's fee,
investment banker's fee or similar payment from the Principal Stockholders, the
Company or either of the Subsidiaries for arranging the transactions
contemplated hereby or introducing the parties to each other.

      3.3 Representations and Warranties of the Company. The Company represents
and warrants to Purchaser that, except as set forth in the Disclosure Schedule:

            3.3.1 Organization, Existence and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under the Laws
of New Jersey.

            3.3.2 Foreign Good Standing. The Company has qualified as a foreign
corporation, and is in good standing, under the Laws of all jurisdictions where
the nature of its business or the nature or location of its assets requires such
qualification and where the failure to so qualify would have a Material Adverse
Effect.

            3.3.3 Power and Authority. The Company has all necessary corporate
power and authority to carry on its business as such business is now being
conducted. The Company has the corporate power and authority to execute, deliver
and perform this Agreement and each of the documents and instruments required to
be entered into pursuant to this Agreement, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by the
Company of this Agreement and each of the documents and instruments required to
be entered into pursuant to this Agreement, and the consummation by the Company
of the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action and such authorization has not been
withdrawn or amended in any manner. In this regard, the requisite approval of
the Company's Board of Directors was obtained at a Board of Directors meeting
held on March 1, 2004 and the Voting Agreements constitute the requisite
approval of the Company's stockholders.

            3.3.4 Enforceability. This Agreement has been duly executed and
delivered by the Company. Assuming due and valid authorization, execution and
delivery of this Agreement by Purchaser, this Agreement is or will be the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with its terms, except that (1) such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws, now or hereafter in effect, affecting creditors' rights generally; and (2)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject

                                       18
<PAGE>
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.

            3.3.5 Consents. No consent, authorization, order or approval of, or
filing or registration with, any Governmental or Regulatory Authority is
required for or in connection with the execution of this Agreement by the
Company or the Principal Stockholders or the consummation by the Company or the
Principal Stockholders of the transactions contemplated hereby.

            3.3.6 Conflicts Under Constituent Documents or Laws. Neither the
execution and delivery of this Agreement by the Company or the Principal
Stockholders, nor the consummation by the Company or the Principal Stockholders
of the transactions contemplated hereby, will conflict with or result in a
breach of any of the terms, conditions or provisions of the Company's or either
of the Subsidiaries' Certificate of Incorporation or by-laws, or of any statute
or administrative regulation, or of any order, writ, injunction, judgment or
decree of any Governmental or Regulatory Authority or of any arbitration award
to which the Company or either of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries is bound.

            3.3.7 Conflicts Under Contracts. Neither the Company nor any of the
Subsidiaries is a party to, or bound by, any unexpired, undischarged or
unsatisfied Contract under the terms of which performance by the Company or the
Principal Stockholders according to the terms of this Agreement will be a
default or an event of acceleration, or grounds for termination, modification or
cancellation, or whereby timely performance by the Company or the Principal
Stockholders according to the terms of this Agreement may be prohibited,
prevented or delayed.

            3.3.8 Subsidiaries. HMO Subsidiary is a corporation duly organized,
validly existing and in good standing under the Laws of Illinois and Management
Subsidiary is a corporation duly organized, validly existing and in good
standing under the Laws of New Jersey. Each of the Subsidiaries has full
corporate power to own all of its properties and assets and to carry on its
business as it is now conducted, and is qualified as a foreign corporation and
is in good standing in all jurisdictions where the nature of its business or the
nature and location of its assets requires such qualification and where the
failure to so qualify may have a Material Adverse Effect. Other than the
Subsidiaries, the Company does not hold or beneficially own any other direct or
indirect interest (whether it be common or preferred stock or any comparable
ownership interest in any Person that is not a corporation), or any
subscriptions, options, warrants, rights, calls, convertible securities or other
agreements or commitments for any interest in any Person.

            3.3.9 Officers and Directors. The name of each director and officer
of the Company and each of the Subsidiaries on the date hereof, and his or her
position(s) with the Company and/or the Subsidiaries, are listed on Section
3.3.9 of the Disclosure Schedule.

            3.3.10 Constituent Documents. True and complete copies of the
certificate or articles of incorporation and all amendments thereto, the by-laws
as amended and currently in force, all stock records, and corporate minute books
and records, of the Company and the Subsidiaries, have been made available for
inspection by Purchaser. Such stock records

                                       19
<PAGE>
accurately reflect all Share transactions and the current stock ownership of the
Company and the Subsidiaries. The corporate minute books and records of the
Company and the Subsidiaries contain true and complete copies of all resolutions
adopted by the stockholders and the boards of directors of the Company and the
Subsidiaries.

            3.3.11 Capitalization.

                  (a) The authorized capital stock of the Company consists
solely of 700,000 Preferred Shares and 1,300,000 Common Shares. The outstanding
capital stock of the Company consists solely of 159,330 Preferred Shares and
960,305 Common Shares. There are no shares of capital stock of the Company of
any other class authorized, issued or outstanding. All of the issued and
outstanding Shares have been validly issued and are fully paid and
nonassessable. Except for the Options (all of which are described in Section
3.3.11 of the Disclosure Schedule), there are no outstanding subscriptions,
options, warrants, rights (including preemptive rights), calls, convertible
securities, contractual obligations to repurchase, redeem or otherwise acquire
any capital stock of the Company, voting trusts, stockholders' agreements or
other agreements or commitments of any character relating to the issued or
unissued capital stock or other securities of the Company or obligating the
Company to issue any securities of any kind. Section 3.3.11 of the Disclosure
Schedule sets forth a true, accurate and complete list of each holder of Shares
or Options and the number of Shares or Options held by such Person.

                  (b) The authorized capital stock of HMO Subsidiary consists of
a single class of 200,000 shares of common stock, without par value, of which
1,000 shares are issued and outstanding. There are no shares of capital stock of
HMO Subsidiary of any other class authorized, issued or outstanding. All of the
issued and outstanding shares of capital stock of HMO Subsidiary have been
validly issued, are fully paid and nonassessable, and are owned beneficially and
of record by the Company, free and clear of all Claims. There are no outstanding
subscriptions, options, warrants, rights (including preemptive rights), calls,
convertible securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other securities of HMO
Subsidiary obligating HMO Subsidiary to issue any securities of any kind.

                  (c) The authorized capital stock of Management Subsidiary
consists of a single class of 10,000 shares of common stock, without par value,
of which 1,000 shares are issued and outstanding. There are no shares of capital
stock of Management Subsidiary of any other class authorized, issued or
outstanding. All of the issued and outstanding shares of capital stock of
Management Subsidiary have been validly issued, are fully paid and
nonassessable, and are owned beneficially and of record by the Company, free and
clear of all Claims. There are no outstanding subscriptions, options, warrants,
rights (including preemptive rights), calls, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock or other securities of Management Subsidiary obligating Management
Subsidiary to issue any securities of any kind.

            3.3.12 Financial Statements. Complete and accurate copies of the
Financial Statements are contained in Section 3.3.12 of the Disclosure Schedule.
The Consolidated Audited Financial Statements and the 2003 Unaudited
Consolidated Financial Statements present fairly, in all material respects, the
consolidated financial position of the Company Group as of

                                       20
<PAGE>
the dates thereof and the consolidated results of operations and cash flows of
the Company Group for the periods covered by said statements, in accordance with
GAAP consistently applied through the periods covered thereby, except for, in
the case of the 2003 Unaudited Consolidated Financial Statements, (a) normal
year-end adjustments, which adjustments will not be material in amount or
significance, and (b) the omission of footnote disclosures. The HMO Audited
Financial Statements and the 2003 Unaudited HMO Financial Statements present
fairly, in all material respects, the financial position of HMO Subsidiary as of
the dates thereof and the results of operations and cash flows of HMO Subsidiary
for the periods covered by said statements, in accordance with SAP consistently
applied through the periods covered thereby, except for, in the case of the 2003
Unaudited HMO Financial Statements, (a) normal year-end adjustments, which
adjustments will not be material in amount or significance, and (b) the omission
of footnote disclosures. The books and records of the Company and the
Subsidiaries have been maintained in accordance with GAAP or SAP, as applicable,
and properly reflect all of the transactions entered into by the Company and the
Subsidiaries, as applicable. The Company has furnished to Purchaser complete and
correct copies of all attorney's responses to audit inquiry letters with respect
to the Company and the Subsidiaries and all management letters from the
Company's and the Subsidiaries' accountants for the last five fiscal years. The
Company has also furnished to Purchaser copies of the Regulatory Statements. The
Regulatory Statements have been prepared, in all material respects, in
accordance with SAP consistently applied.

            3.3.13 Conduct of Business. Since the Financial Statement Date, (a)
the Company Group has conducted the Business only in the ordinary course, (b)
there has not been any Material Adverse Effect, (c) there has been no
non-renewal or material amendment of any of the Permits held by or granted to
the Company or either Subsidiary, and the Company and each Subsidiary has used
commercially reasonable efforts to maintain such Permits, (d) there has been no
physical damage, destruction or other casualty loss (whether or not covered by
insurance) affecting any of the real or personal property or equipment of the
Company Group in an amount exceeding $50,000, individually or in the aggregate,
(e) the Company has not made any Pre-Closing Distribution, and (f) neither the
Company nor either of the Subsidiaries has taken or permitted to be taken any
action which, if proposed to be taken on or after the date of this Agreement,
would require the consent of Purchaser pursuant to Section 4.2.4.

            3.3.14 Undisclosed Liabilities. Neither the Company nor either of
the Subsidiaries has any Liabilities except for (a) Liabilities provided for or
reserved against in the Financial Statements and not discharged subsequent to
the dates of the Financial Statements, and (b) Liabilities which have been
incurred by the Company and the Subsidiaries subsequent to the Interim Financial
Statement Date in the ordinary course of the Company's and the Subsidiaries'
respective Businesses and not discharged since the Interim Financial Statement
Date. Neither the Company nor either of the Subsidiaries has any Liability that
relates to or has arisen out of a breach of contract, breach of warranty, tort,
or infringement by or against the Company or either of the Subsidiaries or any
claim or lawsuit involving the Company or either of the Subsidiaries.

            3.3.15 Working Capital. At the Effective Time, (a) the Company shall
have positive Working Capital, and (b) HMO Subsidiary shall be in full
compliance with all Laws applicable to the adequacy and maintenance of its
statutory surplus, including the applicable required risk-based capital amount.

                                       21
<PAGE>
            3.3.16 Assets. The Company and the Subsidiaries have good title to
their respective assets, free and clear of any Claims, except for Permitted
Liens. No unreleased mortgage, trust deed, chattel mortgage, security agreement,
financing statement or other instrument encumbering any of the Company's or
either of the Subsidiaries' assets has been recorded, filed, executed or
delivered. The Company's and the Subsidiaries' assets are adequate to conduct
the Business as it is presently being conducted, and will be adequate to enable
Purchaser to continue to conduct the Business as it is presently being
conducted. The Company's and the Subsidiaries' assets are in good operating
condition and repair, normal wear and tear excepted, and are suitable for the
uses intended therefor.

            3.3.17 Accounts Receivable. All of the Accounts Receivable reflected
on the 2003 Unaudited Financial Statements or incurred in the normal course of
business since the Interim Financial Statement Date have arisen from bona fide
transactions in the ordinary course of business and, to the extent not
previously collected, are fully collectible, net of any allowance for doubtful
accounts shown on the 2003 Unaudited Financial Statements, in the ordinary
course of business in accordance with their terms and assuming that the methods
of collection practices and procedures used in collection of the accounts
receivable are consistent with those historically used by the Company and the
Subsidiaries. None of the Accounts Receivable is or will be at the Closing Date
subject to any counterclaim or set-off. All reserves, allowances and discounts
with respect to the Accounts Receivable were and are adequate and consistent in
extent with reserves, allowances and discounts previously maintained by the
Company and the Subsidiaries in the ordinary course of business.

            3.3.18 Insurance. The Disclosure Schedule contains a true and
correct list and description (including insurer, coverages, annual premium,
deductibles, material limitations and exclusions (but not including usual and
customary limitations and exclusions), and expiration dates) of all insurance
policies (including fire and casualty, general liability, theft, life, workers'
compensation, directors and officers, business interruption, reinsurance and all
other forms of insurance) which are owned by the Company or either of the
Subsidiaries or which name the Company or either of the Subsidiaries as an
insured (or loss payee), including without limitation those which pertain to the
Company's and the Subsidiaries' respective assets, employees or operations. All
such insurance policies are in full force and effect, all premiums have been
paid thereunder and none of the coverage provided by such policies will
terminate or lapse by reason of any of the transactions contemplated by this
Agreement. In the three year period ending on the date hereof, neither the
Company nor either of the Subsidiaries has received any notice from or on behalf
of any insurance carrier issuing such insurance policies to the effect that
insurance rates will thereafter be substantially increased, that there will
thereafter be no renewal of an existing policy, or that material alteration of
any owned or leased personal or real property, purchase of additional equipment,
or material modification of the Company's or either Subsidiaries' methods of
doing business, will be required or is suggested. There are no pending claims
that have been denied insurance coverage. Neither the Company nor either
Subsidiary has failed to give any notice or present any claim under any
insurance policy in due and timely fashion or as required by any insurance
policy. Section 3.3.18 of the Disclosure Schedule sets forth a list of all
claims made under any insurance policies covering the Company or either of the
Subsidiaries in the last three years. Neither the Company or either of the
Subsidiaries has received notice that any insurer under any policy is denying,
disputing or questioning liability with respect to a claim thereunder or
defending under a reservation of rights clause.

                                       22
<PAGE>

            3.3.19 Bank Accounts. Section 3.3.19 of the Disclosure Schedule
contains a list showing: (a) the name of each bank, safe deposit company or
other financial institution in which the Company or either of the Subsidiaries
has an account, lock box or safe deposit box, (b) the names of all Persons
authorized to draw thereon or to have access thereto and the names of all
Persons, if any, holding powers of attorney from the Company or either of the
Subsidiaries, and (c) all instruments or agreements to which the Company or
either of the Subsidiaries is a party as an endorser, surety or guarantor, other
than checks endorsed for collection or deposit in the ordinary course of
business.

            3.3.20 Taxes.

                  (a) The Company and the Subsidiaries have properly completed
and filed on a timely basis all Returns required to be filed. Such Returns are
accurate and complete in all material respects. As of the time of filing, the
foregoing Returns correctly reflected the facts regarding the income, business,
assets, operations, activities, status and other matters of or information
regarding the Company and the Subsidiaries required to be shown thereon, and no
extension of time within which to file any such Return has been requested or
granted.

                  (b) With respect to all amounts in respect of Taxes imposed
upon the Company or either of the Subsidiaries or for which the Company or
either of the Subsidiaries is or could be liable, whether to taxing authorities
or to other Persons (as, for example, under tax allocation agreements), with
respect to all taxable periods or portions of periods ending on or before the
Closing Date, all applicable Tax Laws have been complied with and all amounts
required to be paid on or prior to the Closing Date by the Company or either of
the Subsidiaries (as the case may be) to Taxing authorities have been paid.

                  (c) No issues have been raised and are currently pending by
any taxing authority in connection with any of the Returns. No waivers of
statutes of limitation with respect to the Returns have been given by or
requested from the Company or either of the Subsidiaries. The Disclosure
Schedule sets forth the taxable years of the Company and the Subsidiaries as to
which the respective statutes of limitations with respect to Taxes have not
expired, and with respect to such taxable years, the years for which
examinations have been completed, the years for which examinations are presently
being conducted, the years for which examinations have not been initiated, and
the years for which required Returns have not yet been files. All deficiencies
asserted or assessments made as a result of any examinations of Returns
previously filed by the Company or either of the Subsidiaries have been fully
paid, or are fully reflected as a liability in the Financial Statements and the
2003 Unaudited Financial Statements, or are being contested and an adequate
reserve therefor has been established and is fully reflected as a liability in
the Financial Statements and the 2003 Unaudited Financial Statements.

                  (d) Neither the Company nor either of the Subsidiaries is a
party to or bound by any tax indemnity, tax sharing or tax allocation agreement.

                  (e) The Company and the Subsidiaries are a part of the same
affiliated group of corporations, within the meaning of Section 1504 of the
Code, with the Company as the common parent corporation. Neither the Company nor
either of the Subsidiaries has ever been a

                                       23
<PAGE>

member of another affiliated group of corporations within the meaning of Section
1504 of the Code.

                  (f) All material elections with respect to Taxes affecting the
Company or either of the Subsidiaries are set forth in the Disclosure Schedule.

                  (g) Neither the Company nor either of the Subsidiaries has
filed a consent pursuant to the collapsible corporation provisions of section
341(f) of the Code (or any corresponding provision of state, local or foreign
income Tax Law) or agreed to have section 341(f)(2) of the Code (or any
corresponding provision of state, local or foreign income Tax Law) apply to any
disposition of any asset owned by it.

                  (h) None of the assets of the Company or either of the
Subsidiaries is "tax-exempt use property" within the meaning of Section 168(h)
of the Code.

                  (i) Neither the Company nor either of the Subsidiaries has
agreed to make, nor is either of them required to make, any adjustment under
section 481(a) of the Code by reason of a change in accounting method or
otherwise.

                  (j) Neither the Company nor either of the Subsidiaries is a
party to any agreement, contract, arrangement or plan that has resulted or would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of section 280G of the Code.

                  (k) No Principal Stockholder is a Person other than a United
States person within the meaning of the Code and the transactions contemplated
hereby is not subject to the withholding provisions of section 3406 or
subchapter A of Chapter 3 of the Code.

                  (l) The Company and the Subsidiaries have disclosed on their
Returns all positions taken therein that could reasonably give rise to a
substantial understatement of Tax within the meaning of section 6662 of the
Code.

                  (m) None of the assets of the Company or either of the
Subsidiaries is property that the Company or either of the Subsidiaries is
required to treat as being owned by any other Person pursuant to the "safe
harbor lease" provisions of former section 168(f)(8) of the Code.

                  (n) None of the assets of the Company directly or indirectly
secures any debt the interest on which is tax-exempt under section 103(a) of the
Code.

                  (o) Neither the Company nor either of the Subsidiaries has
made a deemed dividend election under Regulations Section 1.1502-32(f)(2) or a
consent dividend election under section 565 of the Code.

                  (p) Neither the Company nor either of the Subsidiaries has
participated in an international boycott within the meaning of section 999 of
the Code.

                                       24
<PAGE>

                  (q) Neither the Company nor either of the Subsidiaries has
been a United States real property holding corporation (as defined in section
897(c)(2) of the Code) during the applicable period specified in section
897(c)(1)(A)(ii) of the Code.

                  (r) Neither the Company nor either of the Subsidiaries has had
a permanent establishment in any foreign country, as defined in any applicable
Tax treaty or convention between the United States and such foreign country.

                  (s) The unpaid Taxes of the Company and the Subsidiaries do
not exceed the reserve for Tax liability (excluding any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth or included in the 2003 Unaudited Financial Statements, as adjusted for
the passage of time through the Closing Date, in accordance with the past
practices of the Company and the Subsidiaries.

            3.3.21 Contracts. The Disclosure Schedule contains a true and
correct list of the following undischarged Contracts (including all amendments
thereto) to which the Company or either of the Subsidiaries is a party:

                  (a) agreements with any Governmental or Regulatory Authority;

                  (b) Provider Agreements;

                  (c) agreements for the employment for any period of time
whatsoever, or in regard to the employment, or restricting the employment, of
any employee of the Company or either of the Subsidiaries;

                  (d) consulting agreements;

                  (e) collective bargaining agreements;

                  (f) agreements for the payment of severance benefits,
retention bonuses or sale bonuses to any employee;

                  (g) plans or contracts or arrangements with respect to Benefit
Plans;

                  (h) contracts for the purchase of equipment or other materials
having a purchase price under any such contract in excess of $10,000;

                  (i) contracts for the sale of any equipment or other assets;

                  (j) leases or subleases, either as lessee or sublessee, lessor
or sublessor, of personal property or intangibles, where the lease or sublease
provides for an annual rent in excess of $50,000 and has an unexpired term as of
the Closing Date in excess of one year;

                  (k) agreements restricting in any manner the Company's or
either of the Subsidiaries' right to compete with any other Person, restricting
the Company's or either of the Subsidiaries' right to sell to or purchase from
any other Person, restricting the right of any other

                                       25
<PAGE>

party to compete with the Company or either Subsidiaries or the ability of such
Person to employ any of the Company's or any of the Subsidiaries' employees;

                  (l) agreements between the Company or either of the
Subsidiaries and any of its Affiliates with respect to the purchase of goods or
the performance of services;

                  (m) agreements of agency, representation, distribution, or
franchise which cannot be canceled by the Company or either of the Subsidiaries
without payment or penalty upon notice of thirty (30) days or less;

                  (n) service agreements affecting any of the Company's or
either of the Subsidiaries' assets where the annual service charge is in excess
of $10,000 and has an unexpired term as of the Closing Date in excess of one
year;

                  (o) secrecy or confidentiality agreements;

                  (p) contracts for the advertisement, display or promotion of
any products or services, which cannot be canceled by the Company or either of
the Subsidiaries without payment or penalty upon notice of 30 days or less;

                  (q) contracts or order for the sale of goods or the
performance of services which, if performed by the Company or either of the
Subsidiaries in accordance with its terms, could only be performed by the
Company or either of the Subsidiaries with a gross profit margin of 25% or less,
or which could not be performed within the time limits or other terms therein
provided, or which, when actually performed, would result in an obligation
(contractual or otherwise) to pay damages or penalties;

                  (r) loan or credit agreements, pledge agreements, notes,
security agreements, mortgages, debentures, indentures, factoring agreements or
letters of credit;

                  (s) guaranties, performance, bid or completion bonds, or
surety or indemnification agreements;

                  (t) partnership agreements or joint venture agreements or
other contracts (however named) involving a sharing of profits, losses, costs,
or liabilities by the Company or any of the Subsidiaries and another Person; or

                  (u) any other agreements which provide for the receipt or
expenditure of more than $100,000 or which expire, or may be renewed at the
option of any Person other than the Company or either Subsidiary so as to
expire, more than one year after the date of this Agreement.

All of the Designated Contracts are in full force and effect and are valid and
enforceable in accordance with their terms. The Company or one of the
Subsidiaries (as the case may be) is, in all material respects, in compliance
with all terms and requirements of each Designated Contract and, to the
Knowledge of the Company, each other Person that is party to a Designated
Contract is in material compliance with the terms and requirements of such
Contract. No event has occurred or circumstance existing that (with or without
notice or lapse of time) may contravene,

                                       26
<PAGE>

conflict with or result in a violation or breach of, or give the Company or
either of the Subsidiaries or any other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify any Designated Contract. There are no
renegotiations, attempts to renegotiate or outstanding rights to negotiate any
amount to be paid or payable to or by the Company or either of the Subsidiaries
under any Designated Contract other than with respect to non-material amounts in
the ordinary course of business, and no Person has made a written demand for
such renegotiation. Neither the Company nor either of the Subsidiaries has
released or waived any of its rights under any Designated Contract.

            3.3.22 Providers and Provider Agreements. A true and complete copy
of each Provider Agreement for each hospital and ancillary Provider, the form(s)
of physician or physician group Provider Agreement, and any physician or
physician group Provider Agreements that differ from such form(s) have been made
available to Purchaser. Except as indicated on Section 3.3.22 of the Disclosure
Schedule (but without descriptions of the exceptions), none of the Provider
Agreements (a) has a term of more than one year, (b) obligates the Company Group
to purchase reinsurance for the Provider or otherwise adjusts the compensation
payable to such Provider based on claims experience, (c) requires the Company
Group to pay the Provider on a most-favored Provider basis, (d) obligates the
Company Group to pay access or administrative fees, (e) has a profit-sharing or
risk sharing component, (f) delegates to the Provider medical management duties
and/or payment of claims, (g) requires the Company Group to provide stop loss
protection to a Provider, or (h) includes any provision for rate escalation
based upon the consumer price index, inflation rates or other economic
indicators. The Company Group has compensated and currently compensates each
Provider for services to Members in accordance with the rates and fees set forth
in the applicable Provider Agreement and in a timely manner given the
requirements of such Provider Agreement and applicable Law. Since January 1,
2002, the Company Group has not received any written complaint regarding any
matter in excess of $10,000 from a Provider concerning any aspect of the
Business. None of the Providers who or which is a "physician" or "physician
group" (as such terms are defined at 42 C.F.R. Section 418.479 et seq. are
placed at "substantial financial risk" (as such term is also defined therein).

            3.3.23 Membership. Section 3.3.23 of the Disclosure Schedule sets
forth the true and accurate number of all Members as of January 31, 2004, by
state and region.

            3.3.24 Premiums. All premiums and other payments received by the
Company Group since January 1, 2001 from any Governmental or Regulatory
Authority were bona fide payments received from such Governmental or Regulatory
Authority without subsequent setoff, overpayment, disgorgement or recoupment.

            3.3.25 Medical Claims. Attached to Section 3.3.25 of the Disclosure
Schedule are copies of lag reports setting forth the Companies' payment of
Medical Claims during the 12-month period ended December 31, 2003. Subject to
customary lags, consistent with the attached lag reports, all Medical Claims
made by any parties under any and all products, lines of business or other
medical plans offered by the Company or either Subsidiary have been paid within
the applicable statutory time limit. To the Knowledge of the Company, all
claims, capitated payments and other payments to Providers made by any parties
under any and all products, lines

                                       27
<PAGE>

of business or other medical plans offered by the Company or either Subsidiary
have been paid accurately and completely in accordance with the applicable
Provider's Provider Agreement, and there has been no allegation of insufficient,
untimely or otherwise inadequate payment or handling of Medical Claims. All such
payments have been made in material compliance with any and all Contracts
between the Company or either Subsidiary, and each Member, beneficiary, patient
or Provider to whom or to which payment is or was due, and there is no
legitimate basis for any allegation of noncompliance with respect to the payment
of any Medical Claims under any such Contract.

            3.3.26 Material Adverse Effect. Neither the Company nor either of
the Subsidiaries has suffered or been threatened with, and to the Knowledge of
the Company no facts exist which may cause or result in, any Material Adverse
Effect including, without limiting the generality of the foregoing, the
existence or threat of any labor dispute, or any changes that are reasonably
likely to have a Material Adverse Effect on any relationship between the Company
or either of the Subsidiaries and any of their key Providers or employees.

            3.3.27 Suppliers. Set forth in Section 3.3.27 of the Disclosure
Schedule are the names and addresses of all the suppliers from which the Company
or either Subsidiary ordered supplies, software and other goods or services with
an aggregate purchase price of $50,000 or more during the twelve-month period
ended January 31, 2004 and the amount for which each such supplier invoiced the
Company or such Subsidiary during such period. The Company Group has not
received any notice or has any reason to believe that any such supplier will not
sell supplies, merchandise and other goods to the Company Group at any time
after the Closing Date on terms and conditions substantially similar to those
used in its current sales to the Company Group, subject only to general and
customary price increases and decreases.

            3.3.28 Related Party Transactions. Neither the Company nor either of
the Subsidiaries has entered into any Contracts, arrangements or other business
relationships with any of the Related Parties other than normal employment
arrangements and Benefit Plans (all of which are disclosed in the Disclosure
Schedule). Neither the Company nor either of the Subsidiaries is owed or owes
any amount from or to the Related Parties (excluding employee compensation and
other ordinary incidents of employment). No property or interest in any property
which relates to and is or will be necessary or useful in the present or
currently contemplated future operation of the Business, is presently owned by
or leased by or to any Related Party. Neither the Company, either of the
Subsidiaries nor any Related Party has an interest, directly or indirectly, in
any business, corporate or otherwise, which is in competition with the Business.

            3.3.29 Permits. The Disclosure Schedule contains a true and correct
list of, and the Company and the Subsidiaries possess, all Permits (other than
Environmental Permits, which are addressed in Section 3.3.35) which are required
in order for the Company and the Subsidiaries to conduct their Business as
presently conducted or proposed to be conducted. The Company has delivered
complete and accurate copies of each Permit to Purchaser. HMO Subsidiary is
licensed by DOI to operate as an HMO in the States of Illinois and Indiana. The
operations of HMO Subsidiary comply in all material respects with the Illinois
Health Maintenance Organization Act, codified at Section 215-125 of the Illinois
Code, the Illinois Managed Care Patient Rights Act, codified at Section 215-134
of the Illinois Code, and with

                                       28
<PAGE>

Section 27-13 of the Indiana Code, the rules promulgated by DOI, the IDPA and
the IFSSA and the terms and requirements of each Medicaid Contract held by it,
as applicable. Since January 1, 2001, HMO Subsidiary has not received from DOI,
the IDPA or the IFSSA any citation, suspension, revocation, limitation, warning
or similar notice. The Company Group does not have health plan or other
operations outside of the States of Illinois and Indiana. HMO Subsidiary has no
business other than HMO operations and functions related thereto.

            3.3.30 Employee Benefit Plans. With respect to the Benefit Plans of
the Company and the Subsidiaries:

                  (a) Neither the Company nor any ERISA Affiliate maintains,
administers, contributes to or has any fixed or contingent Liability under any
Benefit Plan other than those Plans, Multiemployer Plans, Welfare Plans and
Other Benefit Plans listed in the Disclosure Schedule.

                  (b) Except as required by section 4980B of the Code, Part 6 of
Subtitle B of Title I of ERISA, or applicable state Law, neither the Company nor
any ERISA Affiliate has promised any former employee or other individual not
employed by the Company or any ERISA Affiliate medical or life insurance
coverage. Neither the Company nor any ERISA Affiliate maintains, contributes to
or has any fixed or continent Liability under any plan or arrangement providing
medical or life insurance benefits to former employees or their dependents,
other than benefits provided in the event of disability and conversion
privileges.

                  (c) Each Benefit Plan complies, in form and operation, in all
material respects, with all applicable Laws, including ERISA and the Code.

                  (d) The funds available under each Benefit Plan intended to be
a funded Benefit Plan equal or exceed the amounts required to be paid, or which
would be required to be paid, if such Benefit Plan were terminated as of the
Closing Date.

                  (e) Any Benefit Plan intended to qualify under section 401(a)
of the Code meets in all material respects all requirements for qualification
under section 401(a) of the Code and the regulations thereunder. A favorable
determination as to the qualification under the Code of each of the Benefit
Plans intended to comply with section 401(a) of the Code has been made by the
IRS. The Company has made available to Purchaser a copy of the most recent
favorable determination letter issued by the IRS concerning each such Benefit
Plan's qualification. Each such Benefit Plan has been administered in all
material respects in accordance with its terms and the applicable provisions of
ERISA and the Code and the regulations thereunder, and no matter exists which
would adversely affect the qualified tax-exempt status of such Benefit Plan and
any related trust.

                  (f) All reports and information relating to each Benefit Plan
required to be filed with any governmental entity have been timely filed and are
accurate in all material respects. All reports and information relating to each
Benefit Plan required to be disclosed or provided to participants or their
beneficiaries have been timely disclosed or provided. To the Knowledge of the
Company, no fiduciary of any Benefit Plan has committed a breach of any

                                       29
<PAGE>

responsibility or obligation imposed upon fiduciaries under Title I of ERISA
with respect to such Benefit Plan.

                  (g) With respect to each Benefit Plan there has been made
available to Purchaser the following: a copy of the annual report (if required
under ERISA) with respect to each such Benefit Plan for the last three years
(including all schedules and attachments); a copy of the summary plan
description, together with each summary of material modifications, required
under ERISA with respect to such Benefit Plan; a true and complete copy of such
Benefit Plan; all trust agreements, insurance contracts, accounts or other
documents which establish the funding vehicle for any Benefit Plan and the
latest financial statements thereof; and any investment management agreements,
administrative services contracts, or other agreements and documents relating to
the ongoing administration and investment of any Benefit Plan.

                  (h) There are no actions, suits, proceedings, investigations
or hearings pending or, to the Knowledge of the Company, overtly threatened with
respect to any Benefit Plan or any fiduciary or assets thereof, other than
claims for benefits arising in the ordinary course of any Benefit Plan.

                  (i) Each Welfare Plan which is a group health plan (within the
meaning of section 5000(b)(1) of the Code) complies in all material respects
with and has been maintained and operated in all material respects in accordance
with each of the requirements of section 4980B of the Code and Part 6 of
Subtitle B of Title I of ERISA.

                  (j) No withdrawals have occurred so as to cause any Plan to
become subject to the provisions of Section 4063 of ERISA, nor has the Company
or any ERISA Affiliate ceased making contributions to any Benefit Plan subject
to Section 4064(a) of ERISA to which the Company or any ERISA Affiliate made
contributions during the six (6) years prior to the date hereof.

                  (k) Neither the Company nor any ERISA Affiliate has incurred
any liability to the PBGC as a result of the voluntary or involuntary
termination of any Plan which is subject to Title IV of ERISA. There is
currently no active filing by the Company or any ERISA Affiliate with the PBGC,
and no proceeding has been commenced by the PBGC, to terminate any Plan which is
subject to Title IV of ERISA and which has been maintained or funded, in whole
or in part, by the Company or any ERISA Affiliate.

                  (l) Neither any Benefit Plan fiduciary nor any Benefit Plan
has engaged in any transaction in violation of Section 406 of ERISA or any
"prohibited transaction" (as defined in section 4975(c)(1) of the Code), and
there has been no "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Benefit Plan. Neither the Company nor any ERISA Affiliate has
failed to make any contributions or to pay any amounts due and owing as required
by the terms of any Benefit Plan or collective bargaining agreement or ERISA or
any other applicable Law. Full payment has been made of all amounts which the
Company or any ERISA Affiliate is required or committed to pay to the Benefit
Plans as of the Interim Financial Statement Date.

                                       30
<PAGE>

                  (m) Neither the Company nor any ERISA Affiliate contributes or
has ever contributed to, or has any fixed or contingent Liability with respect
to, any Multiemployer Plan or any other Benefit Plan subject to Title IV of
ERISA.

            3.3.31 Employee Relations. With respect to the employees of the
Company and the Subsidiaries:

                  (a) No employee of the Company or either of the Subsidiaries
is a party to, or is otherwise bound by, any Contract, including any
confidentiality, non-competition or proprietary rights agreement, between such
employee and the Company or either of the Subsidiaries or, to the Knowledge of
the Company, any other Person that materially adversely affects or will affect
the performance of that employee's duties as an employee of the Company or
either of the Subsidiaries following the Closing. To the Knowledge of the
Company, no officer or other key employee of the Company or either of the
Subsidiaries intends to terminate employment with the Company or either of the
Subsidiaries prior to or following the Closing.

                  (b) There is not presently pending or, to the Knowledge of the
Company, overtly threatened any: (i) strike, slowdown, picketing, work stoppage
or employee grievance process; (ii) charge, grievance proceeding or other claim
against or affecting the Company or either of the Subsidiaries relating to the
alleged violation of any Law pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission
or any comparable Governmental or Regulatory Authority; (iii) union
organizational activity or other labor or employment dispute against or
affecting the Company or either of the Subsidiaries; or (iv) application for
certification of a collective bargaining agent.

                  (c) To the Knowledge of the Company, no event has occurred or
circumstances exist that could provide the basis for any work stoppage or other
labor dispute with respect to the Company or either of the Subsidiaries. There
is no lockout of any employees of the Company or either of the Subsidiaries, and
no such action is contemplated by the Company or either of the Subsidiaries.

                  (d) No employee of the Company or either of the Subsidiaries
has any claim against the Company or either of the Subsidiaries (whether under
Law, any employment agreement or otherwise) on account of or for: (i) overtime
pay, other than overtime pay for the current payroll period, (ii) wages or
salaries, other than wages or salaries for the current payroll period, or (iii)
vacations, sick leave, time off or pay in lieu of vacation, sick leave or time
off, other than vacation, sick leave or time off (or pay in lieu thereof) earned
in the 12 month period immediately prior to the date of this Agreement. The
Company and the Subsidiaries have made all required payments to the relevant
unemployment compensation reserve account with the appropriate governmental
departments with respect to their employees and such accounts have positive
balances.

                  (e) Section 3.3.31 of the Disclosure Schedule contains a true
and correct list of all employees of the Company and the Subsidiaries as of the
date of this Agreement, together with their respective base salaries, bonuses
and positions, and all bonuses or similar payments paid to any employees after
December 31, 2003. The Disclosure Schedule correctly

                                       31
<PAGE>

states the number of employees laid off by the Company and the Subsidiaries in
the 90 days preceding the date hereof. To the Knowledge of the Company, no
employee of the Company or either of the Subsidiaries is an undocumented alien.

                  (f) The employees and former employees of the Company and the
Subsidiaries who have (or have had) access to confidential or proprietary
information of the Company and the Subsidiaries have executed confidentiality
and assignment of inventions forms which, to the Knowledge of the Company, are
adequate to protect the Company's and the Subsidiaries' proprietary interest
therein.

                  (g) The employment of each of the Company's and the
Subsidiaries' employees is terminable at will without cost to the Company or
either of the Subsidiaries except for payments required under the Benefit Plans
and the payment of accrued salaries or wages and vacation pay. No employee or
former employee has any right to be rehired by the Company or either of the
Subsidiaries prior to their hiring a Person not previously employed by the
Company or either of the Subsidiaries.

            3.3.32 Litigation and Claims.

                  (a) There is no litigation or proceeding, at law or in equity,
and there are no proceedings or governmental investigations before any
commission or other Governmental or Regulatory Authority, pending or, to the
Knowledge of the Company, overtly threatened against the Company, the
Subsidiaries, or either of the Company's or Subsidiaries' officers, directors or
Affiliates, with respect to or affecting the Company's or either of the
Subsidiaries' operations, Business or assets, or with respect to the
consummation of the transactions contemplated hereby, nor is there any basis for
any of the foregoing.

                  (b) Section 3.3.32 of the Disclosure Schedule contains (i) a
list of the dates of all surveys performed by any Governmental or Regulatory
Authority to which the Company or either Subsidiary was a party at any time
since January 1, 2001, and any deficiencies for which a plan of correction was
required and (ii) a list of all notices of noncompliance, requests for remedial
action, return of overpayment or imposition of fines (whether ultimately paid or
otherwise resolved) by any Governmental or Regulatory Authority or as a result
of the Company's or either Subsidiary's participation in any Medicaid program at
any time since January 1, 2001.

            3.3.33 Decrees, Orders or Arbitration Awards. Neither the Company
nor either of the Subsidiaries is a party to, or bound by, any decree, order or
arbitration award (or agreement entered into in any administrative, judicial or
arbitration proceeding with any Governmental or Regulatory Authority) with
respect to or affecting the Company's or either Subsidiary's operations,
Business or assets.

            3.3.34 Compliance with Laws. Neither the Company nor either of the
Subsidiaries is in violation of, or delinquent in respect to, any decree, order
or arbitration award or Law of or agreement with, or any Permit from, any
Governmental or Regulatory Authority to which the property, assets, personnel or
Business activities of the Company or either of the Subsidiaries are subject,
including Laws relating to equal employment opportunities, fair

                                       32
<PAGE>

employment practices, occupational health and safety, wages and hours, and
discrimination. Without limiting the generality of the foregoing, the Company
Group is currently in material compliance with the medical privacy provisions
and electronic data transmission standards of HIPAA. During the last six years,
neither the Company nor either of the Subsidiaries has received from any
Governmental or Regulatory Authority any written notification with respect to
possible noncompliance of any decree, order, writ, judgment or arbitration award
or any Law.

            3.3.35 Environmental Matters.

                  (a) The Company and the Subsidiaries are in compliance with
all applicable Environmental Laws and Environmental Permits.

                  (b) The Company and the Subsidiaries possess all Environmental
Permits which are required for the operation of their respective Businesses.

                  (c) Neither the Company nor either of the Subsidiaries has
received any communication alleging that the Company or either of the
Subsidiaries is not, or at any time has not been, in compliance with any
applicable Environmental Laws or Environmental Permits.

                  (d) There is no Environmental Claim pending or, to the
Knowledge of the Company, threatened against the Company or either of the
Subsidiaries.

                  (e) No Leased Real Estate is currently listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the CERCLA or any
comparable state list.

                  (f) Neither the Company nor either of the Subsidiaries has
received any written notice from any Person with respect to any Leased Real
Estate of potential or actual liability or a written request for information
from any Person under or relating to CERCLA or any comparable state or local
Law.

                  (g) There is no and has not been any Hazardous Substances
used, generated, treated, stored, transported, disposed of, handled or otherwise
existing on, under or about any Leased Real Estate in violation of Environmental
Laws.

                  (h) There are no underground or above-ground storage tanks
located on any Leased Real Estate. All underground or above-ground storage tanks
previously located at any such real property and not present thereat as of the
date hereof were removed in accordance with all Environmental Laws.

            3.3.36 Real Estate.

                  (a) Neither the Company nor either of the Subsidiaries owns
any real estate.

                  (b) 3.3.36 of the Disclosure Schedule contains a true and
complete list of all street addresses and legal descriptions of the Leased Real
Estate. All Leased Real Estate is leased to the Company or one of the
Subsidiaries pursuant to written leases, complete and

                                       33
<PAGE>

accurate copies of which have been previously delivered to Purchaser, and all of
which are in full force and effect. Neither the Company nor either of the
Subsidiaries has subleased any Leased Real Estate. The Leased Real Estate is not
subject to any leases or tenancies of any kind, except for the Company's and the
Subsidiaries' leases. All options in favor of the Company or one of the
Subsidiaries to purchase any of the Leased Real Estate, if any, are in full
force and effect. The Leased Real Estate constitutes all real property and
improvements leased by the Company and the Subsidiaries.

                  (c) The Leased Real Estate is not in possession of any adverse
possessors, is used in a manner which is consistent and permitted by applicable
zoning ordinances and other Laws without special use approvals or permits, are
served by all water, sewer, electrical, telephone, drainage and other utilities
required for normal operations of the Business, is in good condition and repair,
and requires no work or improvements to bring it into compliance with any
applicable Law or to repair or maintenance the improvements thereon.

                  (d) None of the utility companies serving any of the Leased
Real Estate has threatened the Company or either of the Subsidiaries with any
reduction in service.

                  (e) There are no challenges or appeals pending regarding the
amount of the real estate Taxes on, or the assessed valuation of, the Leased
Real Estate, and no special arrangements or agreements exist with any
Governmental or Regulatory Authority with respect thereto.

                  (f) There are no condemnation proceedings pending or, to the
Knowledge of the Company, threatened with respect to any portion of the Leased
Real Estate.

                  (g) There is no tax assessment (in addition to the normal,
annual general real estate tax assessment) pending or, to the Knowledge of the
Company, threatened with respect to any portion of the Leased Real Estate.

            3.3.37 Intellectual Property.

                  (a) The Disclosure Schedule sets forth a complete and accurate
list of all U.S. and foreign copyright registrations, copyright applications,
patents and patent applications, trademark and service mark registrations
(including Internet domain name registrations), trademark and service mark
applications and material unregistered trademarks and service marks included
within the Intellectual Property.

                  (b) Section 3.3.37 of the Disclosure Schedule sets forth a
complete and accurate list of all Proprietary Software and Software which is
licensed, leased or otherwise used by the Company or the Subsidiaries (other
than "off-the-shelf" Software), and identifies which Software is owned,
licensed, leased or otherwise used, as the case may be.

                  (c) The Disclosure Schedule sets forth a complete and accurate
list of all Intellectual Property Licenses.

                                       34
<PAGE>

                  (d) The Company or one of the Subsidiaries (as indicated in
the Disclosure Schedule) is the owner of, or has exclusive rights to use, all of
the Intellectual Property.

                  (e) The conduct of the Company's and the Subsidiaries'
respective Businesses and the exercise of their respective rights relating to
the Intellectual Property does not infringe upon or otherwise violate
intellectual property rights of any Person.

                  (f) To the Knowledge of the Company, no Person is infringing
upon or otherwise violating any of the Intellectual Property.

                  (g) Neither the Company nor either of the Subsidiaries has
received notice of any claims, and, to the Knowledge of the Company, there are
no pending claims, of any Persons relating to the scope, ownership or use of any
of the Intellectual Property.

                  (h) Except with respect to unregistered trademarks and service
marks, each owner listed on the Disclosure Schedule is listed in the records of
the appropriate governmental entity as the sole owner of record of the
Intellectual Property.

                  (i) Each copyright registration, patent and registered
trademark and application therefor listed on the Disclosure Schedule is in
proper form, not disclaimed and has been duly maintained, including the
submission of all necessary filings in accordance with the legal and
administrative requirements of the appropriate jurisdictions.

                  (j) Neither the Company nor either of the Subsidiaries has
licensed or sublicensed its rights in any of the Intellectual Property or
received or granted any such rights, other than pursuant to Intellectual
Property Licenses.

                  (k) All Proprietary Software was either developed by employees
of the Company or one of the Subsidiaries within the scope of their employment;
or by independent contractors who have assigned their right to the Company or
one of the Subsidiaries pursuant to written agreements.

            3.3.38 Commercial Bribery. Neither the Company, the Subsidiaries,
nor, to the Knowledge of the Company, any of their respective former or current
officers, directors, employees, agents or representatives has made, directly or
indirectly, with respect to the Business, any bribes or kickbacks, illegal
political contributions, payments from corporate funds not recorded on the books
and records of the Company and the Subsidiaries, payments from corporate funds
to governmental officials, in their individual capacities, for the purpose of
affecting their action or the action of the government they represent, to obtain
favorable treatment in securing business or licenses or to obtain special
concessions, or illegal payments from corporate funds to obtain or retain
business. Without limiting the generality of the foregoing, neither the Company
nor any of the Subsidiaries has directly or indirectly made or agreed to make
(whether or not said payment is lawful) any payment to obtain, or with respect
to, sales other than usual and regular compensation to its employees and sales
representatives with respect to such sales.

                                       35
<PAGE>

            3.3.39 No Omissions. The representations and warranties of the
Company in this Agreement, and all representations, warranties and statements of
the Company contained in any schedule, financial statement, exhibit, list,
certificate or other document delivered pursuant hereto or in connection
herewith, do not omit to state a material fact necessary in order to make the
representations, warranties or statements contained herein or therein not
misleading.

            3.3.40 Disclosure. The Company has furnished to Purchaser complete
and accurate copies of all documents and information requested by Purchaser.

            3.3.41 Brokers. Except as set forth in Section 3.3.41 of the
Disclosure Schedule, neither the Principal Stockholders, any of their
Affiliates, the Company nor any of the Subsidiaries have dealt with any Person
who is entitled to a broker's commission, finder's fee, investment banker's fee
or similar payment from Purchaser, the Company or any of the Subsidiaries for
arranging the transactions contemplated hereby or introducing the parties to
each other.

      3.4 Individual Representations and Warranties of the Principal
Stockholders. Each of the Principal Stockholders, individually and not jointly
and severally, represents and warrants to Purchaser with respect to such
Principal Stockholder (and only such Principal Stockholder) as follows:

            3.4.1 Organization, Existence and Good Standing. If such Principal
Stockholder is a corporation, limited partnership, limited liability company,
bank, trust company, trust or other entity, such Principal Stockholder is duly
organized, existing and in good standing under the Laws of its jurisdiction of
incorporation or formation.

            3.4.2 Power and Authority. Such Principal Stockholder has full power
and authority to execute and perform this Agreement. If such Principal
Stockholder is a corporation, limited partnership, limited liability company,
bank, trust company, trust or other entity, the execution and delivery of this
Agreement by such Principal Stockholder and the performance by it of all of its
obligations under this Agreement have been duly approved prior to the date of
this Agreement by all requisite action of its board of directors, general
partners, managers, trustees or the like, as the case may be. The approval of
such Principal Stockholder's shareholders, members, limited partners,
beneficiaries or the like (as the case may be), for it to execute this Agreement
or consummate the transactions contemplated hereby is either not required or has
been duly given.

            3.4.3 Enforceability. This Agreement has been duly executed and
delivered by such Principal Stockholder and constitutes a legal, valid and
binding agreement of such Principal Stockholder, enforceable against such
Principal Stockholder in accordance with its terms.

            3.4.4 Consents. No consent, authorization, order or approval of, or
filing or registration with, any Governmental or Regulatory Authority is
required for or in connection with the consummation by such Principal
Stockholder of the transactions contemplated hereby.

            3.4.5 Conflicts Under Constituent Documents or Laws. If such
Principal Stockholder is a corporation, limited partnership, limited liability
company, bank, trust company, trust or other entity, neither the execution and
delivery of this Agreement by such Principal

                                       36
<PAGE>

Stockholder, nor the consummation by it of the transactions contemplated hereby
will conflict with or constitute a breach of any of the terms, conditions or
provisions of its certificate or articles of incorporation or formation,
by-laws, agreement of limited partnership, operating agreement, trust agreement
or declaration of trust, or other organizational documents, as the case may be.
Neither the execution and delivery of this Agreement by such Principal
Stockholder, nor the consummation by him, her or it of the transactions
contemplated hereby will conflict with or constitute a breach of any of the
terms, conditions or provisions of any statute or administrative regulation, or
of any order, writ, injunction, judgment or decree of any Governmental or
Regulatory Authority or of any arbitration award, to which such Principal
Stockholder is a party or by which such Principal Stockholder is bound.

            3.4.6 Conflicts Under Contracts. Such Principal Stockholder is not a
party to, or bound by, any unexpired, undischarged or unsatisfied Contract under
the terms of which the execution, delivery and performance by such Principal
Stockholder of this Agreement and the consummation of the transactions
contemplated hereby by such Principal Stockholder will require a consent,
approval, or notice or result in a lien on the Shares owned by such Principal
Stockholder.

            3.4.7 Title to Shares. Such Principal Stockholder owns the number of
Shares and Options listed opposite such Principal Stockholder's name on Section
3.3.11 of the Disclosure Schedule, free and clear of all Claims, other than
agreements between the Company and the Principal Stockholders which will be
terminated as of the Closing.

            3.4.8 Brokers. Neither such Principal Stockholders nor any of its
Affiliates has dealt with any Person who is entitled to a broker's commission,
finder's fee, investment banker's fee or similar payment from Purchaser, the
Company or any of the Subsidiaries for arranging the transactions contemplated
hereby or introducing the parties to each other.

                                   ARTICLE IV
                          CONDUCT PRIOR TO THE CLOSING

      4.1 General. The Company, Purchaser and Merger Sub have the rights and
obligations with respect to the period between the date hereof and the Closing
Date which are set forth in the remainder of this ARTICLE IV.

      4.2 The Company's Obligations.

            4.2.1 Full Access. The Company and the Subsidiaries shall give to
Purchaser's officers, employees, agents, attorneys, consultants, accountants and
lenders full access to all of the properties, books, Contracts, documents,
insurance policies, records and personnel of or with respect to the Company and
the Subsidiaries and shall furnish to Purchaser and such Persons as Purchaser
shall designate to the Company such information as Purchaser or such Persons may
at any time and from time to time reasonably request.

            4.2.2 Pre-Integration Planning. The Company shall (a) make available
reasonable office space and accommodations, and provide full access to the
Company's facilities, so as to permit at least two employees or other
representatives of Purchaser to maintain a full-time presence at the Company
Group's offices, (b) confer with Purchaser and its

                                       37
<PAGE>

representatives and obtain Purchaser's written approval, which approval shall
not be unreasonably withheld or delayed, concerning any and all material
operational matters relating to the Company or either Subsidiary, (c) report not
less than weekly to Purchaser concerning the business, operations and finances
of the Company Group, (d) review with Purchaser and obtain Purchaser's written
approval concerning any material disbursements or payments (excluding payments
to Providers in the ordinary course of business), (e) cooperate with Purchaser
as may be reasonably requested by Purchaser from time to time to develop and
implement an integration plan for the Company Group, (f) cause the officers of
the Company Group to furnish Purchaser and its employees and representatives
such financial, operating, technical, actuarial and cost data and other
information with respect to the Business and the assets and properties of the
Company Group as Purchaser and its representatives may from time to time
reasonably request, and (g) use commercially reasonable efforts to orient,
educate and otherwise train Purchaser and permit Purchaser's employees and
representatives to work with the employees of the Company Group regarding (i)
the Company Group's current operating policies and procedures, (ii) the health
plan benefits and services offered by the Company Group to Members, including
member services, member outreach and education and preventative medicine
programs, (iii) the Providers and Providers Agreements, (iv) the Company Group's
medical management policies and procedures and (v) the operation of the
Business. Purchaser shall maintain an employee or other representative at the
Company, or shall otherwise make available for consultation with the Company an
employee or other representative, who shall have the authority to provide the
Company with prompt written approval of such actions under this Section 4.2.2
which require such approval. Further, Purchaser's employees and representatives
will conduct themselves appropriately so as not to disrupt or interfere with the
Company's operations or the ability of the Company's management or employees to
carry out their duties in a timely manner.

            4.2.3 Consents and Permits. The Company shall use its commercially
reasonable efforts and make every good faith attempt to obtain all consents to
the assignment of, or alternative arrangements satisfactory to Purchaser with
respect to, any Contract, Permit or Environmental Permit required to be listed
on the Disclosure Schedule pursuant to Section 3.3.7. The Company shall use
commercially reasonable efforts to assist and cooperate with Purchaser, as may
be requested by Purchaser, in obtaining such Permits as may be necessary in
connection with the consummation of the transactions contemplated hereby or the
operation of the Business following the Closing.

            4.2.4 Conduct of Business. The Company and the Subsidiaries shall
carry on their respective businesses in the usual and ordinary course of
business, consistent with past practices, and shall, without limitation, pay all
of their respective payables, Taxes and other Liabilities when due, pay and
perform all of their other respective obligations when due, collect receivables
in the ordinary course of business, consistent with past practice, and use
commercially reasonable efforts to preserve intact the Company's and the
Subsidiaries' respective business organizations, keep available the services of
the present officers and key employees of the Company Group, preserve their
respective relationships with Providers, Members, suppliers, licensors,
licensees, independent contractors and other Persons having business dealings
with them, maintain their respective Permits, and otherwise preserve the
goodwill of those having business relationships with the Company Group. Without
limiting the generality of the foregoing, without the prior written consent of
Purchaser, the Company and the Subsidiaries shall not:

                                       38
<PAGE>

                  (a) amend the Company's or either of the Subsidiaries'
certificate or articles of incorporation or by-laws;

                  (b) split, combine or reclassify the Shares, or make any
change in the Company's or either of the Subsidiaries' authorized capital stock
or issue any shares of stock of any class or issue or become a party to any
subscriptions, warrants, rights, options, convertible securities or other
agreements or commitments of any character relating to the issued or unissued
capital stock of the Company or either of the Subsidiaries, or to other equity
securities of the Company or either of the Subsidiaries, or grant any stock
appreciation or similar rights;

                  (c) enter into any Contract or commitment, or amend or
otherwise modify any of the terms of any of its Contracts, other than (i)
Provider Agreements entered into in the ordinary course of business that have a
term of not more than one year and which involve total obligations of less than
$50,000 per annum, and (ii) Contracts (excluding Provider Agreements and
Contracts with consultants) which involve total obligations of less than $50,000
per annum and which are not otherwise material to the Business; provided that
the Company shall notify Purchaser prior to the Company Group entering into any
Provider Agreement that involves total obligations of $100,000 or more per
annum;

                  (d) increase the compensation payable to any employee, except
in the ordinary course of business consistent with past practices as described
in the Disclosure Schedule;

                  (e) establish or modify any targets, goals, bonuses, pools or
similar provisions under any Benefit Plan, employment Contract or other employee
compensation arrangement, independent contractor Contract or other compensation
arrangement, or pay any bonus or similar payment other than as expressly set
forth in the Disclosure Schedule;

                  (f) incur or commit to incur any capital expenditures not set
forth in the Disclosure Schedule in excess of $50,000 in any instance or
$100,000 in the aggregate;

                  (g) sell, transfer or otherwise dispose of any asset or
property, including any Intellectual Property, except for transfers of cash in
payment of the Company's and the Subsidiaries' liabilities, all in the usual and
ordinary course of business in accordance with past practices;

                  (h) acquire any assets or properties from any other Person,
other than acquisitions in the ordinary course of business, consistent with past
practice, not to exceed $50,000 in the aggregate during any month;

                  (i) incur, assume or guarantee any long-term or short-term
Indebtedness;

                  (j) enter into (i) any operating lease, other than in the
ordinary course of business, consistent with past practice, and providing for
payments of not greater than $50,000 over the term of the lease in any instance
or $100,000 in the aggregate during any month, or (ii) any lease for real
property;

                                       39
<PAGE>

                  (k) pay, discharge or satisfy any claim, obligation or
Liability arising other than in the ordinary course of business, other than the
payment, discharge or satisfaction of Liabilities reflected or reserved against
in the 2003 Unaudited Financial Statements and reasonable expenses incurred in
connection with the transactions contemplated by this Agreement;

                  (l) fail to pay or delay payment of any Medical Claim or other
Indebtedness when due (unless being contested in good faith);

                  (m) commence a lawsuit other than (i) for the routine
collection of bills or (ii) for a breach of this Agreement;

                  (n) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof;

                  (o) make or change any election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any Tax return or any
amendment to a Tax return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;

                  (p) reduce the amount of any insurance coverage provided by
existing insurance policies, or fail to renew any such insurance policy;

                  (q) do any act or omit to do any act, or permit any act or
omission to occur, which will cause a breach by the Company or either of the
Subsidiaries of any of the Designated Contracts;

                  (r) institute or amend any employee benefit program or fringe
benefit program with respect to the employees of the Company or either of the
Subsidiaries, or make any loan to any employee;

                  (s) enter into or modify any written employment Contract with
any Person;

                  (t) fail to maintain or renew any Permits or fail to comply
with any applicable Law;

                  (u) make any change to the Company's and the Subsidiaries'
accounting methods, principles or practices;

                  (v) revalue any of its assets, including writing off notes or
accounts receivable or writing down any other assets;

                  (w) terminate or waive any right of substantial value;

                                       40
<PAGE>

                  (x) pay or declare any dividend or make any distribution on
its securities of any class or purchase or redeem any of its securities of any
class, other than any Pre-Closing Distribution expressly directed by Purchaser
to be paid pursuant to Section 2.6;

                  (y) enter into any Contract with any Affiliate, or otherwise
make any payment or incur any obligation to any Affiliate;

                  (z) alter the conduct or operations of the Business in any
material respect; or

                  (aa) take or agree in writing or otherwise to take any of the
actions described in Sections 4.2.4(a) through 4.2.4(y).

            4.2.5 2003 Audited Financial Statements. As soon as reasonably
possible following the date hereof (and in any event prior to April 15, 2004, or
such earlier date as may be (1) required or appropriate to comply with
applicable Law or (2) reasonably requested by the managing underwriter of
Purchaser's planned initial public offering), the Company shall deliver to
Purchaser (a) the 2003 Audited Financial Statements, which shall be prepared in
consultation with, and subject to the reasonable approval of, Purchaser, and (b)
a certificate, signed by the Stockholders' Committee and by the President and
Chief Financial Officer of the Company, certifying that (1) the 2003 Audited
Financial Statements fairly present in all material respects the financial
position of both HMO Subsidiary, on a stand-alone basis, and the Company Group,
on a consolidated basis, as of December 31, 2003 and the results of operations
of both HMO Subsidiary, on a stand-alone basis, and the Company Group, on a
consolidated basis, for the year ended December 31, 2003, and (2) the 2003
Audited Financial Statements have been prepared in accordance with SAP or GAAP,
as applicable, applied on a basis consistent with the past practices of HMO
Subsidiary or the Company, as applicable, the 2003 Unaudited Financial
Statements and with the HMO Audited Financial Statements or the Consolidated
Audited Financial Statements, as applicable.

            4.2.6 No Solicitation. The Company and the Subsidiaries shall not,
and shall cause all of their respective Affiliates (including any investment
banker, attorney or accountant retained or engaged by that party) to not,
directly or indirectly: (a) initiate, solicit or encourage any inquiries
concerning an Acquisition Proposal or a Competing Transaction; (b) engage in any
negotiations concerning, or provide any information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal or a Competing
Transaction; (c) facilitate any effort or attempt to make or implement an
Acquisition Proposal; or (d) consummate, agree or commit to consummate an
Acquisition Proposal or a Competing Transaction. The Company shall immediately
cease or cause to be terminated any existing activities, discussions or
negotiations with any Person relating to any of the foregoing activities, and
shall promptly notify in writing (the form of which written notice shall be
subject to Purchaser's prior review and approval) any Person with whom the
Company has entered into any confidentiality agreement in connection with any
Acquisition Proposal or Competing Transaction proposed or contemplated prior to
the date hereof that any information provided to the Company or any of its
Affiliates after the date of such notice is not subject to such confidentiality
agreement. In addition, the Company shall notify Purchaser immediately of any
Acquisition Proposal, of any inquiry received by the Company or any of its
Affiliates from any Person concerning an Acquisition Proposal, of any

                                       41
<PAGE>

request from any Person for confidential information concerning the Company,
either of the Subsidiaries, the Business, or both, and if any Person seeks to
initiate or continue any discussions or negotiations with the Company concerning
a Competing Transaction or an Acquisition Proposal. In any such event, the
Company shall provide Purchaser with the details thereof, including the identity
of the Person or Persons making such offer or proposal, and shall keep Purchaser
fully informed on a current basis of the status and details thereof and of any
modifications to the terms thereof; provided, however, that the preceding two
sentences shall not in any way be deemed to limit the obligations of the Company
set forth in the first sentence of this Section. The Company acknowledges that
this Section was a significant inducement for Purchaser to enter into this
Agreement and the absence of such provision would have resulted in either (i) a
material reduction in the Purchase Price or (ii) a failure to induce Purchaser
to enter into this Agreement.

            4.2.7 Monthly Financial Statements. The Company shall furnish
promptly to Purchaser all separate monthly financial statements, budgets,
analyses and schedules of the Company and the Subsidiaries (as prepared in
accordance with normal accounting procedures) promptly after such financial
statements, budgets, analyses and schedules are available, and all other
material information concerning the operations, properties and personnel of the
Company and the Subsidiaries as Purchaser may reasonably request.

            4.2.8 Working Capital. The Company shall use commercially reasonable
efforts to ensure that the Company has positive Working Capital as of the
Closing.

            4.2.9 Non-Competition; Non-Solicitation. In order to induce
Purchaser to enter into this Agreement, the Company shall cause each of the
individuals designated on Annex A attached hereto to sign a Restrictive Covenant
Agreement in substantially the form of Exhibit D attached hereto. In addition,
between the date of this Agreement and the Closing Date, the Company shall
cooperate with Purchaser in good faith, as may be requested by Purchaser, to
develop appropriate non-competition restrictions applicable to such other
employees of the Company as may be identified by Purchaser; provided that any
costs associated with obtaining any such additional non-competition restrictions
shall be borne by Purchaser.

            4.2.10 Stockholder Approval. The Company shall take all actions in
accordance with applicable Law and its Certificate of Incorporation and by-laws
to duly call, give notice of, convene and hold, as promptly as practicable after
the date hereof, a meeting of the stockholders of the Company for the purpose of
considering and voting upon this Agreement, the Merger and the transactions
described herein. The Company's Board of Directors shall recommend approval of
this Agreement and the Merger by the stockholders of the Company and shall not
withdraw or modify such recommendation. The Company shall take all lawful action
to solicit from its stockholders proxies in favor of this Agreement and the
Merger and shall take all other action necessary or advisable to secure the vote
or consent of the Company's stockholders to approve this Agreement and the
Merger. The Company shall ensure that any disclosure documents provided to its
stockholders in connection with the approval of this Agreement and the Merger do
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading. Any such disclosure
documents shall be subject to the prior approval of Purchaser, which approval
shall not be unreasonably withheld or delayed.

                                       42
<PAGE>

            4.2.11 Employment Agreement. The Company and Christopher Adams shall
cause that certain Employment Agreement, dated February 12, 1996, to which they
are parties (including any subsequent amendments thereto) to be terminated as of
or prior to the Effective Time, such termination to be in form and substance
satisfactory to Purchaser.

      4.3 Purchaser's Obligations. Purchaser shall use commercially reasonable
efforts to obtain all Permits from Governmental or Regulatory Authorities as may
be required in connection with the Acquisition, and Purchaser shall promptly
disclose to the Company the results of such efforts. Without limiting the
generality of the foregoing, Purchaser shall make any filings required to be
made by it with any Governmental or Regulatory Authority by no later than March
31, 2004.

      4.4 Joint Obligations.

            4.4.1 Consummation of Transactions. Each of the parties hereto shall
use all commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate the transactions contemplated hereby as soon as
practicable. Each party shall use commercially reasonable efforts to cause the
conditions to its obligations to consummate the transactions described herein to
be satisfied.

            4.4.2 Notification of Certain Matters. Each party shall promptly
give the other party written notice of the existence or occurrence of any
condition which would make any representation or warranty herein contained of
either party untrue, or which might reasonably be expected to prevent the timely
consummation of the transactions described herein.

            4.4.3 Certain Actions. No party shall intentionally perform any act
which, if performed, or intentionally omit to perform any act which, if omitted
to be performed, would prevent or excuse the performance of this Agreement by
any party hereto or which would result in any representation or warranty herein
contained of said party being untrue in any material respect as if originally
made on and as of the Closing Date.

                                    ARTICLE V
                              CONDITIONS TO CLOSING

      5.1 Conditions to the Company's Obligations. The obligation of the Company
to close the transactions contemplated hereby is subject to the fulfillment of
all of the following conditions (any of which may be waived, in writing, by the
Company) on or prior to the Closing Date, upon the non-fulfillment of any of
which, this Agreement may, at the Company's option, be terminated pursuant to
and with the effect set forth in ARTICLE X:

            5.1.1 The representations and warranties made by Purchaser shall be
true and correct in all material respects as if originally made on and as of the
Closing Date.

            5.1.2 All obligations of Purchaser and Merger Sub to be performed
hereunder through, and including on, the Closing Date (including all obligations
which Purchaser and Merger Sub would be required to perform at the Closing if
the transactions contemplated hereby were consummated) shall have been fully
performed.

                                       43
<PAGE>

            5.1.3 No lawsuit, proceeding or investigation shall have been
commenced by any Governmental or Regulatory Authority on any grounds to
restrain, enjoin or hinder the consummation of the transactions contemplated
hereby.

            5.1.4 Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated.

            5.1.5 Purchaser and the Escrow Agent shall have executed and
delivered to the Company the Escrow Agreement.

            5.1.6 Purchaser shall have delivered to the Company all of the
documents set forth in Section 6.2.

      5.2 Conditions to Purchaser's Obligations. The obligation of Purchaser to
close the transactions contemplated hereby is subject to the fulfillment of all
of the following conditions (any of which may be waived, in writing by
Purchaser) on or prior to the Closing Date, upon the non-fulfillment of any of
which, this Agreement may, at Purchaser's option, be terminated pursuant to and
with the effect set forth in ARTICLE X:

            5.2.1 The representations and warranties made by the Company and/or
the Principal Stockholders shall be true and correct in all material respects as
if originally made on and as of the Closing Date.

            5.2.2 All obligations of the Company and/or the Principal
Stockholders to be performed hereunder through, and including on, the Closing
Date (including all obligations which the Company and the Principal Stockholders
would be required to perform at the Closing if the transactions contemplated
hereby were consummated) shall have been fully performed.

            5.2.3 All of the consents to the assignment of, or alternate
arrangements satisfactory to Purchaser with respect to, any Contract, Permit or
Environmental Permit required to be listed on the Disclosure Scheduled pursuant
to Section 3.3.7 shall have been obtained, and all approvals or consents of any
Governmental or Regulatory Authority required to permit the consummation of the
transactions described herein shall have been obtained and be in full force and
effect. To the extent Permits or Environmental Permits held by the Company or
either of the Subsidiaries are not assignable, Purchaser shall have either
obtained licenses and permits on substantially the same terms as the Permits and
Environmental Permits have been issued to the Company and either of the
Subsidiaries, or shall have obtained binding commitments from the applicable
governmental authorities to issue such licenses and permits to Purchaser
following the Closing.

            5.2.4 During the period from the date of this Agreement to the
Closing Date, there shall not have occurred, and there shall not exist on the
Closing Date, any condition or fact which, individually or in the aggregate, has
or reasonably may be expected to result in a Material Adverse Effect.
Additionally, during the period from the date of this Agreement to the Closing
Date, neither the Company nor either of the Subsidiaries, nor their respective
assets shall have been materially and adversely affected by reason of any loss,
condemnation, destruction or damage, whether or not insured against.

                                       44
<PAGE>
            5.2.5 No lawsuit, proceeding or investigation shall have been
commenced by any Governmental or Regulatory Authority on any grounds to
restrain, enjoin or hinder the consummation of the transactions contemplated
hereby.

            5.2.6 Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated.

            5.2.7 Purchaser shall be satisfied, in its reasonable discretion,
that the Company has positive Working Capital at the time of the Closing.

            5.2.8 The Stockholders' Committee shall have executed and delivered
to Purchaser the Escrow Agreement.

            5.2.9 The Company shall have delivered to Purchaser all of the
documents set forth in Section 6.3.

                                   ARTICLE VI
                                     CLOSING

      6.1 Form of Documents. At the Closing, the parties shall deliver the
documents, and shall perform the acts, which are set forth in this ARTICLE VI.
All documents which the Company or the Principal Stockholders shall deliver
shall be in form and substance reasonably satisfactory to Purchaser and
Purchaser's counsel. All documents which Purchaser shall deliver shall be in
form and substance reasonably satisfactory to the Company and the Company's
counsel.

      6.2 Purchaser's Deliveries. Purchaser and/or Merger Sub, as applicable,
shall execute and/or deliver to the Stockholders' Committee all of the
following:

            6.2.1 the Net Closing Amount;

            6.2.2 certified copies of Purchaser's and Merger Sub's certificate
or articles of incorporation issued by the secretaries of state of Purchaser's
or Merger Sub's respective state of incorporation;

            6.2.3 certificates of good standing of Purchaser and Merger Sub,
issued not earlier than ten days prior to the Closing Date by the secretaries of
state of Purchaser's or Merger Sub's respective state of incorporation;

            6.2.4 a certificate of the secretary of Purchaser and Merger Sub
certifying as true and correct the following: (a) the incumbency and specimen
signature of each officer of Purchaser and Merger Sub executing this Agreement
and any other document delivered hereunder on behalf of Purchaser; (b) a copy of
Purchaser's and Merger Sub's by-laws; and (c) a copy of the resolutions of
Purchaser's and Merger Sub's board of directors authorizing the execution,
delivery and performance of this Agreement and any other documents delivered by
Purchaser hereunder;

                                       45
<PAGE>
            6.2.5 a closing certificate executed by the President of Purchaser
(or any other officer of Purchaser specifically authorized to do so), on behalf
of Purchaser, pursuant to which Purchaser certifies to the Company and the
Principal Stockholders that: (a) Purchaser's representations and warranties to
the Company and the Principal Stockholders are true and correct as of the
Closing Date as if then originally made (or, if any such representation or
warranty is untrue in any respect, specifying the respect in which the same is
untrue); (b) all covenants required by the terms hereof to be performed by
Purchaser or Merger Sub on or before the Closing Date, to the extent not waived
by the Company in writing, have been so performed (or, if any such covenant has
not been so performed, indicating that such covenant has not been performed);
and (c) all documents to be executed and delivered by Purchaser at the Closing
have been executed by duly authorized officers of Purchaser;

            6.2.6 the Escrow Agreement;

            6.2.7 the Certificate of Merger;

            6.2.8 the written opinion of Greenberg Traurig, LLP, counsel for
Purchaser, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company; and

            6.2.9 without limitation by specific enumeration of the foregoing,
all other documents reasonably required from Purchaser to consummate the
transactions contemplated hereby.

      6.3 The Company's and Principal Stockholders' Deliveries. The Company and,
as applicable, the Principal Stockholders shall execute and/or deliver to
Purchaser all of the following:

            6.3.1 certificates representing all outstanding Shares owned by the
Principal Stockholders;

            6.3.2 physical possession of all records, tangible assets, licenses,
policies, contracts, plans, leases or other instruments owned by or pertaining
to the Company and the Subsidiaries which are in the possession of the Company;

            6.3.3 the minute books and stock records of the Company and the
Subsidiaries;

            6.3.4 a certificate in compliance with the FIRPTA certifying that no
Equityholder is a person or entity subject to withholding under FIRPTA, executed
by the Company and the Principal Stockholders;

            6.3.5 landlord waivers with respect to all property of the Company
and the Subsidiaries located at the Leased Real Estate, such waivers to be in
form and substance reasonably satisfactory to Purchaser and Purchaser's lenders;

            6.3.6 copies of all consents to the assignment of, or alternative
arrangements satisfactory to Purchaser with respect to, any Contract, Permit or
Environmental Permit required to be listed on the Disclosure Schedule pursuant
to Sections 3.3.5 or 3.3.7;

                                       46
<PAGE>
            6.3.7 payoff letters, issued by the holders of Indebtedness not
earlier than five days prior to the Closing Date, setting forth the amounts
required to repay all Indebtedness in full on the Closing Date;

            6.3.8 releases of all liens and other encumbrances and security
interests held by the holders of Indebtedness in any of the Company's and the
Subsidiaries' assets, including UCC-3 termination statements;

            6.3.9 evidence of the termination, as of the Closing, of all
shareholders agreements and registration rights agreement to which any of the
Equityholders is a party and which affect any of the Shares;

            6.3.10 a Stockholder Release duly executed by each Principal
Stockholder and each holder of any Option outstanding as of the date of this
Agreement;

            6.3.11 the written resignations effective as of the Closing Date of
such directors and officers of the Company and the Subsidiaries as requested by
Purchaser to resign;

            6.3.12 certified copies of the Company's and each Subsidiary's
certificate or articles of incorporation issued by the secretary of state of the
Company's or the Subsidiary's respective state of incorporation;

            6.3.13 certificates of good standing of the Company and the
Subsidiaries issued not earlier than ten days prior to the Closing Date by the
secretaries of state of each state in which the Company and the Subsidiaries are
either incorporated or qualified to do business as a foreign corporation;

            6.3.14 a certificate of the secretary of the Company certifying as
true and correct the following: (a) the incumbency and specimen signature of
each member of the Stockholders' Committee executing this Agreement and any
other document delivered hereunder on behalf of the Equityholders; (b) a copy of
the Company's and each Subsidiaries' by-laws; and (c) a copy of the resolutions
of the Company's board of directors and shareholders authorizing the execution,
delivery and performance of this Agreement and any other documents delivered by
the Company hereunder;

            6.3.15 a closing certificate duly executed by the President of the
Company, on behalf of the Company, and by the Stockholders' Committee, pursuant
to which the Company and the Stockholders' Committee certifies to Purchaser
that: (a) the Company's and the Principal Stockholders' representations and
warranties to Purchaser are true and correct as of the Closing Date as if then
originally made, except for changes in the ordinary course of business which do
not have a Material Adverse Effect (or if any such representation or warranty is
untrue in any respect, specifying the respect in which the same is untrue); (b)
all covenants required by the terms hereof to be performed by the Company and/or
the Principal Stockholders on or before the Closing Date, to the extent not
waived in writing by Purchaser, have been so performed (or if any such covenant
has not been so performed, indicating that such covenant has not been
performed); and (c) all documents to be executed by the Company and/or the
Principal Stockholders and delivered at the Closing have been executed by duly
authorized officers of the Company and/or the Principal Stockholders, as
applicable;

                                       47
<PAGE>
            6.3.16 the Escrow Agreement;

            6.3.17 the Restrictive Covenant Agreements to be delivered pursuant
to Section 4.2.9;

            6.3.18 the Certificate of Merger;

            6.3.19 evidence reasonably satisfactory to Purchaser that the
Employment Agreement between the Company and Christopher Adams shall have been
terminated in accordance with the terms of Section 4.2.11.

            6.3.20 the written opinion of Stevens & Lee, P.C., counsel to the
Company, dated as of the Closing Date, in form and substance reasonably
satisfactory to Purchaser; and

            6.3.21 without limitation by specific enumeration of the foregoing,
all other documents reasonably required from the Company or the Equityholders to
consummate the transactions contemplated hereby.

                                   ARTICLE VII
                             POST-CLOSING AGREEMENTS

      7.1 Post-Closing Agreements. From and after the Closing, the parties shall
have the respective rights and obligations which are set forth in the remainder
of this ARTICLE VII.

      7.2 Use of Trademarks. The Principal Stockholders shall not use and shall
not license or permit any third party to use, any name, slogan, logo or
trademark which is deceptively similar to any of the names or trademarks used in
connection with the Business of the Company and the Subsidiaries.

      7.3 Third Party Claims. The parties shall cooperate with each other with
respect to the defense of any Third Party Claims subsequent to the Closing Date
which are not subject to the indemnification provisions contained in Article
VIII, provided that the party requesting cooperation shall reimburse the other
party for the other party's reasonable out-of-pocket costs and expenses of
furnishing such cooperation.

      7.4 Medical Claims. During the period beginning on the Closing Date and
continuing through December 31, 2004, Purchaser shall provide the Stockholders'
Committee, within 30 days following the end of each calendar quarter (beginning
with the calendar quarter following the Closing) with a quarterly lag report, in
such form as may be prepared by the Company in the ordinary course of business
following the Closing, with respect to payments of Medical Claims related to
periods on and prior to December 31, 2003. Purchaser will meet and confer with
the Stockholders' Committee, on an advisory, non-binding basis, as may be
reasonably requested from time to time by the Stockholders' Committee to review
any concerns the Stockholders' Committee may have with respect to such lag
reports.

                                       48
<PAGE>
                                  ARTICLE VIII
                                OTHER AGREEMENTS

      8.1 Confidentiality. Each of the parties hereto hereby agrees to keep the
existence and terms of this Agreement (except to the extent contemplated
hereby), and such information or knowledge obtained pursuant to the negotiation
and execution of this Agreement or the effectuation of the transactions
described herein, confidential; provided, however, that the foregoing shall not
apply to information or knowledge which (a) a party can demonstrate was already
lawfully in its possession prior to the disclosure thereof by the other party,
(b) is or becomes generally known to the public and did not become so known
through any violation of Law, or a confidentiality agreement or other
contractual, legal or fiduciary obligation of confidentiality of the disclosing
party or any other party with respect to such information, (c) is later lawfully
acquired by such party without confidentiality restrictions from other sources
not bound by applicable confidentiality restrictions, or (d) is required to be
disclosed by order of court or Governmental or Regulatory Authority with
subpoena powers (provided that such party shall have provided the other party
with prior notice of such order and an opportunity to object or seek a
protective order and take any other available action), under applicable Law or
the rules of any stock exchange, or in connection with any lawsuit or
arbitration proceeding between the parties hereto (and in such event only to the
extent such disclosure is required). Notwithstanding the foregoing, each party
may disclose any such information to those of its Representatives as are
assisting it in connection with the evaluation, negotiations or consummation of
the transactions described herein, provided that such party first informs each
of its Representatives receiving information of the confidential nature thereof
and of the foregoing obligations of confidentiality, and directs its
Representatives to treat such information confidentially and in accordance with
the foregoing obligations. In the event that this Agreement is terminated for
any reason prior to the Closing, each party shall, and shall cause its
Representatives to, destroy (or at their option, return to the applicable party)
all such information which has been provided in tangible form, together with all
copies thereof, as well as all summaries, analyses and similar items (whether in
tangible, electronic or similar form) prepared based in material part upon such
information, except that each party may retain one copy of all such information
for archival purposes.

      8.2 Publicity. Except as otherwise required by Law or applicable stock
exchange rules, press releases and other publicity concerning this transaction
shall be made only with the prior agreement of (a) the Company (prior to the
Closing) or the Stockholders' Committee (after the Closing) and (b) Purchaser
(and in any event, the parties shall use all reasonable efforts to consult and
agree with each other with respect to the content of any such required press
release or other publicity).

      8.3 Employee Matters. In the event that the employment of any employees of
the Company is terminated by Purchaser within 180 days following the Closing
Date (other than as a result of such employee's misconduct or performance
deficiencies), the Purchaser shall pay severance to each such employee in an
amount equal to (a) in the case of any employee at the manager level or above,
not less than two weeks' of his or her then-current salary for each year of
service with the Company (including years of service with the Company prior to
the Closing Date), and (b) in the case of any employee below the level of
manager, not less than one week of his or her then-current salary for each year
of service with the Company (including years of

                                       49
<PAGE>
service with the Company prior to the Closing Date), but, in either case, in no
event less than a total of two weeks' of his or her then-current salary.

      8.4 Further Assurances. The parties shall execute and deliver such further
documents, and perform such further acts, as may be necessary or desirable to
comply with the terms of this Agreement and consummate the transactions
described herein, including by making available such books and records relating
to the Company and the Subsidiaries, for reasonable business purposes and at
reasonable times, as may be reasonably requested by any other party hereto.

                                   ARTICLE IX
                                 INDEMNIFICATION

      9.1 Indemnification of the Purchaser. Subject to the provisions of
Sections 9.2 and 9.6, the Company and the Principal Stockholders, individually
and only to the extent of their respective obligations hereunder, shall
indemnify, save and hold harmless each Purchaser Indemnitee against and from all
Damages sustained or incurred by any Purchaser Indemnitee, as a result of, or
arising out of or by virtue of:

            9.1.1 any inaccuracy in or breach of any representation and warranty
made by the Company or the Principal Stockholders to Purchaser herein or in any
certificate or closing document delivered to Purchaser in connection herewith;

            9.1.2 the breach by the Company or any Principal Stockholder of, or
failure of the Company or any Principal Stockholder to comply with, any of the
covenants or obligations under this Agreement to be performed by the Company or
the Principal Stockholders (including their obligations under this ARTICLE IX);

            9.1.3 acts or omissions of the Company and the Subsidiaries, or of
any former subsidiaries of the Company, on or before the Closing Date, including
the operation of the Business before the Closing Date;

            9.1.4 Taxes which are unpaid as of the Closing Date and which are
imposed on the Company or any of the Subsidiaries with respect to (a) any
taxable period ending on or before the Closing Date, or (b) the pre-Closing
portion of any taxable period which begins before, and ends after, the Closing
Date, to the extent the liability for such Taxes exceeds the accrual for Taxes
contained on the Closing Balance Sheet; or

            9.1.5 without being limited by Sections 9.1.1 through 9.1.4 above
and without regard to the fact that any one or more of the items referred to in
this Section 9.1.5 may be disclosed in the Disclosure Schedule or in any
documents included or referred to therein: (a) any Plan or Welfare Plan which
either the Company, one of the Subsidiaries or an ERISA Affiliate has at any
time maintained or administered or to which the Company, one of the Subsidiaries
or any ERISA Affiliate has at any time contributed (including any liability for
health continuation requirements under Code Section 4980B or Part 6 of Subtitle
B of Title I of ERISA and any liability arising pursuant to Title IV of ERISA
for plan termination, withdrawal or partial withdrawal from any Multiemployer
Plan, or any lien to enforce any Title IV liability); any benefits accrued
pursuant to any Welfare Plan or Employee Benefit Plan at or prior to the
Closing; or any action or failure to act, in whole or in part, at or prior to
the Closing with respect

                                       50
<PAGE>
to any Plan, Welfare Plan or Employee Benefit Plan; or (b) any violation of, or
delinquency in respect to, any decree, order or arbitration award or Law in
effect on or prior to the Closing Date of or agreement of either the Company or
one of the Subsidiaries with, or any license or Permit granted to the Company or
one of the Subsidiaries from, any Governmental or Regulatory Authority to which
the Company or one of the Subsidiaries is subject.

Notwithstanding the foregoing, the Company's obligation to indemnify Purchaser
under this Section 9.1 shall terminate at the Closing.

      9.2 Limitation on the Purchaser's Indemnification Rights. The Purchaser
Indemnitees' rights pursuant to the provisions of Section 9.1 are subject to the
following limitations:

            9.2.1 The Purchaser Indemnitees shall not be entitled to recover
under Section 9.1.1 until the total amount which the Purchaser Indemnitees would
recover under Section 9.1.1, but for this Section 9.2.1, exceeds the Basket, in
which event the Purchaser Indemnitees shall be entitled to recover for all
Damages recoverable under Section 9.1.1, including the amount less than the
Basket. The foregoing limitation shall not apply to recovery under Section 9.1.1
for breaches of one or more of the Extended Representations and Warranties.

            9.2.2 The Purchaser Indemnitees shall not be entitled to recover
under Section 9.1 unless a claim has been asserted by written notice, delivered
to the Stockholders' Committee on or prior to the Survival Date.

            9.2.3 The Purchaser Indemnitees shall not be entitled to recover
under Section 9.1.1 for the amount of Damages in excess of the Indemnification
Cap, and following the Closing the Purchaser Indemnitees' exclusive source of
recovery pursuant to this ARTICLE IX shall be the Escrow Amount, in each case
other than in the event of:

                  (a) Damages arising from any inaccuracy in or breach of any
Extended Representation and Warranty;

                  (b) Damages arising from any fraudulent acts of any of the
Principal Stockholders; and

                  (c) Damages arising from any fraudulent acts of the Company;
provided, however, that in the case of any fraudulent acts of the Company that
are not directly related to the negotiation or execution of this Agreement or
the transactions described herein, the aggregate liability of each Principal
Stockholder on account of such Damages shall in no event exceed (i) the
aggregate amount of the Purchase Price received by such Principal Stockholder or
(ii) any lesser amount found appropriate by a court of competent jurisdiction,
in each case unless such Principal Stockholder perpetrated, participated in or
had knowledge of the fraudulent acts (in which case such aggregate liability
limitations shall not apply), it being understood that, except as expressly
modified by the foregoing, Purchaser shall retain all of its common law rights
and remedies and nothing contained in this Section 9.2.3 shall be construed as
expanding Purchaser's rights and remedies beyond those available at common law;

provided that in each of clauses (a), (b) and (c) above the liability of the
Principal Stockholders shall be several but not joint.

                                       51
<PAGE>
      9.3 Indemnification of the Equityholders. Subject to the provisions of
Sections 9.4 and 9.6, Purchaser, to the extent of its obligations hereunder,
shall indemnify, save and hold harmless each Equityholder against and from all
Damages sustained or incurred by any Equityholder, as a result of, or arising
out of or by virtue of:

            9.3.1 any inaccuracy in or breach of any representation and warranty
made by Purchaser to the Company herein or in any certificate or closing
document delivered to the Stockholders' Committee in connection herewith; or

            9.3.2 any breach by Purchaser of, or failure by Purchaser to comply
with, any of the covenants or obligations under this Agreement to be performed
by Purchaser (including without limitation its obligations under this ARTICLE
IX).

      9.4 Limitation on the Equityholders' Indemnification Rights. The
Equityholders' rights pursuant to the provisions of Section 9.3 are subject to
the following limitations:

            9.4.1 The Equityholders shall not be entitled to recover under
Section 9.3.1 until the total amount which the Equityholders would recover under
Section 9.3.1, but for this Section 9.4.1, exceeds the Basket, in which event
the Equityholders shall be entitled to recover for all Damages recoverable under
Section 9.3.1, including the amount less than the Basket. The foregoing
limitation shall not apply to recovery under Section 9.3.1 for breaches of one
or more of the Extended Representations and Warranties.

            9.4.2 The Equityholders shall not be entitled to recover under
Section 9.3 unless a claim has been asserted by written notice, delivered to
Purchaser on or prior to the Survival Date.

            9.4.3 The Equityholders shall not be entitled to recover under
Section 9.3.1 for the amount of Damages in excess of the Indemnification Cap,
other than in the case of Damages arising from any fraudulent acts of Purchaser.

      9.5 Cooperation. Subject to the provisions of Section 9.6, the
Indemnifying Party shall have the right, at its own expense, to participate in
the defense of any Third Party Claim, and if said right is exercised, the
parties shall cooperate in the investigation and defense of said Third Party
Claim.

      9.6 Third Party Claims. Promptly after the receipt of written notice of a
Third Party Claim, the party receiving the notice of the Third Party Claim shall
notify the other party of its existence setting forth with reasonable
specificity the facts and circumstances of which such party has received notice,
and if the party giving such notice is an Indemnified Party, specifying the
basis hereunder upon which the Indemnified Party's claim for indemnification is
asserted; provided, however, that the failure to provide such notice shall not
release the Indemnifying Party from any of its obligations under this ARTICLE IX
except to the extent the Indemnifying Party is materially prejudiced by such
failure. The Indemnified Party may, upon reasonable notice, tender the defense
of a Third Party Claim to the Indemnifying Party. If

            9.6.1 the defense of a Third Party Claim is so tendered and within
thirty (30) days thereafter such tender is accepted without qualification by the
Indemnifying Party; or

                                       52
<PAGE>
            9.6.2 within 30 days after the date on which written notice of a
Third Party Claim has been given pursuant to this Section 9.6, the Indemnifying
Party shall acknowledge without qualification its indemnification obligations as
provided in this ARTICLE IX in writing to the Indemnified Party and accept the
defense thereof;

then, except as herein provided, the Indemnified Party shall not, and the
Indemnifying Party shall, have the right to contest, defend, litigate or settle
such Third Party Claim. The Indemnified Party shall have the right to be
represented by counsel at its own expense in any such contest, defense,
litigation or settlement conducted by the Indemnifying Party, provided that the
Indemnified Party shall be entitled to reimbursement therefor if the
Indemnifying Party shall not be entitled, or shall lose its right, to contest,
defend, litigate and settle the Third Party Claim as herein provided. The
Indemnifying Party shall not be entitled, or shall lose its right, as
applicable, to contest, defend, litigate and settle a Third Party Claim if (a)
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the Indemnified Party for
the same counsel to represent both the Indemnifying Party and the Indemnified
Party, (b) the Indemnifying Party shall fail to diligently contest the Third
Party Claim, (c) such Third Party Claim involves remedies or disputes other than
claims for monetary damages, or (d) such Third Party Claim or the resolution
thereof could impair ongoing business relationships with any material Provider,
any Governmental or Regulatory Authority, or any other Person doing business
with the Indemnified Party or any of its Affiliates. So long as the Indemnifying
Party is entitled and has not lost its right and/or obligation to contest,
defend, litigate and settle as herein provided, the Indemnifying Party shall
have the exclusive right to contest, defend and litigate the Third Party Claim
and shall have the exclusive right, in its discretion exercised in good faith,
and upon the advice of counsel, to settle any such matter, either before or
after the initiation of litigation, at such time and upon such terms as it deems
fair and reasonable, provided that (i) at least ten days prior to any such
settlement, written notice of its intention to settle shall be given to the
Indemnified Party, (ii) such settlement includes as an unconditional term
thereof the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all Liabilities in respect of such Third Party Claim, (iii) such
settlement does not impose any obligations of any kind upon the Indemnified
Party and (iv) such settlement does not otherwise impair ongoing business
relationships with any material Provider, any Governmental or Regulatory
Authority, or any other Person doing business with the Indemnified Party or any
of its Affiliates. All expenses (including without limitation attorneys' fees)
incurred by the Indemnifying Party in connection with the foregoing shall be
paid by the Indemnifying Party. No failure by an Indemnifying Party to
acknowledge in writing its indemnification obligations under this ARTICLE IX
shall relieve it of such obligations to the extent they exist. If an Indemnified
Party is entitled to indemnification against a Third Party Claim, and the
Indemnifying Party fails to accept a tender of, or assume, the defense of a
Third Party Claim pursuant to this Section 9.6, or if, in accordance with the
foregoing, the Indemnifying Party shall not be entitled or shall lose its right
to contest, defend, litigate and settle such a Third Party Claim, the
Indemnified Party shall have the right, without prejudice to its right of
indemnification hereunder, in its discretion exercised in good faith and upon
the advice of counsel, to contest, defend and litigate such Third Party Claim,
and may settle such Third Party Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable. If, pursuant to this Section 9.6, the Indemnified Party so
contests, defends, litigates or settles a Third Party Cl aim for which it is
entitled to indemnification hereunder, the Indemnified Party shall be reimbursed
by the Indemnifying Party

                                       53
<PAGE>
for the reasonable attorneys' fees and other expenses of contesting, defending,
litigating and/or settling the Third Party Claim which are incurred from time to
time, forthwith following the presentation to the Indemnifying Party of itemized
bills for said attorneys' fees and other expenses.

      9.7 No Contribution. Each of the Principal Stockholders hereby waives any
right to contribution or any similar rights it may have against the Company or
either of the Subsidiaries arising out of the Principal Stockholders' agreement
to indemnify Purchaser pursuant to this ARTICLE IX.

                                   ARTICLE X
                             EFFECT OF TERMINATION

      10.1 Right to Terminate. Anything to the contrary herein notwithstanding,
this Agreement and the transactions contemplated hereby may be terminated at any
time prior to the Closing:

            10.1.1 by the mutual written consent of Purchaser and the Company;

            10.1.2 by prompt notice by either of such parties if (a) the Closing
shall not have occurred at or before 11:59 p.m. Eastern Time on July 30, 2004;
provided, however, that the right to terminate this Agreement under this Section
10.1.2 shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur on or prior to the aforesaid date, (b) there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the transactions contemplated hereby; (c) there shall
be any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the consummation of the transactions contemplated hereby by
any Governmental or Regulatory Authority that would make consummation of the
transactions contemplated hereby illegal; or (d) any of the Permits required to
be obtained from any Governmental or Regulatory Authority to permit the
consummation of the transactions contemplated hereby shall be denied, or shall
be granted with conditions or requirements that are materially adverse to the
terminating party, and any applicable periods to appeal such decision shall have
expired (provided, however, that the right to terminate this Agreement under
this Section 10.1.2(d) shall not be available to any party whose failure to
fulfill any obligation hereunder has been the cause of, or resulted in, the
failure to obtain such Permit);

            10.1.3 by Purchaser if there shall be any action taken, or any Law
or order enacted, promulgated or issued or deemed applicable to the consummation
of the transactions contemplated hereby, by any Governmental or Regulatory
Authority, which would: (a) prohibit Purchaser's ownership or operation of all
or any material portion of the business of the Company Group, (b) compel
Purchaser to dispose of or hold separate all or any portion of the assets and
properties of the Company Group as a result of the consummation of the
transactions contemplated hereby, or (c) prevent or impair Purchaser's ability
to operate the Company Group in a manner substantially similar to the operations
of the Company Group prior to the date of this Agreement;

                                       54
<PAGE>
            10.1.4 by Purchaser if (a) any representation or warranty of the
Company or the Principal Stockholders is not true and correct in any material
respect either on the date of this Agreement or at the Closing, such that the
conditions set forth in Sections 5.2.1 or 5.2.4 would not be satisfied, and, if
such breach of a representation or warranty is capable of being cured, such
breach shall not have been fully cured within 15 days following delivery by
Purchaser to the Stockholders' Committee of written notice of such breach, or
(b) the Company or the Principal Stockholders shall not have complied in full
with any covenant or agreement contained in this Agreement, and, if such failure
to comply is capable of being cured, such non-compliance shall not have been
fully cured within 15 days following delivery by Purchaser to the Stockholders'
Committee of written notice of such non-compliance, or (c) the Company or either
Subsidiary makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against the Company or either Subsidiary
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up or reorganization, arrangement, adjustment, protection, relief or
composition of any Indebtedness under any applicable Laws; or

            10.1.5 by the Company if (a) any representation or warranty of
Purchaser is not true and correct in any material respect either on the date of
this Agreement or at the Closing, such that the conditions set forth in Section
5.1.1 would not be satisfied, and, if such breach of a representation or
warranty is capable of being cured, such breach shall not have been fully cured
within 15 days following delivery by the Stockholders' Committee to Purchaser of
written notice of such breach, or (b) Purchaser shall not have complied in full
with any covenant or agreement contained in this Agreement, and, if such failure
to comply is capable of being cured, such non-compliance shall not have been
fully cured within 15 days following delivery by the Stockholders' Committee to
Purchaser of written notice of such non-compliance, or (c) Purchaser makes a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against Purchaser seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of any Indebtedness under any
applicable Laws.

      10.2 Certain Effects of Termination. In the event of the termination of
this Agreement by either the Company or Purchaser as provided in Section 10.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of the Company, Merger Sub, the Principal Stockholders or
Purchaser, or their respective officers, directors, managers, members,
stockholders or Affiliates; provided, however, that termination of this
Agreement shall be without prejudice to any rights any party may have hereunder
against any other party for any breaches of this Agreement prior to its
termination; and provided, further, that the provisions of ARTICLE VIII, ARTICLE
IX, this Section 10.2 , Section 10.4, ARTICLE XI, ARTICLE XII and the applicable
definitions set forth in ARTICLE I, of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.

      10.3 Remedies. Notwithstanding any termination right granted in Section
10.1, in the event of the non-fulfillment of any condition to a party's closing
obligations, in the alternative, such party may elect to do one of the
following:

            10.3.1 proceed to close despite the non-fulfillment of any closing
condition, it being understood that consummation of the Closing shall not be
deemed a waiver of a breach of

                                       55
<PAGE>
any representation, warranty or covenant or of such party's rights and remedies
with respect thereto;

            10.3.2 decline to close, terminate this Agreement as provided in
Section 10.1, and thereafter seek damages under law or equity (in addition to
any fee payable pursuant to Section 10.4); or

            10.3.3 seek specific performance of the obligations of the other
party. Each party hereby agrees that in the event of any breach by such party of
this Agreement, the remedies available to the other party at law would be
inadequate and that such party's obligations under this Agreement may be
specifically enforced.

      10.4 Termination Fee.

            10.4.1 Without limiting any other rights or remedies available to
the Company, in the event that (a) the Company shall terminate this Agreement
pursuant to Section 10.1.2(a), and the failure of the Closing to occur on or
prior to the date set forth in such Section shall have resulted from the failure
of Purchaser or Merger Sub to fulfill any of its obligations under this
Agreement, (b) the Company shall terminate this Agreement pursuant to Section
10.1.2(d), and the failure to obtain a Permit as set forth in such Section shall
have resulted from the failure of Purchaser or Merger Sub to fulfill any of its
obligations under this Agreement, or (c) the Company shall terminate this
Agreement pursuant to Section 10.1.5, provided in each such case that the
Company shall not at such time be in breach of any representation, warranty,
covenant or other provision of this Agreement, then Purchaser shall pay to the
Company, in same day funds within three Business Days of the date of
termination, the sum of $1,000,000.

            10.4.2 Without limiting any other rights or remedies available to
Purchaser, in the event that (a) Purchaser shall terminate this Agreement
pursuant to Section 10.1.2(a), and the failure of the Closing to occur on or
prior to the date set forth in such Section shall have resulted from the failure
of the Company or any of the Principal Stockholders to fulfill any of its
obligations under this Agreement, (b) Purchaser shall terminate this Agreement
pursuant to Section 10.1.2(d), and the failure to obtain a Permit as set forth
in such Section shall have resulted from the failure of the Company or any of
the Principal Stockholders to fulfill any of its obligations under this
Agreement, or (c) Purchaser shall terminate this Agreement pursuant to Section
10.1.4, provided in each such case that Purchaser shall not at such time be in
breach of any representation, warranty, covenant or other provision of this
Agreement, then the Company shall pay to Purchaser, in same day funds within
three Business Days of the date of termination, the sum of $1,000,000.

                                   ARTICLE XI
                             STOCKHOLDERS' COMMITTEE

      11.1 Appointment of Stockholders' Committee. The parties hereto agree that
the Equityholders are third-party beneficiaries under this Agreement to the
extent expressly set forth herein. Each of the Principal Stockholders and each
of the other Equityholders hereby irrevocably constitutes and appoints
Christopher Adams, Jay Hoffman and Elwood Kleaver as the Stockholders' Committee
to represent the interests of the Equityholders. This power is

                                       56
<PAGE>
irrevocable and coupled with an interest, and shall not be affected by the
death, incapacity, illness, dissolution or other inability to act of any of the
Equityholders.

      11.2 Authority. Each of the Principal Stockholders and each of the other
Equityholders hereby irrevocably grants the Stockholders' Committee full power
and authority:

            11.2.1 to execute and deliver, on behalf of such Principal
Stockholder or other Equityholder, and to accept delivery of, on behalf of such
Principal Stockholder or other Equityholder, such documents as may be deemed by
the Stockholders' Committee, in their sole discretion, to be appropriate to
consummate this Agreement, the Merger and the other transactions contemplated
hereby, including the Escrow Agreement;

            11.2.2 to endorse and to deliver on behalf of such Principal
Stockholder or other Equityholder, certificates representing the Shares to be
exchanged by such Principal Stockholder at the Closing;

            11.2.3 to acknowledge receipt at the Closing of the Net Closing
Amount, to designate the manner of payment of the Net Closing Amount, the Escrow
Balance and the IBNR Adjustment, if applicable, and to certify, on behalf of
such Principal Stockholder or other Equityholder, as to the accuracy of the
representations and warranties of such Principal Stockholder or other
Equityholder under, or pursuant to the terms of, this Agreement;

            11.2.4 to (a) dispute or refrain from disputing, on behalf of such
Principal Stockholder or other Equityholder, any claim made by Purchaser under
this Agreement; (b) negotiate and compromise, on behalf of such Principal
Stockholder or other Equityholder, any dispute that may arise under, and to
exercise or refrain from exercising any remedies available under, this Agreement
or the Escrow Agreement; and (c) execute, on behalf of such Principal
Stockholder or other Equityholder, any settlement agreement, release or other
document with respect to such dispute or remedy;

            11.2.5 to waive, on behalf of such Principal Stockholder or other
Equityholder, any closing condition contained in ARTICLE V of this Agreement and
to give or agree to, on behalf of such Principal Stockholder or other
Equityholder, any and all consents, waivers, amendments or modifications, deemed
by the Stockholders' Committee, in their sole discretion, to be necessary or
appropriate, under this Agreement or the Escrow Agreement, and, in each case, to
execute and deliver any documents that may be necessary or appropriate in
connection therewith;

            11.2.6 to enforce, on behalf of such Principal Stockholder or other
Equityholder, any claim against Purchaser arising under this Agreement or the
Escrow Agreement;

            11.2.7 to engage attorneys, accountants and agents at the expense of
the Principal Stockholders;

            11.2.8 to retain $390,000 of the Purchase Price as a fund for the
payment of expenses (including attorneys' fees) payable by the Principal
Stockholders pursuant to the provisions hereof, adjustments to the Purchase
Price, and potential claims for indemnification by Purchaser, and to invest such
retained portion for the benefit of the Equityholders;

                                       57
<PAGE>
            11.2.9 to amend this Agreement (other than this ARTICLE XI), the
Escrow Agreement or any of the instruments to be delivered to Purchaser by such
Principal Stockholder or other Equityholder pursuant to this Agreement; and

            11.2.10 to give such instructions and to take such action or refrain
from taking such action, on behalf of such Principal Stockholder or other
Equityholder, as the Stockholders' Committee deems, in their sole discretion,
necessary or appropriate to carry out the provisions of this Agreement or the
Escrow Agreement.

      11.3 Reliance. Each Principal Stockholder and each other Equityholder
hereby agrees that:

            11.3.1 in all matters in which action by the Stockholders' Committee
is required or permitted, a majority of the members of the Stockholders'
Committee is authorized to act on behalf of such Principal Stockholder or other
Equityholder, notwithstanding any dispute or disagreement among Principal
Stockholders or other Equityholders, among the members of the Stockholders'
Committee, or between any Principal Stockholder or other Equityholder and the
Stockholders' Committee, and Purchaser shall be entitled to rely on any and all
action taken by the Stockholders' Committee, or a majority of the members
thereof, under this Agreement or the Escrow Agreement without any liability to,
or obligation to inquire of, any of Principal Stockholders or the other members
of the Stockholders' Committee, notwithstanding any knowledge on the part of
Purchaser of any such dispute or disagreement;

            11.3.2 notice to any member of the Stockholders' Committee,
delivered in the manner provided in Section 12.1, shall be deemed to be notice
to all of the members of the Stockholders' Committee and to all Principal
Stockholders and other Equityholders for the purposes of this Agreement;

            11.3.3 the power and authority of the Stockholders' Committee, as
described in this Agreement, shall continue in force until all rights and
obligations of the Principal Stockholders and other Equityholders under this
Agreement shall have terminated, expired or been fully performed;

            11.3.4 a majority in interest of Principal Stockholders shall have
the right, exercisable from time to time upon written notice delivered to the
Stockholders' Committee and Purchaser: (a) to remove any member or members of
the Stockholders' Committee, with or without cause; (b) to appoint a Principal
Stockholder (or, in the case of a Principal Stockholder which is a corporation,
partnership, limited liability company or trust, an officer, manager, employee
or partner of such Principal Stockholder) to fill a vacancy caused by the death,
resignation or removal of a member of the Stockholders' Committee; and (c)
subject to Section 11.3.6, to expand the number of members of the Stockholders'
Committee and to appoint Principal Stockholders (or officers, managers,
employees or partners as aforesaid) to fill the vacancies created thereby;

            11.3.5 if any member of the Stockholders' Committee resigns or is
removed or otherwise ceases to function in his capacity as such for any reason
whatsoever, and no successor is appointed pursuant Section 11.3.4 within thirty
(30) days, the Stockholders' Committee shall

                                       58
<PAGE>
consist solely of the remaining members of the Stockholders' Committee. If, as a
result of such resignation, removal or cessation, there are no remaining members
of the Stockholders' Committee and no successor is appointed by a majority in
interest of Principal Stockholders within thirty (30) days, then Purchaser shall
have the right to appoint a Principal Stockholder to act as the sole member of
the Stockholders' Committee, to serve as described in this Agreement; and

            11.3.6 there shall at no time be more than three members of the
Stockholders' Committee.

      11.4 Indemnification of Purchaser and Its Affiliates. Principal
Stockholders, jointly and severally, shall indemnify the Purchaser Indemnitees
against, and agree to hold the Purchaser Indemnitees harmless from, any and all
Damages incurred or suffered by any Purchaser Indemnitee arising out of, with
respect to or incident to the operation of, or any breach of any covenant or
agreement pursuant to, this ARTICLE XI, or the designation, appointment and
actions of the Stockholders' Committee pursuant to the provisions hereof,
including without limitation, with respect to (a) actions taken by the
Stockholders' Committee or any member thereof; and (b) reliance by any Purchaser
Indemnitee on, and actions taken by any Purchaser Indemnitee in response to or
in reliance on, the instructions of, notice given by or any other action taken
by the Stockholders' Committee.

      11.5 Indemnification of Stockholders' Committee. Each Principal
Stockholder shall severally indemnify each member of the Stockholders' Committee
against any Damages (except such Damages as result from such member's gross
negligence or willful misconduct) that such member may suffer or incur in
connection with any action or omission of such member as a member of the
Stockholders' Committee. Each Principal Stockholder shall bear its pro-rata
portion of such Damages. No member of the Stockholders' Committee shall be
liable to any Principal Stockholder with respect to any action or omission taken
or omitted to be taken by the Stockholders' Committee pursuant to this ARTICLE
XI, except for such member's gross negligence or willful misconduct.

                                   ARTICLE XII
                                  MISCELLANEOUS

      12.1 Notices. All notices required or permitted to be given hereunder
shall be in writing and may be delivered by hand, by facsimile, by nationally
recognized private courier, or by United States mail. Notices delivered by mail
shall be deemed given three Business Days after being deposited in the United
States mail, postage prepaid, registered or certified mail, return receipt
requested. Notices delivered by hand, by facsimile, or by nationally recognized
private courier shall be deemed given on the first business day following
receipt; provided, however, that a notice delivered by facsimile shall only be
effective if such notice is also delivered by hand, or deposited in the United
States mail, postage prepaid, registered or certified mail, on or before two
Business Days after its delivery by facsimile. All notices shall be addressed as
follows:

                                       59
<PAGE>
If to the Company (prior to the Closing):

           Harmony Health Systems, Inc.
           125 South Wacker Drive, Suite 2600
           Chicago, IL 60606-4402
           Attention: Dr. John Blank, President & Chief Executive
           Officer
           Fax: (312) 251-0295

with a copy to:

           Stevens & Lee
           620 Freedom Business Center
           Suite 200
           King of Prussia, PA 19406
           Attention: Alan M. Gnessin, Esq.
           Fax: (610) 371-7962

If to the Stockholders' Committee:

           Christopher Adams
           4300 Wheatland Way
           Palm Harbor, FL 34685
           Fax: (727) 944-3738

           Jay Hoffman
           Richland Ventures, L.P.
           200 31st Avenue North, Suite 200
           Nashville, TN 37203
           Fax: (615) 269-0463

           Elwood Kleaver
           800 Park Boulevard, Suite 760
           Boise, ID 83712
           Fax: (208) 433-4601

with a copy to:

           Stevens & Lee
           620 Freedom Business Center
           Suite 200
           King of Prussia, PA 19406
           Attention: Alan M. Gnessin, Esq.
           Fax: (610) 371-7962

                                       60
<PAGE>
If to Purchaser:

           WellCare Health Plans, Inc.
           6800 North Dale Mabry Highway
           Suite 268
           Tampa, Florida 33614
           Attention: General Counsel
           Fax: (813) 290-6210

with a copy to:

           Greenberg Traurig, LLP
           1750 Tysons Boulevard
           Suite 1200
           McLean, Virginia 22102
           Attention: Jason Simon, Esq.
           Fax: (703) 749-1301

and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 12.1.

      12.2 Expenses; Transfer Taxes. Each party hereto shall bear all fees and
expenses incurred by such party in connection with, relating to or arising out
of the negotiation, preparation, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
including financial advisors', attorneys', accountants' and other professional
fees and expenses. The Principal Stockholders shall pay the cost of all sales,
use, stamp, documentary, excise and transfer Taxes which may be payable in
connection with the transactions contemplated hereby.

      12.3 Entire Agreement. This Agreement, together with the Voting Agreements
and the instruments and other documents to be delivered by the parties pursuant
to the provisions hereof constitute the entire agreement between the parties and
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, successors and permitted assigns. Each
Exhibit, schedule and the Disclosure Schedule, shall be considered incorporated
into this Agreement. Any amendments, or alternative or supplementary provisions,
to this Agreement, must be made in writing and duly executed by an authorized
representative or agent of each of the parties hereto.

      12.4 Non-Waiver. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement, shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.

                                       61
<PAGE>
      12.5 Counterparts. This Agreement may be executed in multiple counterparts
and by facsimile, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.

      12.6 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable Law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, and, for purposes of such
jurisdiction, such provision or portion thereof shall be struck from the
remainder of this Agreement, which shall remain in full force and effect. This
Agreement shall be reformed, construed and enforced in such jurisdiction so as
to best give effect to the intent of the parties under this Agreement.

      12.7 Applicable Law. This Agreement shall be governed and controlled as to
validity, enforcement, interpretation, construction, effect and in all other
respects by the internal Laws of the State of Illinois applicable to contracts
made in that state, without giving effect to any choice of law or conflict of
law provision or rule that would cause the application of the Laws of any
jurisdiction other than the State of Illinois.

      12.8 Binding Effect; Benefit. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, and their successors and permitted
assigns. Nothing in this Agreement, express or implied, shall confer on any
Person other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, including third party beneficiary rights.

      12.9 Assignability. This Agreement shall not be assignable by the Company
or any Principal Stockholder without the prior written consent of Purchaser.

      12.10 Rule of Construction. The parties acknowledge and agree that each
has negotiated and reviewed the terms of this Agreement, assisted by such legal
and tax counsel as they desired, and has contributed to its revisions. The
parties further agree that the rule of construction that any ambiguities are
resolved against the drafting party will be subordinated to the principle that
the terms and provisions of this Agreement will be construed fairly as to all
parties and not in favor of or against any party.

      12.11 Waiver of Trial by Jury. EACH OF THE PARTIES HERETO WAIVES THE RIGHT
TO A JURY TRIAL IN CONNECTION WITH ANY LAWSUIT, ACTION OR PROCEEDING SEEKING
ENFORCEMENT OF SUCH PARTY'S RIGHTS UNDER THIS AGREEMENT.

      12.12 Consent to Jurisdiction. This Agreement has been executed and
delivered in and shall be deemed to have been made in Illinois. The Company, the
Principal Stockholders and Purchaser each agree to the exclusive jurisdiction of
any state or Federal court within the city of Chicago, Illinois, with respect to
any claim or cause of action arising under or relating to this Agreement, and
waives personal service of any and all process upon it, and consents that all
services of process be made by registered or certified mail, return receipt
requested, directed to it at its address as set forth in Section 12.1, and
service so made shall be deemed to be completed

                                       62
<PAGE>
when received. The Company, the Principal Stockholders and Purchaser each waive
any objection based on forum non conveniens and waive any objection to venue of
any action instituted hereunder. Nothing in this paragraph shall affect the
right of the Company, the Principal Stockholders or Purchaser to serve legal
process in any other manner permitted by Law.

      12.13 Amendments. This Agreement shall not be modified or amended except
pursuant to an instrument in writing executed and delivered on behalf of
Purchaser, the Stockholders' Committee and, prior to the Closing, the Company.

      12.14 Headings. The headings contained in this Agreement are for
convenience of reference only and shall not affect the meaning or interpretation
of this Agreement.

              [THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       63
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date first
above written.

                                PURCHASER:

                                WELLCARE HEALTH PLANS, INC.

                                By:  /s/ Todd S. Farha
                                     -------------------------------------------
                                Name: Todd S. Farha
                                Title: President & Chief Executive Officer

                                MERGER SUB:

                                ZEPHYR ACQUISITION SUB, INC.

                                By:  /s/ Todd S. Farha
                                     -------------------------------------------
                                Name: Todd S. Farha
                                Title: President & Chief Executive Officer

                                THE COMPANY:

                                HARMONY HEALTH SYSTEMS, INC.

                                By:  /s/ John P. Blank
                                     -------------------------------------------
                                Name: John P. Blank
                                Title: President

                                PRINCIPAL STOCKHOLDERS:

                                /s/ Christopher Adams
                                ------------------------------------------------
                                Christopher Adams

                                RICHLAND VENTURES, L.P.

                                By:  /s/ W. P. Ortale III
                                     -------------------------------------------
                                Name: W. P. Ortale III
                                Title: General Partner
<PAGE>
                                CALVER FUND, INC.

                                By:  /s/ Neil R. Anderson
                                     -------------------------------------------
                                Name: Neil R. Anderson
                                Title: President

                                /s/ Alan M. Gnessin
                                ------------------------------------------------
                                Alan M. Gnessin

                                /s/ John P. Blank
                                ------------------------------------------------
                                John P. Blank

                                /s/ Robert Currie
                                ------------------------------------------------
                                Robert Currie

                                /s/ Carol Coughlin
                                ------------------------------------------------
                                Carol Coughlin

                                /s/ Dolores Carnes
                                ------------------------------------------------
                                Delores Carnes

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