NORTHBAY FINANCIAL CORP, SC 13D, 1995-11-17

NORTHBAY FINANCIAL CORP
SC 13D, 1995-11-17
SAVINGS INSTITUTION, FEDERALLY CHARTERED

Previous: CHEROKEE INC, SC 13D/A, 1995-11-17

Next: FISCHER WATT GOLD CO INC, 8-K, 1995-11-17

<PAGE> 1
CUSIP No. 663749 10 9 13D Page 1 of 89 Pages

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934

NORTHBAY FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Issuer)

Common Stock, $0.10 Par Value
- --------------------------------------------------------------------------------
(Title of Class of Securities)

663749 10 9
-----------
(CUSIP Number)

Mr. Don J. McGrath
President and Chief Operating Officer
Bank of the West
180 Montgomery Street
San Francisco, CA 94104

Copies to:

Rodney R. Peck, Esq.
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Telephone: (415) 983-1516

- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

November 9, 1995
- --------------------------------------------------------------------------------
(Date of Event which Requires
Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.

Check the following box if a fee is being paid with this statement /X/.

Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Exchange Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).

THIS STATEMENT SHALL NOT BE CONSTRUED AS AN ADMISSION THAT THE
REPORTING PERSON IS THE BENEFICIAL OWNER OF ANY SECURITIES COVERED BY
THE STATEMENT.
(Continued on following pages)
<PAGE> 2
CUSIP No. 663749 10 9 13D Page 2 of 89 Pages

- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON Bank of the West

S.S. OR I.R.S.
IDENTIFICATION NO. OF ABOVE PERSON 94-0475440
- --------------------------------------------------------------------------------

2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) / /
(b) /X/
- --------------------------------------------------------------------------------

3. SEC USE ONLY
- --------------------------------------------------------------------------------

4. SOURCE OF FUNDS WC
- --------------------------------------------------------------------------------

5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) / /
- --------------------------------------------------------------------------------

6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------

7. SOLE VOTING POWER 965,305 (including option
to acquire up to 547,354
in certain circumstances
and proxies to vote
417,951 in certain
circumstances)
(See Item 5)
NUMBER OF ----------------------------------------------------------
BENEFICIALLY
OWNED BY 8. SHARED VOTING POWER -0-
EACH ----------------------------------------------------------
REPORTING
PERSON 9. SOLE DISPOSITIVE POWER 547,354 (See Item 5)
WITH ----------------------------------------------------------

10. SHARED DISPOSITIVE POWER -0-
----------------------------------------------------------

11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
965,305 (including option
to acquire up to 547,354
in certain circumstances
and proxies to vote
417,951 in certain
circumstances)
(See Item 5)
- -------------------------------------------------------------------------------

12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- --------------------------------------------------------------------------------

13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 35.1%
- --------------------------------------------------------------------------------

14. TYPE OF REPORTING PERSON BK
- --------------------------------------------------------------------------------
<PAGE> 3
CUSIP No. 663749 10 9 13D Page 3 of 89 Pages

Introductory Statement

The reporting company hereby disclaims beneficial ownership of any
securities of the issuer and by filing this Schedule 13D does not admit
beneficial ownership for purposes of Section 13 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or otherwise.

Item 1. Security and Issuer.

The title of the class of equity securities to which this Statement
relates is the common stock, par value $0.10 (the "Company Common Stock"), of
Northbay Financial Corporation, a Delaware corporation (the "Company"). The
principal executive offices of the Company are located at 1360 Redwood Way,
Petaluma, California 94954.

Item 2. Identity and Background.

This Statement is being filed by Bank of the West, a California
corporation ("BW"). BW's principal business is the business of banking and its
principal offices are located at 180 Montgomery Street, San Francisco,
California 94104. BW is a wholly-owned subsidiary of Banque Nationale de Paris,
a banking corporation organized and existing under the laws of the Republic of
France ("BNP"). The principal offices of BNP are located at 16, Boulevard des
Italiens 75009 Paris, France. The outstanding voting shares of capital stock of
BNP are widely-held and traded on various stock exchanges outside of the United
States, including the Bourse in Paris, France.

Appendix I hereto, which is incorporated herein by reference, sets
forth for each director and executive officer of BW, such person's name,
residence or business address, present principal occupation or employment, and
the name, principal business and address of any corporation or organization in
which such employment is conducted, and such person's citizenship.

Appendix II hereto, which is incorporated herein by reference, sets
forth for each director and executive officer of BNP, such person's name,
residence or business address, present principal occupation or employment, and
the name, principal business and address of any corporation or organization in
which such employment is conducted, and such person's citizenship.

During the last five years, neither BW nor BNP nor any of the persons
listed in Appendices I or II hereto (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) has
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

BW has the option (the "Stock Option"), exercisable only in certain
circumstances (see Item 6), to acquire up to 547,354 fully paid and
nonassessable shares (subject to adjustment for certain dilutive events) of the
Company Common Stock, at a price of $13.25 per share, pursuant to the Stock
Option Agreement dated as of November 9, 1995 (the "Stock Option Agreement"),
among BW, NF Acquisition Co., a Delaware corporation and a wholly-owned
subsidiary of BW ("Sub"), and the Company, a copy of which is attached hereto as
Exhibit 1 to this Schedule 13D. Execution and delivery of the Stock Option
Agreement by the Company was a condition to the execution of the Agreement and
Plan of Merger dated as of November 9, 1995, among BW, Sub
<PAGE> 4
CUSIP No. 663749 10 9 13D Page 4 of 89 Pages

and the Company (the "Merger Agreement"), a copy of which is attached hereto as
Exhibit 2 to this Schedule 13D.

In the event that BW acquires shares of Company Common Stock pursuant
to the Stock Option Agreement, it is currently anticipated that funds required
to purchase such shares would be provided by BW's working capital.

As described in Item 5 below, BW disclaims any beneficial ownership of
any shares of Company Common Stock.

Item 4. Purpose of Transaction.

The grant of the Stock Option, exercisable only in certain
circumstances, to acquire shares of the Company Common Stock, was a condition to
the execution of the Merger Agreement, pursuant to which Sub will, subject to
certain conditions being satisfied or waived, be merged with and into the
Company (the "Merger"). Following the Merger, the separate corporate existence
of Sub shall cease and the Company shall continue as the surviving corporation.
It is anticipated that the Company and its wholly-owned subsidiary, Northbay
Savings Bank, F.S.B., will be merged with and into BW immediately following
consummation of the Merger.

As a result of the Merger, each issued and outstanding share of Company
Common Stock, not owned directly or indirectly by BW or the Company, will be
converted into the right to receive $15.75 in cash (subject to adjustment as
provided in the Merger Agreement).

Some of the basic terms of the Merger are set forth below. The Merger
Agreement is attached hereto as Exhibit 2 to this Schedule 13D, and this summary
is qualified in its entirety by reference to the complete Merger Agreement.

The Merger Agreement provides that each issued and outstanding share of
Company Common Stock (other than shares owned directly or indirectly by BW or
the Company) shall be converted into the right to receive, upon consummation of
the Merger, in cash, without interest, $15.75, subject to certain adjustments
described in more detail below (the "Merger Consideration"). As of the effective
time of the Merger (the "Effective Time"), all such shares of Company Common
Stock shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate previously
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration.

The Merger Consideration shall be adjusted downward if, at the
Effective Time, the Company Net Worth (as such term is defined in Section
8.03(c) of the Merger Agreement and as determined in accordance with Section
5.16 of the Merger Agreement) shall be less than the Net Worth Floor (as such
term is defined below), by an amount equal to the product of (i) the dollar
amount by which the Company Net Worth at such time is less than such amount and
(ii) 1.125, divided by 2,987,705. Notwithstanding the foregoing provisions, in
no event shall the Merger Consideration be adjusted downward to less than
$15.375 per share of Company Common Stock.

The "Net Worth Floor" is defined in the Merger Agreement as follows:

$35,000,000 in the event the closing of the Merger (the
"Closing") occurs on or after April 30, 1996;

$34,850,000 in the event the Closing occurs between March 31,
1996 and April 29, 1996 (dates inclusive);
<PAGE> 5
CUSIP No. 663749 10 9 13D Page 5 of 89 Pages

$34,700,000 in the event the Closing occurs between February
29, 1996 and March 30, 1996 (dates inclusive);

$34,550,000 in the event the Closing occurs between January 31,
1996 and February 28, 1996 (dates inclusive); and

$34,400,000 in the event the Closing occurs between December
31, 1995 and January 30, 1996 (dates inclusive).

If prior to the Effective Time, the Company shall declare a stock
dividend or distribution upon or subdivide, split up, reclassify or combine
Company Common Stock, or declare a dividend, or make a distribution, on Company
Common Stock in any security convertible into Company Common Stock, appropriate
adjustment or adjustments as reasonably determined by BW will be made to the
Merger Consideration to reflect the change in the capital stock of the Company
as a result thereof. If at the Effective Time, the Company shall have
outstanding more shares of Company Common Stock than are contemplated to be
outstanding or subject to option pursuant to the Company's representation and
warranty in Section 3.01(b) of the Merger Agreement, then, at BW's election and
notwithstanding other provisions of the Merger Agreement, and without limiting
any of its other rights hereunder, the Merger Consideration shall be adjusted
downward so as to reflect the total number of shares of Company Common Stock
outstanding over the amount contemplated pursuant to the Company's
representation and warranty in Section 3.01(b) of the Merger Agreement.

Each share of Company Common Stock that is owned by the Company or by
any subsidiary thereof (which shall not include any shares owned by the
Company's employee stock ownership plan and trust ("ESOP")) and each share of
Company Common Stock that is owned by BW, Sub or any other subsidiary of BW
(other than in each case, shares in trust accounts, managed accounts, custodial
accounts and the like that are beneficially owned by third parties) shall be
automatically canceled and retired and shall cease to exist, and no
consideration shall be delivered in exchange therefor.

Each option issued under the Company's stock option, stock bonus and
incentive plans and outstanding at the Effective Time shall be treated in
accordance with Section 5.06 of the Merger Agreement.

Under certain circumstances as specified in Section 7.01 of the Merger
Agreement, BW, the Company, or Sub may terminate the Merger Agreement.

Consummation of the Merger is subject to approval by a vote of the
majority of the outstanding shares of the Company and to obtaining any requisite
approvals by the Federal Deposit Insurance Corporation, the Office of Thrift
Supervision (the "OTS") and the California State Banking Department and to the
satisfaction of certain other conditions.

The Merger Agreement also provides that the directors of Sub at the
Effective Time, and the officers of Sub immediately prior to the Effective Time,
shall be the directors and officers, respectively, of the surviving corporation
after the Merger, until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.

As a result of the Merger, all shares of Company Common Stock will be
delisted from the American Stock Exchange, will not be listed on any national
securities exchange or quoted in any inter-dealer quotation system, and will be
eligible for termination of registration pursuant to Section 12(b) of the
Exchange Act.
<PAGE> 6
CUSIP No. 663749 10 9 13D Page 6 of 89 Pages

The foregoing summary of the terms of the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Merger Agreement, a copy of which is attached hereto as Exhibit 2 to
this Schedule 13D.

Item 5. Interest in Securities of the Issuer.

(a) and (b). BW has the right, exercisable only in certain
circumstances, to acquire up to 547,354 shares (subject to adjustment for
certain dilutive events) of Company Common Stock constituting approximately 19.9
percent of the issued and outstanding shares of Company Common Stock, without
adjustment to reflect the issuance to BW of such 547,354 shares. When and if BW
acquires such shares, it will have sole voting and investment power with respect
thereto, subject to certain transfer restrictions. BW disclaims beneficial
ownership of such shares until the events allowing BW to acquire such shares
occur.

Concurrently with the execution and delivery of the Merger Agreement,
members of the Board of Directors of the Company executed and delivered to BW
certain proxies irrevocably appointing certain officers of BW as proxies of such
directors for the sole purpose of voting all shares of Company Common Stock held
of record and/or beneficially owned by such directors, as of the record date for
the meeting of the stockholders of the Company at which the Merger Agreement
will be acted upon, or any adjournments thereof, in favor of the transactions
contemplated by the Merger Agreement. The aggregate number of shares of Company
Common Stock owned by such directors, beneficially and of record, as of the date
hereof (excluding any shares subject to employee stock options) is approximately
417,951 shares, which, based upon the information available to BW, constitutes
approximately 15.2 percent of the outstanding shares of the Company. The
directors executing and delivering such proxies are Alfred A. Alys, Victor L.
DeCarli, Herold Mahoney, Raymond Nizibian, D.D.S., Donald P. Ramatici, Martin A.
Stinar and Eugene W. Traverso. The form of proxy executed by such directors of
the Company is attached hereto as Exhibit 3 to this Schedule 13D.

Other than the Stock Option and the shares of Company Common Stock held
of record and/or beneficially owned by the directors of the Company subject to
the proxies discussed above, BW does not beneficially own any shares of Company
Common Stock. To the best knowledge of BW, none of BW's executive officers or
directors beneficially owns any shares of Company Common Stock.

BW hereby disclaims beneficial ownership with respect to the foregoing
shares of Company Common Stock and by filing this Schedule 13D does not admit
beneficial ownership for purposes of the provisions of Section 13(d) of the
Exchange Act or otherwise.

(c) Except for the Stock Option and the above described proxies, there
have been no transactions in shares of Company Common Stock by BW, or to the
best knowledge of BW, by any of BW's executive officers or directors, during the
past 60 days.

(d) Not applicable.

(e) Not applicable.
<PAGE> 7
CUSIP No. 663749 10 9 13D Page 7 of 89 Pages

Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.

Stock Option Agreement

Set forth below is a description of selected provisions of the Stock
Option Agreement. The Stock Option Agreement is attached hereto as Exhibit 1 to
this Schedule 13D, and this summary is qualified in its entirety by reference to
the complete Stock Option Agreement.

The Stock Option Agreement provides for the purchase by BW of up to
547,354 fully paid and nonassessable shares (subject to adjustment for certain
dilutive events)(such shares, the "Option Shares") of the Company Common Stock,
at a purchase price of $13.25 per Option Share (such price, as may be adjusted
from time to time, the "Option Price"). The Option Shares, if issued pursuant to
the Stock Option Agreement, would represent approximately 19.9 percent of the
issued and outstanding shares of Company Common Stock, without giving effect to
the issuance of any shares pursuant to an exercise of the Stock Option.

The number of shares of Company Common Stock subject to the Stock
Option will be increased to the extent that the Company issues additional shares
of Company Common Stock (otherwise than pursuant to an exercise of the Stock
Option) such that the number of Option Shares will continue to equal 19.9
percent of the then issued and outstanding shares of Company Common Stock
without giving effect to the issuance of shares pursuant to an exercise of the
Stock Option. The number of shares of Company Common Stock subject to the Stock
Option, and the applicable exercise price per Option Share, also will be
appropriately adjusted in the event of any stock dividend, split-up,
recapitalization, combination, subdivision, conversion, exchange of shares, or
similar transaction relating to the Company.

In the event BW wishes to exercise the Stock Option, it must send to
the Company a written notice (the date of which is referred to as the "Notice
Date") specifying (i) the total number of Option Shares it will purchase
pursuant to such exercise and (ii) a date not earlier than three business days
nor later than 60 business days from the Notice Date for the closing of such
purchase (such date, the "Closing Date"). If prior notification to or approval
of the OTS or any other governmental entity is required, BW will promptly file
the required notice or application. The period of time referred to in this
paragraph will run from the date the notification period expires or is
terminated or any necessary approval is obtained and any requisite waiting
period has passed. In no event shall the Closing Date be more than 18 months
after the related Notice Date.

BW may exercise the Stock Option, in whole or in part, at any time
after both an "Initial Triggering Event" and a "Subsequent Triggering Event"
occur prior to termination of the Stock Option. "Initial Triggering Event" is
defined as the occurrence with respect to the Company of any of the following
events or circumstances:

(A) The Company or any of its Subsidiaries (as such term is
defined in the Merger Agreement) (each, a "Company Subsidiary") without
having received BW's prior written consent, shall have entered into an
agreement to engage in an Acquisition Transaction (as defined below)
with any person (the term "person" for purposes of the Stock Option
Agreement having the meaning assigned thereto in Sections 3(A)(9) and
13(d)(3) of the Exchange Act and the rules and regulations thereunder)
other than BW or any of its Subsidiaries (each, a "BW Subsidiary") or
the Board of Directors of the Company shall have recommended that the
stockholders of the Company approve or accept any Acquisition
Transaction with any person other than BW or any BW Subsidiary. For
purposes of the Stock Option Agreement, "Acquisition Transaction" means
(x) a merger or consolidation, or any similar transaction, involving
the Company or any of the Company's subsidiaries, (y) a purchase, lease
or other acquisition of all or substantially
<PAGE> 8
CUSIP No. 663749 10 9 13D Page 8 of 89 Pages

all of the assets of the Company or any subsidiary or (z) a purchase or
other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the
voting power of the Company or any subsidiary; provided that the term
"Acquisition Transaction" does not include any internal merger or
consolidation involving only the Company and/or the Company
Subsidiaries;

(B) Any person (other than BW or any BW Subsidiary) shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Company Common
Stock (the term "beneficial ownership" for purposes of the Stock Option
Agreement having the meaning assigned thereto in Section 13(d) of the
Exchange Act, and the rules and regulations thereunder);

(C) Any person other than BW or any BW Subsidiary shall have
made a bona fide proposal to the Company or its stockholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any person other than BW or
any BW Subsidiary shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to, a tender offer or exchange offer to purchase
any shares of Company Common Stock such that, upon consummation of such
offer, such person would own or control 10% or more of the then
outstanding shares of Company Common Stock);

(D) After a proposal is made by a third party to the Company or
its stockholders to engage in an Acquisition Transaction, the Company
shall have breached any covenant or obligation contained in the Merger
Agreement and such breach would entitle BW to terminate the Stock
Option Agreement, the holders of Company Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders held
for the purpose of voting thereon, such meeting shall not have been
held or shall have been canceled prior to termination of the Merger
Agreement or the Company's Board of Directors shall have withdrawn or
modified in a manner adverse to BW the recommendation of the Company's
Board of Directors with respect to the Merger Agreement;

(E) Any person other than BW or any Subsidiary thereof, other
than in connection with a transaction to which BW has given its prior
written consent, shall have filed an application or notice with the OTS
or other federal or state bank regulatory authority for approval to
engage in an Acquisition Transaction with respect to the Company; or

(F) The Company shall have breached any covenant or obligation
contained in that certain letter agreement dated October 17, 1995
between BW and the Company, a copy of which is attached hereto as
Exhibit 4 to this Schedule 13D.

"Subsequent Triggering Event" is defined as the occurrence with respect
to the Company of either of the following events or circumstances after the date
of the Stock Option Agreement:

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

(B) The occurrence of an Initial Triggering Event described in
paragraph (A) above except that the percentage referred to in clause
(z) thereof shall be 25%.

In certain circumstances, purchase of shares of Company Common Stock
pursuant to the exercise of the Stock Option will be subject to approval by the
OTS.
<PAGE> 9
CUSIP No. 663749 10 9 13D Page 9 of 89 Pages

The Stock Option terminates upon the earliest to occur of (i) the
Effective Time of the Merger, (ii) termination of the Merger Agreement pursuant
to the terms thereof (other than for any of the reasons described in clause
(iii) below), and (iii) the later of (A) 18 months after termination of the
Merger Agreement (x) by either BW or Sub under Section 7.01(c)(i) thereof, (y)
by BW under Section 7.01(b)(ii) thereof as a result of a willful breach of any
covenant or obligation or willful breach of any of the Company's representations
or warranties contained in the Merger Agreement, provided, however, that such
breach need not be willful if such termination occurs after the occurrence of an
Initial Triggering Event, or (z) by the Company under Section 7.01(b)(iv) of the
Merger Agreement under circumstances where BW or Sub could effect termination
pursuant to Section 7.01(c)(i) thereof, and (B) the passage of 18 months after
the occurrence of the first Initial Triggering Event; provided, however, that
any such exercise and purchase of Option Shares shall be subject to compliance
with applicable laws.

The Stock Option Agreement provides also that the Company shall, if
requested by BW at any time and from time to time (i) within three years of the
first exercise of the Stock Option or (ii) for 30 business days following (x)
receipt by BW of official notice that an approval of the OTS or any other
governmental entity required for the purchase of the Option Shares would not be
issued or granted or (y) a Closing Date shall not have occurred within 18 months
after BW has given notice to the Company that it wishes to exercise the Stock
Option due to the failure to obtain any such required approval, or receipt by BW
of official notice that an approval of the OTS or any other governmental entity
required for a repurchase as contemplated by the Stock Option Agreement would
not be issued or granted (but solely as to the shares of Company Common Stock or
portion of the Stock Option with respect to which the required approval was not
received), as expeditiously as practicable prepare and file up to two
registration statements under the Securities Act if necessary in order to permit
the sale or other disposition of the shares of Company Common Stock or other
securities that have been acquired by or are issuable to BW upon exercise of the
Stock Option in accordance with the intended method of sale or other disposition
stated by BW, including a "shelf" registration statement under the Securities
Act.

At the request of BW at any time during (i) the period during which the
Stock Option is exercisable, (ii) the period of 30 business days immediately
following (x) receipt by BW of official notice that an approval of the OTS or
any other governmental entity required for the purchase of the Option Shares
would not be issued or granted or (y) a Closing Date shall not have occurred
within 18 months after BW has given notice to the Company that it wishes to
exercise the Stock Option due to the failure to obtain any such required
approval (but solely as to the shares of Company Common Stock with respect to
which the required approval was not received) (either such period being referred
to herein as the "Repurchase Period"), the Company (or any successor entity
thereof) shall repurchase from BW (A) the Stock Option (or, in the circumstances
set forth in clause (ii) above, that portion thereof relating to shares of
Company Common Stock with respect to which required approvals were not received)
unless the Stock Option has expired or been terminated in accordance with the
terms of the Stock Option Agreement and (B) all Option Shares purchased by BW
pursuant thereto with respect to which BW then has beneficial ownership.

Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:

(1) the aggregate exercise price paid by BW for any Option
Shares acquired with respect to which BW then has beneficial ownership;

(2) the excess, if any, of (x) the Applicable Price (as such
term is defined in the Stock Option Agreement) for shares of Company
Common Stock over (y) the Option Price, with such excess multiplied by
the number of Option Shares with respect to which the Stock Option has
not been exercised; and
<PAGE> 10
CUSIP No. 663749 10 9 13D Page 10 of 89 Pages

(3) the excess, if any, of (x) the Applicable Price over (y) the
Option Price paid (or, in the case of Option Shares with respect to
which the Option has been exercised but the Closing Date has not
occurred, payable) by BW for each Option Share with respect to which
the Stock Option has been exercised, with such excess multiplied by the
number of such Option Shares.

If BW exercises the foregoing repurchase rights, the Company shall,
within 10 business days after the date on which BW exercises such rights, pay
the Section 8 Repurchase Consideration to BW in immediately available funds, and
BW shall surrender to the Company the Stock Option and the certificates
evidencing the shares of Company Common Stock purchased thereunder with respect
to which BW then has beneficial ownership.

Except to the extent that BW shall have previously exercised its rights
to require repurchase of the Stock Option pursuant to the foregoing, at the
request of the Company during the six-month period commencing 15 months
following the first occurrence of a Subsequent Triggering Event, the Company may
repurchase from BW, and BW shall sell to the Company, all (but not less than
all) the shares of Company Common Stock acquired by BW pursuant to the Stock
Option Agreement and with respect to which BW has beneficial ownership at the
time of such repurchase at a price equal to the greater of (i) 110% of the
Current Market Price (as such term is defined in the Stock Option Agreement) or
(ii) the sum of (A) the Option Price in respect of the shares so acquired and
(B) BW's pre-tax per share carrying cost (as such term is defined in the Stock
Option Agreement), multiplied in the case of either clause (i) or (ii) above by
the number of shares so acquired; provided that BW, within 30 days following the
Company's notice of its intention to purchase shares pursuant to foregoing, may
deliver an Offeror's Notice (as such term is defined in the Stock Option
Agreement) pursuant to Section 11 thereof.

If the Company exercises its rights pursuant to the foregoing and BW
does not elect to sell, assign, transfer or otherwise dispose of all or any of
the shares of Company Common Stock pursuant to Section 11 of the Stock Option
Agreement, the Company shall, within 10 business days after the expiration of
the 30-day period referred to in the foregoing paragraph or, if applicable, upon
abandonment of the sale to a third party pursuant to Section 11 of the Stock
Option Agreement, pay the repurchase consideration in immediately available
funds, and BW shall surrender to the Company the certificates evidencing the
shares of Company Common Stock purchased pursuant to the terms of the Stock
Option Agreement with respect to which BW then has beneficial ownership.

In the event that, prior to the termination of the Stock Option, the
Company shall enter into an agreement (i) to consolidate with or merge into any
person, other than BW or one of its subsidiaries, and shall not be the
continuing or surviving corporation of such consolidation or merger, (ii) to
permit any person, other than BW or one of its subsidiaries, to merge into the
Company and the Company shall be the continuing or surviving corporation, but,
in connection with such merger, the then outstanding shares of Company Common
Stock shall be changed into or exchanged for stock or other securities of the
Company or any other person or cash or any other property or the then
outstanding shares of Company Common Stock shall after such merger represent
less than 50% of the outstanding shares and share equivalents of the merged
company or (iii) to sell or otherwise transfer all or substantially all its
assets to any person, other than BW or one of its subsidiaries, then, and in
each such case, the agreement governing such transaction shall make proper
provision so that the Stock Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth in the Stock Option
Agreement, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of BW, of either (A) the Acquiring Corporation (as
defined below) or (B) any person that controls the Acquiring Corporation.
<PAGE> 11
CUSIP No. 663749 10 9 13D Page 11 of 89 Pages

"Acquiring Corporation" is defined in the Stock Option Agreement as (A)
the continuing or surviving corporation of a consolidation or merger with the
Company (if other than the Company), (B) the Company in a merger in which the
Company is the continuing or surviving person or (C) the transferee of all or
substantially all of the Company's assets.

The Substitute Option shall have the same terms as the Stock Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Stock Option, such terms shall be as similar as possible and
in no event less advantageous to BW. The issuer of the Substitute Option (the
"Substitute Option Issuer") shall also enter into an agreement with BW in
substantially the same form as the Stock Option Agreement, which shall be
applicable to the Substitute Option.

The Substitute Option shall be exercisable for such number of shares of
common stock of the Substitute Option Issuer ("Substitute Common Stock") as is
equal to the then-current Applicable Price multiplied by the number of shares of
Company Common Stock for which the Stock Option is then exercisable, divided by
the then-current Average Price (as such term is defined in the Stock Option
Agreement). The exercise price of the Substitute Option per share of Substitute
Common Stock shall then be equal to the Option Price multiplied by a fraction in
which the numerator is the number of shares of Company Common Stock for which
the Stock Option is then exercisable and the denominator is the number of shares
of the Substitute Common Stock for which the Substitute Option is exercisable;
provided that in no event shall the Substitute Option be exercisable for more
than 19.9 percent of the shares of Substitute Common Stock outstanding prior to
the exercise of the Substitute Option.

Neither BW nor the Company may assign any of its respective rights and
obligations under the Stock Option Agreement or the Stock Option to any other
person without the other party's prior written consent, except that BW may
assign in whole or in part its rights and obligations under the Stock Option
Agreement and the Stock Option to Sub or to any other direct or wholly-owned
subsidiary of BW without the consent of the Company.

If the Stock Option terminates under certain circumstances as described
in the Stock Option Agreement, BW may have as many as 30 days subsequent to such
termination to exercise the Stock Option (or Substitute Option) in connection
with the resale of Company Common Stock or other securities pursuant to a
registration statement as provided in the Stock Option Agreement.

The foregoing summary of the Stock Option Agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of
the Stock Option Agreement, a copy of which is attached hereto as Exhibit 1 to
this Schedule 13D. See Item 5, above.

Merger Agreement

BW, Sub and the Company are also parties to the Merger Agreement, a
copy of which is attached hereto as Exhibit 2 to this Schedule 13D. See Item 4,
above.

Irrevocable Proxies

directors of the Company is attached hereto as Exhibit 3 to this Schedule 13D.
See Item 5, above.

Except for the contracts, arrangements, understandings and
relationships described above, neither BW nor BNP is a party to any contracts,
arrangements, understandings or relationships with respect to any securities of
the Company, including but not limited to the transfer or voting of any of the
securities of the Company, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.

Item 7. Materials to be Filed as Exhibits.

Exhibit 1 Stock Option Agreement dated as of November
9, 1995

Exhibit 2 Agreement and Plan of Merger dated as of
November 9, 1995

Exhibit 3 Form of Proxy delivered by Directors of the
Company to BW

Exhibit 4 Letter Agreement dated October 17, 1995
between the Company and BW

SIGNATURE

After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.

Dated as of November 17, 1995.

BANK OF THE WEST

By /s/ Douglas C. Grigsby
--------------------------------------
Its Executive Vice President and Chief
Financial Officer

<PAGE> 13
CUSIP No. 663749 10 9 13D Page 13 of 89 Pages

SCHEDULE 13D

INDEX TO APPENDICES AND EXHIBITS

<TABLE>
<CAPTION>
Sequentially
Numbered
Item Description Page
- ---------- ------------------ ------------
<S> <C> <C>
Appendix I Directors and Executive Officers of BW 14

Appendix II Directors and Executive Officers of BNP 19

Exhibit 1 Stock Option Agreement dated as of
November 9, 1995 23

Exhibit 2 Agreement and Plan of Merger dated as
of November 9, 1995 36

Exhibit 3 Form of Proxy delivered by Directors of
the Company to BW 85

Exhibit 4 Letter Agreement dated October 17, 1995
between the Company and BW 87
</TABLE>
<PAGE> 14
CUSIP No. 663749 10 9 13D Page 14 of 89 Pages

APPENDIX I TO SCHEDULE 13D

DIRECTORS AND EXECUTIVE OFFICERS

OF BW

A. Directors

1. Michel Larrouilh

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Chief Executive Officer of Bank of the West ("BW") and
Vice Chairman of the Board of Directors

c. Citizenship: USA

2. Don J. McGrath

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: President and Chief Operating Officer of BW

c. Citizenship: USA

3. Lionel Bordarier

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Head of American Department-Banque Nationale de Paris
("BNP")

c. Citizenship: France

4. Maryellen Cattani

a. Business Address: American President Companies
1111 Broadway
Oakland, California 94607

b. Occupation: Senior Vice President and General Counsel

c. Citizenship: USA

5. Robert A. Fuhrman

a. Business Address: Bank of the West
180 Montgomery Street

<PAGE> 15
CUSIP No. 663749 10 9 13D Page 15 of 89 Pages

San Francisco, California 94104

b. Occupation: Chairman of the Board of Directors of BW and Retired
Vice Chairman of the Board and Chief Operating Officer
of Lockheed Corporation

c. Citizenship: USA

6. Vivien Levy-Garboua

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Senior Executive Vice President, International
Affairs-BNP

c. Citizenship: France

7. Yves Martrenchar

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Head of the Retail and Professional Department, Domestic
Network-BNP

c. Citizenship: France

8. Otis W. Mitchell

a. Business Address: Holmes Properties
P.O. Box 1710
San Jose, California 95109

b. Occupation: General Manager of Holmes Properties

c. Citizenship: USA

9. Rodney R. Peck

a. Business Address: Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, California 94104

b. Occupation: Attorney

c. Citizenship: USA

10. Donald A. Pelton

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

<PAGE> 16
CUSIP No. 663749 10 9 13D Page 16 of 89 Pages

b. Occupation: Retired from position as Senior Executive Vice
President, Real Estate Administration-BW

c. Citizenship: USA

11. Joel Sibrac

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Head of the North American Sector, American Division-BNP

c. Citizenship: France

12. William R. Thomas

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Retired Senior Vice President, Global Marine, Inc.

c. Citizenship: USA

13. Jean Thomazeau

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Executive Vice President, Corporations, Banks and
Commitments, International Division

c. Citizenship: France

14. Admiral Robert A. Toney, USN Retired

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Retired Admiral, United States Navy

c. Citizenship: USA

15. Jacques Henri Wahl

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Advisor to the Chairman-BNP

c. Citizenship: France

<PAGE> 17
CUSIP No. 663749 10 9 13D Page 17 of 89 Pages

B. Executive Officers

1. Michel Larrouilh
(see entry under "Directors")

2. Don J. McGrath
(see entry under "Directors")

3. Bernard Brasseur

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Risk Manager-BW

c. Citizenship: France

4. Stephen C. Glenn

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President and Chief Administrative
Officer and Corporate Secretary

c. Citizenship: USA

5. Thomas J. Burns

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President-Credit Administration

c. Citizenship: USA

6. Richard T. McGoldrick

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President-Consumer Credit Division

c. Citizenship: USA

7. Christian Morio

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

<PAGE> 18
CUSIP No. 663749 10 9 13D Page 18 of 89 Pages

b. Occupation: Chief Inspector-BW

c. Citizenship: France

8. Douglas C. Grigsby

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President and Chief Financial Officer

c. Citizenship: USA

9. Frank Bonetto

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President-Community Banking

c. Citizenship: USA

10. Donald E. Weyant

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President-Real Estate Industries Group

c. Citizenship: USA

11. James R. Henry

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President, Corporate Banking

c. Citizenship: USA

12. Donald R. Ward

a. Business Address: Bank of the West
180 Montgomery Street
San Francisco, California 94104

b. Occupation: Executive Vice President-Operations and Systems

c. Citizenship: USA

<PAGE> 19

CUSIP No. 663749 10 9 13D Page 19 of 89 Pages

APPENDIX II TO SCHEDULE 13D

DIRECTORS AND EXECUTIVE OFFICERS

OF BNP

A. Directors

1. Lindsay Owen-Jones

a. Business Address: 14, rue Royale
75008 Paris, France

b. Occupation: Chairman of L'Oreal

c. Citizenship: United Kingdom

2. Alain Joly

a. Business Address: 75 Quai d'Orsay
75007 Paris, France

b. Occupation: Chairman of Air Liquide

c. Citizenship: France

3. Jurgen Sarrazin

a. Business Address: Jurgen Ponto Platz 1
60301 Frankfurt am Main
Germany

b. Occupation: Chairman of the Executive Committee of
Dresdner Bank

c. Citizenship: Germany

4. Rene Thomas

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Chairman Emeritus of BNP

c. Citizenship: France

5. Michel Pebereau

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Chairman of BNP
<PAGE> 20
CUSIP No. 663749 10 9 13D Page 20 of 89 Pages

c. Citizenship: France

6. Daniel Lebegue

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: President and Chief Operating Officer - BNP

c. Citizenship: France

7. Jacques Henri Wahl

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Advisor to the Chairman - BNP

c. Citizenship: France

8. Jean-Louis Beffa

a. Business Address: Les Miroirs
92096 La Defense, France

b. Occupation: Chairman of Saint-Gobain

c. Citizenship: France

9. Jean Gandois

a. Business Address: 31, ave Pierre ler de Serbie
75016 Paris, France

b. Occupation: President of the CNPF (Conseil National
du Patronat Francais)

c. Citizenship: France

10. Philippe Jaffre

a. Business Address: Tour ELF

2 place de la Coupole, La Defense
92400 Courbevoie, France

b. Occupation: Chairman of ELF-Aquitaine

c. Citizenship: France

11. Patrick Auguste

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France
<PAGE> 21
CUSIP No. 663749 10 9 13D Page 21 of 89 Pages

b. Occupation: Employee - BNP

c. Citizenship: France

12. Jean-Marie Gianno

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Employee - BNP

c. Citizenship: France

13. Jacques Friedman

a. Business Address: 9, place Vendome
75001 Paris, France

b. Occupation: Chairman of UAP

c. Citizenship: France

14. Louis Schweitzer

a. Business Address: 34, quai du Point du Jour
92109 Boulogne - Billancourt

b. Occupation: Chairman of Renault

c. Citizenship: France

15. Philippe Mussot

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Employee - BNP

c. Citizenship: France

B. Executive Officers

1. Daniel Lebegue
(see entry under "Directors")

2. Jacques Henri Wahl
(see entry under "Directors")
<PAGE> 22
CUSIP No. 663749 10 9 13D Page 22 of 89 Pages

3. Christian Aubin

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Senior Executive Vice President, Auditing
and Strategy

c. Citizenship: France

4. George Chodron de Courcel

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Senior Executive Vice President, Finance

c. Citizenship: France

5. Vivien Levy-Garboua

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Senior Executive Vice President,
International Affairs

c. Citizenship: France

6. Baudouin Prot

a. Business Address: Banque Nationale de Paris
16 Boulevard des Italiens
75009 Paris, France

b. Occupation: Senior Executive Vice President, Domestic
Network

c. Citizenship: France
<PAGE> 23
CUSIP No. 663749 10 9 13D Page 23 of 89 Pages

EXHIBIT 1

Stock Option Agreement
dated as of November 9, 1995
<PAGE> 24

Execution Copy

STOCK OPTION AGREEMENT dated as of November 9, 1995, among BANK
OF THE WEST, a California banking corporation ("Grantee"), NF
ACQUISITION CO., a Delaware corporation and a wholly owned subsidiary
of Grantee ("Sub"), and NORTHBAY FINANCIAL CORPORATION, a Delaware
corporation ("Issuer").

WHEREAS, Issuer is a registered savings and loan holding company under the
Savings and Loan Holding Company Act, as amended (the "SLHC Act");

WHEREAS, Grantee is a commercial bank organized and existing under
California law;

WHEREAS, Grantee, Sub and Issuer propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (the "Merger Agreement");

WHEREAS, as a condition and inducement to Grantee's and Sub's willingness
to enter into the Merger Agreement, Grantee and Sub have required that Issuer
grant to Grantee the Option (as defined in Section 2); and

WHEREAS, the Board of Directors of Issuer, believing it to be in the best
interests of Issuer, has approved this Agreement and the grant by Issuer of the
Option.

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the parties hereto agree as follows:

1. Definitions; Interpretation. Capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement, which also
contains in Section 8.03(b) thereof certain rules of construction and
interpretation that shall be applicable hereto as if set forth herein.

2. Grant of Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up
to 547,354 fully paid and nonassessable shares (such amount, as may be adjusted
from time to time as set forth herein, the "Option Shares") of Common Stock, par
value $0.10 per share ("Issuer Common Stock"), of the Issuer at a purchase price
of U.S. $13.25 per Option Share (such price, as may be adjusted from time to
time as set forth herein, the "Option Price"). The number of Option Shares that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as set forth in Section 6.

3. Exercise of Option. (a) Grantee may exercise the Option, in whole or
part, at any time and from time to time on or after the date hereof if, but only
if, both an Initial Triggering Event (as defined below) and a Subsequent
Triggering Event (as defined below) shall have occurred prior to the occurrence
of an Exercise Termination Event (as defined below). Each of the following shall
be an Exercise Termination Event: the earliest to occur of (i) the Effective
Time of the Merger, (ii) termination of the Merger Agreement pursuant to Section
7.01 thereof (other than for any of the reasons described in clause (iii) of
this Section 3(a)), and (iii) the later of (A) 18 months after termination of
the Merger Agreement (x) by either Grantee or Sub under Section 7.01(c)(i)
thereof, (y) by Grantee under Section 7.01(b)(ii) thereof as a result of a
willful breach of any covenant or obligation or willful breach of any of
Issuer's representations, or warranties contained in the Merger Agreement,
provided, however, that such breach need not be willful if such termination
occurs after the occurrence of an Initial Triggering Event, or (z) by Issuer
under Section 7.01(b)(iv) under circumstances where Grantee or Sub could effect
termination pursuant to Section 7.01(c)(i), and (B) the passage of 18 months
after the occurrence of the first Initial Triggering Event; provided, however,
that, any such exercise and purchase of

-1-
<PAGE> 25

Option Shares shall be subject to compliance with applicable laws, including the
SLHC Act. The rights set forth in Sections 8, 9 and 10 shall not terminate when
the right to exercise the Option terminates as set forth herein, but shall
extend to such time as is provided in such Sections 8, 9 and 10. Notwithstanding
the termination of the Option, Grantee shall be entitled to purchase those
Option Shares with respect to which it has exercised the Option in accordance
with the terms hereof prior to the termination of the Option.

(b) (i) An "Initial Triggering Event" means the occurrence with respect to
the Issuer of any of the following events or circumstances after the date
hereof:

(A) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary")
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as defined
below) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(A)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Securities Exchange
Act"), and the rules and regulations thereunder) other than Grantee or any
of its Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors
of Issuer shall have recommended that the stockholders of Issuer approve or
accept any Acquisition Transaction with any person other than Grantee or
any Grantee Subsidiary. For purposes of this Agreement, "Acquisition
Transaction" shall mean (x) a merger or consolidation, or any similar
transaction, involving Issuer or any of Issuer's subsidiaries, (y) a
purchase, lease or other acquisition of all or substantially all of the
assets of Issuer or any subsidiary or (z) a purchase or other acquisition
(including by way of merger, consolidation, share exchange or otherwise) of
securities representing 10% or more of the voting power of Issuer or any
subsidiary; provided that the term "Acquisition Transaction" does not
include any internal merger or consolidation involving only Issuer and/or
Issuer Subsidiaries;

(B) Any person (other than Grantee or any Grantee Subsidiary) shall
have acquired beneficial ownership or the right to acquire beneficial
ownership of 10% or more of the outstanding shares of Issuer Common Stock
(the term "beneficial ownership" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Securities Exchange Act,
and the rules and regulations thereunder);

(C) Any person other than Grantee or any Grantee Subsidiary shall have
made a bona fide proposal to Issuer or its stockholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction (including,
without limitation, any situation in which any person other than Grantee or
any Grantee Subsidiary shall have commenced (as such term is defined in
Rule 14d-2 under the Securities Exchange Act) or shall have filed a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon consummation of
such offer, such person would own or control 10% or more of the then
outstanding shares of Issuer Common Stock (such an offer being referred to
herein as a "Tender Offer" or an "Exchange Offer," respectively));

(D) After a proposal is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach would entitle Grantee to terminate the Agreement, the holders
of Issuer Common Stock shall not have approved the Merger Agreement at the
meeting of such stockholders held for the purpose of voting thereon, such
meeting shall not have been held or shall have been cancelled prior to
termination of the Merger Agreement or Issuer's Board of Directors shall
have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the Merger
Agreement;

(E) Any person other than Grantee or any Subsidiary thereof, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall

-2-
<PAGE> 26

have filed an application or notice with the Office of Thrift Supervision
("OTS") or other federal or state bank regulatory authority for approval to
engage in an Acquisition Transaction with respect to Issuer; or

(F) Issuer shall have breached any covenant or obligation contained in
that certain letter agreement dated October 17, 1995 between Grantee and
Issuer.

(ii) The term "Subsequent Triggering Event" shall mean the occurrence with
respect to Issuer of either of the following events or circumstances after the
date hereof:

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

(B) The occurrence of an Initial Triggering Event described in Section
3(b)(i)(A) except that the percentage referred to in clause (z) shall be
25%.

(c) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event or Subsequent Triggering Event (together, a
"Triggering Event"); provided that it is understood that the giving of such
notice by Issuer shall not be a condition to the right of Grantee to exercise
the Option.

(d) In the event Grantee is entitled to and wishes to exercise the Option,
it shall send to Issuer a written notice (the date of which being referred to
herein as the "Notice Date") specifying (i) the total number of Option Shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (a "Closing Date"); provided that if prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with such purchase, Grantee shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which, as the case may be, (A) any required
notification periods have expired or been terminated or (B) such approvals have
been obtained and any requisite waiting period or periods shall have passed.

(e) Notwithstanding Section 3(d), in no event shall any Closing Date be
more than 18 months after the related Notice Date, and if the Closing Date shall
not have occurred within 18 months after the related Notice Date due to the
failure to obtain any such required approval, the exercise of the Option
effected on the Notice Date shall be deemed to have expired. In the event (i)
Grantee receives official notice that an approval of the OTS or any other
Governmental Entity required for the purchase of the Option Shares would not be
issued or granted or (ii) a Closing Date shall not have occurred within 18
months after the related Notice Date due to the failure to obtain any such
required approval, Grantee shall nevertheless be entitled to exercise its right
as set forth in Section 8 or to exercise the Option in connection with the
resale of Issuer Common Stock or other securities pursuant to a registration
statement as provided in Section 10. The provisions of this Section 3 and
Section 4 shall apply with appropriate adjustments to any such exercise.

4. Payment and Delivery of Certificates. (a) On each Closing Date referred
to in Section 3(d), Grantee shall pay to Issuer in immediately available funds
by a wire transfer to a bank account designated by Issuer an amount equal to the
Option Price multiplied by the number of Option Shares to be purchased on such
Closing Date.

(b) On each Closing Date, simultaneously with the delivery of immediately
available funds as provided in Section 4(a), Issuer shall deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased on
such Closing Date. If the Option should be exercised in part only, a new Option
evidencing the rights of Grantee to purchase the balance of the Option Shares
purchasable hereunder shall be issued to Grantee, and Grantee shall deliver to
Issuer a copy of this Agreement and a letter agreeing that Grantee will not
offer to sell or otherwise dispose of such Option Shares in violation of
applicable law or the provisions of this Agreement.

-3-
<PAGE> 27

(c) Certificates for Issuer Common Stock delivered on a Closing Date
hereunder shall be endorsed with a restrictive legend that shall read
substantially as follows:

THE TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
CERTAIN RESALE RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
NOVEMBER 9, 1995, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF ISSUER. A COPY OF SUCH AGREEMENT WILL BE MAILED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.

It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if Grantee shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission, or an opinion of counsel, in
form and substance satisfactory to Issuer, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Option Shares have been
sold or transferred in compliance with the provisions of this Agreement and
under circumstances that do not require the retention of such reference; and
(iii) the legend shall be removed in its entirety if the conditions in the
preceding clauses (i) and (ii) are both satisfied. In addition, such
certificates shall bear any other legend as may be required by law.

(d) Upon the giving by Grantee to Issuer of the written notice of exercise
of the Option provided for under Section 3(d), the tender of the applicable
purchase price in immediately available funds and the tender of a copy of this
Agreement to Issuer, Grantee shall be deemed to be the holder of record of the
Option Shares issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such Option Shares shall not then be actually delivered to Grantee. Issuer shall
pay all expenses and any and all federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 4 in the name of Grantee or
its assignee, transferee or designee.

(e) If, at the time of issuance of any Option Shares pursuant to an
exercise of all or a portion of the Option hereunder, Issuer shall have created
a "poison pill" or similar security and issued any "rights" or similar
securities pursuant thereto ("Rights"), then each Option Share issued pursuant
to such exercise shall also represent Rights or new rights with terms
substantially identical to and at least as favorable to Grantee as are provided
under the Rights Agreement or any similar agreement then in effect.

5. Authorizations, etc. Issuer agrees (i) that it shall at all times
maintain, free from preemptive rights or Liens, sufficient authorized but
unissued shares of Issuer Common Stock (and other securities issuable pursuant
to Section 6) so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
recapitalization, reclassification, consolidation, merger, dissolution or sale
of assets, or by any other voluntary act, avoid or seek to avoid the observance
or performance of any of the covenants, stipulations or conditions to be
observed or performed hereunder by Issuer, (iii) promptly to take all action as
may from time to time be required (including, in the event, under the SLHC Act,
or a state banking law, prior approval of or notice to the OTS or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with Grantee in preparing such applications or notices and
providing such information to the OTS or such state regulatory authority as they
may require) in order to permit Grantee to exercise the Option and so that the
Option Shares, when issued, shall be duly authorized, validly issued, fully paid
and nonassessable and free and clear of all Liens and not subject to any
preemptive rights; and (iv) promptly to take all action provided herein to
protect the rights of Grantee against dilution.

-4-
<PAGE> 28

6. Adjustments. (a) In the event that any additional shares of Issuer
Common Stock are issued or otherwise become outstanding after the date of this
Agreement (other than pursuant to an exercise of the Option or an event
described in Section 6(b)), including pursuant to stock option plans and in
connection with acquisitions and other transactions permitted by the Merger
Agreement, the number of Option Shares shall be increased so that, after such
issuance, it equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding (without giving pro forma effect to the issuance of the
Option Shares). Nothing contained in this Section 6(a) or elsewhere in this
Agreement shall be deemed to authorize Issuer to issue shares of Issuer Common
Stock in breach of, or otherwise breach any of, the provisions of the Merger
Agreement.

(b) In the event of any change in Issuer Common Stock by reason of a stock
dividend, split-up, recapitalization, combination, subdivision, conversion,
exchange of shares or similar transaction, the type and number of Option Shares
shall be appropriately adjusted and proper provision shall be made in the
agreements governing any such transaction, so that Grantee shall receive upon
exercise of the Option the number and class of shares, other securities,
property or cash that Grantee would have received in respect of Issuer Common
Stock if the Option had been exercised in full and the Option Shares had been
issued to Grantee immediately prior to such event or the record date therefor,
as applicable. Whenever the number of Option Shares is adjusted as provided in
this Section 6(b), the Option Price shall be adjusted by multiplying the Option
Price by a fraction, the numerator of which is equal to the number of Option
Shares purchasable prior to the adjustment and the denominator of which is equal
to the number of Option Shares purchasable after the adjustment.

7. Replacement Options. (a) In the event that, prior to an Exercise
Termination Event, Issuer shall enter into an agreement (i) to consolidate with
or merge into any person, other than Grantee or one of its subsidiaries, and
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or one of its
subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property or
the then outstanding shares of Issuer Common Stock shall after such merger
represent less than 50% of the outstanding shares and share equivalents of the
merged company or (iii) to sell or otherwise transfer all or substantially all
its assets to any person, other than Grantee or one of its subsidiaries, then,
and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
Grantee, of either (A) the Acquiring Corporation (as defined below) or (B) any
person that controls the Acquiring Corporation.

(b) The following terms have the meanings indicated:

(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in a merger in which Issuer is the continuing or
surviving person or (C) the transferee of all or substantially all of
Issuer's assets.

(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.

(iii) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that, if Issuer is
the issuer of the Substitute Option, the Average Price shall be computed
with respect to a share of common stock issued by the person merging into
Issuer or by any company which controls or is controlled by such person, as
Grantee may elect.

-5-
<PAGE> 29

(c) The Substitute Option shall have the same terms as the Option, provided
that, if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to Grantee. The issuer of the Substitute Option (the
"Substitute Option Issuer") shall also enter into an agreement with Grantee in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option. Without limiting the generality of the foregoing, the
provisions of Sections 8, 9, 10, 11 and 12 shall apply with respect to the
Substitute Option and any securities for which the Substitute Option becomes
exercisable with the same effect as if all references to "Issuer" in such
Sections were references to "Substitute Option Issuer", all references to
"Issuer Common Stock" were references to "Substitute Common Stock", all
references to the "Option" were references to the "Substitute Option" and all
references to "Option Shares" were references to "Substitute Option Shares".

(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the then-current Applicable Price (as
defined in Section 8(c)) multiplied by the number of shares of Issuer Common
Stock for which the Option is then exercisable, divided by the then-current
Average Price. The exercise price of the Substitute Option per share of
Substitute Common Stock shall then be equal to the Option Price multiplied by a
fraction in which the numerator is the number of shares of Issuer Common Stock
for which the Option is then exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.

(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to the exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to such exercise but for the
limitation in this paragraph (e), the Substitute Option Issuer shall make a cash
payment to Grantee equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this paragraph (e) over (ii) the
value of the Substitute Option after giving effect to the limitation in this
paragraph (e). This difference in value shall be determined by a nationally
recognized investment banking firm selected by Grantee.

(f) Issuer shall not enter into any transaction described in Section 7(a)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder.

8. Repurchase at the Option of Grantee. (a) At the request of Grantee at
any time during (i) the period during which the Option is exercisable pursuant
to Section 3 or (ii) the period of 30 business days immediately following the
occurrence of either of the events set forth in clauses (i) and (ii) of the
second sentence of Section 3(e) (but solely as to the shares of Issuer Common
Stock with respect to which the required approval was not received) (either such
period being referred to herein as the "Repurchase Period"), Issuer (or any
successor entity thereof) shall repurchase from Grantee (A) the Option (or, in
the circumstances set forth in clause (ii) above, that portion thereof relating
to shares of Issuer Common Stock with respect to which required approvals were
not received) unless the Option has expired or been terminated in accordance
with the terms hereof and (B) all Option Shares purchased by Grantee pursuant
hereto with respect to which Grantee then has beneficial ownership. The date on
which Grantee exercises its rights under this Section 8 is referred to as the
"Request Date". Such repurchase shall be at an aggregate price (the "Section 8
Repurchase Consideration") equal to the sum of:

(1) the aggregate exercise price paid by Grantee for any Option Shares
acquired with respect to which Grantee then has beneficial ownership;

(2) the excess, if any, of (x) the Applicable Price for shares of
Issuer Common Stock over (y) the Option Price, with such excess multiplied
by the number of Option Shares with respect to which the Option has not
been exercised; and

-6-
<PAGE> 30
(3) the excess, if any, of (x) the Applicable Price over (y) the
Option Price paid (or, in the case of Option Shares with respect to which
the Option has been exercised but the Closing Date has not occurred,
payable) by Grantee for each Option Share with respect to which the Option
has been exercised, with such excess multiplied by the number of such
Option Shares.

(b) If Grantee exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Grantee in immediately available funds, and Grantee shall
surrender to Issuer the Option and the certificates evidencing the shares of
Issuer Common Stock purchased thereunder with respect to which Grantee then has
beneficial ownership, and Grantee shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all Liens. Notwithstanding the foregoing, to the extent that prior notification
to or approval of the OTS or other Governmental Entity is required in connection
with the payment of all or any portion of the Section 8 Repurchase
Consideration, Issuer shall deliver from time to time that portion of the
Section 8 Repurchase Consideration that it is not then so prohibited from paying
and shall promptly file the required notice or application for approval and
shall expeditiously process the same (and Grantee shall cooperate with Issuer in
the filing of any such notice or application and the obtaining of any such
approval), and the period of time that otherwise would run pursuant to the
preceding sentence for the payment of the portion of the Section 8 Repurchase
Consideration requiring such notification or approval shall run instead from the
date on which, as the case may be, (i) any required notification period has
expired or been terminated or (ii) such approval has been obtained and, in
either event, any requisite waiting period shall have passed. If the OTS or any
other Governmental Entity disapproves of any part of Issuer's proposed
repurchase pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Grantee and redeliver to Grantee the Option Shares it is then prohibited
from repurchasing, and Grantee shall have the right to exercise the Option as to
the number of Option Shares for which the Option was exercisable at the Request
Date less the number of shares as to which payment has been made pursuant to
Section 8(a)(2); provided that if the Option shall have terminated prior to the
date of such notice or shall be scheduled to terminate prior to the date of such
notice or shall be scheduled to terminate at any time before the expiration of a
period ending on the 30th business day after such date, Grantee shall
nonetheless have the right so to exercise the Option or exercise its rights
under Section 10 until the expiration of such period of 30 business days.
Notwithstanding anything herein to the contrary, Grantee shall be entitled to
exercise its right under this Section 8 on only one occasion.

(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share at which a tender offer or exchange
offer has been made for shares of Issuer Common Stock after the date hereof and
on or prior to the Request Date (or any other applicable determination date),
(ii) the price per share to be paid by any third party for shares of Issuer
Common Stock or the consideration per share to be received by holders of Issuer
Common Stock, in each case pursuant to an agreement with Issuer for a merger or
other business combination entered into on or prior to the Request Date (or any
other applicable determination date), (iii) the highest price per share paid by
any third party to acquire from a stockholder of Issuer, in one transaction or
in a series of related transactions, an aggregate amount of Issuer Common Stock
of 10% or more of the outstanding Issuer Common Stock or (iv) the highest bid
price per share of Issuer Common Stock as quoted on the American Stock Exchange
or, if not so quoted, on the principal trading market on which such shares are
traded as reported by a recognized source during the 60 business days preceding
the Request Date (or any other applicable determination date). If the
consideration to be offered, paid or received pursuant to a transaction
described in either clause (i) or (ii) above shall be other than cash, the value
of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Grantee and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.

9. Repurchase at the Option of Issuer. (a) Except to the extent that
Grantee shall have previously exercised its rights under Section 8, at the
request of Issuer during the six-month period commencing 15 months following the
first occurrence of a Subsequent Triggering Event, Issuer may repurchase from
Grantee, and Grantee shall sell to Issuer, all (but not less than all)

-7-
<PAGE> 31

the shares of Issuer Common Stock acquired by Grantee pursuant hereto and with
respect to which Grantee has beneficial ownership at the time of such repurchase
at a price equal to the greater of (i) 110% of the Current Market Price (as
defined below) or (ii) the sum of (A) the Option Price in respect of the shares
so acquired and (B) Grantee's pre-tax per share carrying cost (as defined
below), multiplied in the case of either clause (i) or (ii) above by the number
of shares so acquired (the "Section 9 Repurchase Consideration"); provided that
Grantee, within 30 days following Issuer's notice of its intention to purchase
shares pursuant to this Section 9, may deliver an Offeror's Notice (as defined
in Section 11) pursuant to Section 11, in which case the provisions of Section
11 and not those of this Section 9 shall control; and provided further that
Issuer's rights under this Section 9 shall be suspended (with any such rights
being extended accordingly) during any period when the exercise of such rights
would subject Grantee to liability pursuant to Section 16(b) of the Exchange Act
by reason of Grantee's purchase of shares of Issuer Common Stock pursuant to
this Agreement.

(b) If Issuer exercises its rights under this Section 9 and Grantee does
not deliver an Offeror's Notice or Grantee does not sell the shares to a third
party pursuant thereto, Issuer shall, within 10 business days after the
expiration of the 30-day period referred to in paragraph (a) above or, if
applicable, upon abandonment of the transaction covered by the Offeror's Notice,
pay the Section 9 Repurchase Consideration in immediately available funds, and
Grantee shall surrender to Issuer the certificates evidencing the shares of
Issuer Common Stock purchased hereunder with respect to which Grantee then has
beneficial ownership, and Grantee shall warrant that it has sole record and
beneficial ownership of such shares and that the same are then free and clear of
all Liens.

(c) As used herein, (i) "Current Market Price" means the average closing
bid price per share of Issuer Common Stock as quoted on the American Stock
Exchange or, if not so quoted, on the principal trading market on which such
shares are traded as reported by a recognized source for the 10 business days
preceding the date of the Issuer's request for repurchase pursuant to this
Section 9 and (ii) "Grantee's pretax per share carrying cost" shall be the
amount equal to the interest on the aggregate Option Price paid for the shares
of Issuer Common Stock purchased from the date of purchase to the date of
repurchase at the rate of interest announced by Parent as its prime or base
lending or reference rate during such period, less any dividends received on the
shares so purchased, divided by the number of shares so purchased.

10. Registration Rights; Listing. (a) Issuer shall, if requested by Grantee
at any time and from time to time (i) within three years of the first exercise
of the Option or (ii) for 30 business days following the occurrence of either of
the events set forth in clauses (i) and (ii) of the second sentence of Section
3(e) or receipt by Grantee of official notice that an approval of the OTS or any
other Governmental Entity required for a repurchase as contemplated by Section
8(b) would not be issued or granted (but solely as to the shares of Issuer
Common Stock or portion of the Option with respect to which the required
approval was not received), as expeditiously as practicable prepare and file up
to two registration statements under the Securities Act if necessary in order to
permit the sale or other disposition of the shares of Issuer Common Stock or
other securities that have been acquired by or are issuable to Grantee upon
exercise of the Option in accordance with the intended method of sale or other
disposition stated by Grantee, including a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision. Issuer shall use
its best efforts to cause each such registration statement to become effective
and to remain effective for such period not in excess of 180 days from the day
such registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. Issuer shall also use its
best efforts to qualify such shares or other securities under any applicable
state securities laws. Grantee agrees to use all reasonable efforts to cause,
and to cause any underwriters or agents of any sale or other disposition to
cause, any sale or other disposition pursuant to such registration statement to
be effected on a widely distributed basis so that upon consummation thereof no
purchaser or transferee shall own beneficially more than 2% of the then
outstanding voting power of Issuer. In the event that Grantee requests Issuer to
file a registration statement following the failure to obtain a required
approval for an exercise of the Option as described in Section 3(e), the closing
of the sale or other disposition of Issuer Common Stock or other securities
pursuant to such registration statement shall occur substantially simultaneously
with the exercise of the Option,

-8-
<PAGE> 32

and Grantee shall be entitled to cause the Option Shares to be issued directly
to the underwriters or agents named in such registration statement. The
obligations of Issuer hereunder to file a registration statement and to maintain
its effectiveness may be suspended for one or more periods of time that do not
exceed 60 days in the aggregate for all such periods if the Board of Directors
of Issuer shall have determined that the filing of such registration statement
or the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Issuer. Any registration
effected under this Section 10 shall be at Issuer's expense, except for
underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto. Grantee shall provide all
information reasonably requested by Issuer for inclusion in any registration
statement to be filed hereunder. If requested by Grantee in connection with any
such registration, Issuer shall become a party to any underwriting agreement
relating to the sale of such shares or other securities, but only to the extent
of obligating itself in respect of representations, warranties, covenants,
indemnities, contribution and other agreements customarily included in such
underwriting agreements for the issuer. If, during the time periods referred to
in the first sentence of this Section 10, Issuer effects a registration under
the Securities Act of Issuer Common Stock for its own account or for any other
stockholders of Issuer (other than on Form S-4 or S-8, or any successor form),
it shall allow Grantee the right to participate in such registration, and such
participation shall not affect the obligation of Issuer to effect two
registration statements for Grantee under this Section 10; provided that, if the
managing underwriters of such offering advise Issuer in writing that in their
opinion the number of shares of Issuer Common Stock requested to be included in
such registration exceeds the number which can be sold in such offering, Issuer
shall include the shares requested to be included therein by Grantee pro rata
with the shares intended to be included therein by Issuer or other stockholders,
taken as a single group.

(b) If Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on a national or regional securities
exchange or quoted on a national or regional quotation system, Issuer, upon
request of Grantee, shall use its best efforts to make any filings and obtain
any approvals necessary in order to cause the Option Shares or other securities
acquired upon exercise of the Option to be so listed or quoted.

11. First Refusal. At any time after the first occurrence of a Subsequent
Triggering Event and prior to the later of (a) expiration of 24 months
immediately following the first purchase of shares of Issuer Common Stock
pursuant to the Option and (b) the termination of the Option pursuant to Section
3(a), if Grantee shall desire to sell, assign, transfer or otherwise dispose of
all or any of the shares of Issuer Common Stock or other securities acquired by
it pursuant to the Option, it shall give Issuer written notice of the proposed
transaction (an "Offeror's Notice"), identifying the proposed transferee,
accompanied by a copy of a binding offer to purchase such shares or other
securities from such transferee and setting forth the terms of the proposed
transaction. An Offeror's Notice shall be deemed an offer by Grantee to Issuer,
which may be accepted within 10 business days of the receipt of such Offeror's
Notice, on the same terms and conditions and at the same price at which Grantee
is proposing to transfer such shares or other securities to such transferee. The
purchase of any such shares or other securities by Issuer shall be settled
within 10 business days of the date of the acceptance of the offer and the
purchase price shall be paid to Grantee in immediately available funds; provided
that, if prior notification to or approval of the OTS or any other Governmental
Entity is required in connection with such purchase, Issuer shall promptly file
the required notice or application for approval and shall expeditiously process
the same (and Grantee shall cooperate with Issuer in the filing of any such
notice or application and the obtaining of any such approval) and the period of
time that otherwise would run pursuant to this sentence shall run instead from
the date on which, as the case may be, (i) any required notification period has
expired or been terminated or (ii) such approval has been obtained and, in
either event, any requisite waiting period shall have passed. In the event of
the failure or refusal of Issuer to purchase all the shares or other securities
covered by an Offeror's Notice or if the OTS or any other Governmental Entity
disapproves Issuer's proposed purchase of such shares or other securities,
Grantee may, within 60 days from the date of the Offeror's notice (subject to
any necessary extension for regulatory notification, approval or waiting
periods), sell all, but not less than all, of such shares or other securities to
the proposed transferee at no less than the price specified, and on terms no
more favorable than those specified, in the Offeror's Notice. The requirements

-9-
<PAGE> 33

of this Section 11 shall not apply to (A) any disposition as a result of which
the proposed transferee would own beneficially not more than 2% of the
outstanding voting power of Issuer, (B) any disposition of Issuer Common Stock
or other securities by a person to whom Grantee has assigned its rights under
the Option with the consent of Issuer, (C) any sale by means of a public
offering registered under the Securities Act in which steps are taken to
reasonably assure that no purchaser will acquire securities representing more
than 2% of the outstanding voting power of Issuer or (D) any transfer to Sub or
to any other wholly owned subsidiary of Parent that agrees in writing to be
bound by the terms hereof.

12. Division of Option. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any Stock Option Agreements and related Options for which this Agreement
(and the Option granted hereby) may be exchanged. Upon receipt by Issuer of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Agreement, and (in the case of loss, theft, or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed, or mutilated shall at any time
be enforceable by anyone.

13. Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement or the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Grantee may assign in whole or
in part its rights and obligations hereunder to Sub or to any other direct or
indirect wholly owned subsidiary of Grantee without the consent of Issuer.
Subject to the preceding sentence, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns.

14. Further Assurances. Each party hereto will use its best efforts to make
all filings with, and to obtain consent of, all third parties and governmental
authorities necessary or advisable to the consummation of the transactions
contemplated by this Agreement, including applying to the OTS under the SLHC Act
for approval to acquire the shares issuable hereunder. In the event of any
exercise of the Option by Grantee, Issuer, Grantee and Sub shall execute and
deliver all other documents and instruments and take all other action that may
be reasonably necessary or advisable in order to consummate the transactions
provided for by such exercise.

15. Specific Performance. The parties hereto acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party hereto
and that the obligations of the parties hereto shall be enforceable by either
party hereto through specific performance, injunctive relief or other equitable
relief. This provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.

16. Severability. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a Federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions contained in this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 8, the full number of Option Shares provided in
Section 1(a) hereof (as adjusted pursuant to Section 6), it is the express
intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of Option Shares as may be permissible without any
amendment or modification hereof.

-10-
<PAGE> 34

17. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in the manner and to the addresses specified in accordance with Section 8.02 of
the Merger Agreement.

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

19. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

20. Expenses. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.

21. Waiver and Amendment. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.

22. Entire Agreement; No Third-Party Beneficiaries. Except as otherwise
expressly provided herein or in the Merger Agreement, this Agreement (and the
Merger Agreement and the other documents and instruments referred to herein and
therein) contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereof, written or oral. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and permitted assigns, any
rights,

-11-
<PAGE> 35

remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.

IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
day and year first above written.

BANK OF THE WEST,

by
/s/ Don J. McGrath
---------------------------------------------
Name: Don J. McGrath
Title: President and Chief Operating Officer

NF ACQUISITION CO.,

by
/s/ Douglas C. Grigsby
---------------------------------------------
Name: Douglas C. Grigsby
Title: Treasurer

NORTHBAY FINANCIAL CORPORATION,

by
/s/ Alfred A. Alys
---------------------------------------------
Name: Alfred A. Alys
Title: President and Chief Executive Officer

-12-
<PAGE> 36
CUSIP No. 663749 10 9 13D Page 36 of 89 Pages

EXHIBIT 2

Agreement and Plan of Merger
dated as of November 9, 1995
<PAGE> 37

Confidential Execution Copy

AGREEMENT AND PLAN OF MERGER

Dated as of November 9, 1995

among

BANK OF THE WEST

NF ACQUISITION CO.

and

NORTHBAY FINANCIAL CORPORATION
<PAGE> 38
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C>
Parties and Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE I The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.03. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.05. Certificate of Incorporation and By-laws . . . . . . . . . . . . . . . 2
SECTION 1.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.08. Absence of Control . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.09. Alternative Structure . . . . . . . . . . . . . . . . . . . . . . . . 2

ARTICLE II Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates . . . . . . . . . . . . . . . . 2
SECTION 2.01. Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Capital Stock of Sub . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cancellation of Company and Parent Owned Stock . . . . . . . . . . . . 3
(c) Conversion of Company Common Stock . . . . . . . . . . . . . . . . . . 3
(d) Outstanding options . . . . . . . . . . . . . . . . . . . . . . . . . 3
(e) Appraisal rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(f) Conversion of Dissenting Shares . . . . . . . . . . . . . . . . . . . 4
(g) Closure of Stock Transfer Books . . . . . . . . . . . . . . . . . . . 4
(h) Adjustments for Dilution and Other Matters . . . . . . . . . . . . . . 4
SECTION 2.02. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Parent To Provide Funds . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 4
(d) No Further Ownership Rights in Company Common Stock . . . . . . . . . 5
(e) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(f) Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 5

ARTICLE III Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.00. Materiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.01. Representations and Warranties of the Company . . . . . . . . . . . . 6
(a) Organization and Authority . . . . . . . . . . . . . . . . . . . . . . 6
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) SEC Documents; Financial Statements; Reports . . . . . . . . . . . . . 8
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . 10
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(h) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(i) Absence of Changes in Benefit Plans . . . . . . . . . . . . . . . . . 12
(j) ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(k) Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(l) State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . 14
(m) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(n) Other Activities of the Company and its Subsidiaries . . . . . . . . . 15
(o) Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(p) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(q) Material Interests of Certain Persons . . . . . . . . . . . . . . . . 16
(r) Brokers and Finders; Schedule of Fees and Expenses . . . . . . . . . . 16
(s) Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . 16
(t) Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>

(i)

<PAGE> 39

<TABLE>
<S> <C>
(u) Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(v) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . 17
(w) Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . . 17
(x) Registration Obligations . . . . . . . . . . . . . . . . . . . . . . . 18
(y) Accounting Records . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(z) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . 19
(aa) Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . 19
(bb) Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(cc) Interest Rate Risk Management Instruments; Structured Notes . . . . . 20
(dd) Compliance with Policies . . . . . . . . . . . . . . . . . . . . . . . 20
(ee) Community Reinvestment Act . . . . . . . . . . . . . . . . . . . . . . 20
(ff) Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 3.02. Representations and Warranties of Parent and Sub . . . . . . . . . . . 21
(a) Organization and Authority . . . . . . . . . . . . . . . . . . . . . . 21
(b) Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Ownership of Company Common Stock . . . . . . . . . . . . . . . . . . 22
(e) Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . 22
(f) Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(g) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Community Reinvestment Act Compliance . . . . . . . . . . . . . . . . 22
(i) Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE IV Covenants Relating to Conduct of the Company's Business . . . . . . . . . . . 23
SECTION 4.01. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . . . 23
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(f) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(h) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(i) Advice of Changes; Government Filings . . . . . . . . . . . . . . . . 24
(j) Accounting Methods . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(k) Compensation; Benefit Plans Employment Agreement . . . . . . . . . . . 25
(l) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(m) Settlements, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(n) Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(o) Loans and Commitments . . . . . . . . . . . . . . . . . . . . . . . . 26
(p) Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(q) No Change in Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(r) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 4.02. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE V Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.01. Preparation of the Proxy Statement . . . . . . . . . . . . . . . . . . 27
SECTION 5.02. Access to Information . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 5.03. Company Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.04. Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 5.05. Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5.06. Stock Options and the ESOP; Profit Sharing Plan . . . . . . . . . . . 30
SECTION 5.07. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5.08. Indemnification, Exculpation and Insurance . . . . . . . . . . . . . . 31
SECTION 5.09. Company Accruals and Reserves . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.10. Letters of Accountants to the Company . . . . . . . . . . . . . . . . 31
SECTION 5.11. Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.12. Parent Covenants; Other Actions . . . . . . . . . . . . . . . . . . . 31
SECTION 5.13 Joint Implementation Team . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>

-ii-
<PAGE> 40

<TABLE>
<S> <C>
SECTION 5.14 Employee Training . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 5.15 Environmental, ADA and Seismic Investigations . . . . . . . . . . . . 32
SECTION 5.16. Certificates re Financial Data . . . . . . . . . . . . . . . . . . . . 33

ARTICLE VI Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger . . . . . . 33
(a) Company Stockholder Approval . . . . . . . . . . . . . . . . . . . . . 33
(b) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(c) No Injunctions or Restraints; Illegality . . . . . . . . . . . . . . . 33
SECTION 6.02. Conditions to Obligations of Parent . . . . . . . . . . . . . . . . . 33
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . 33
(b) Performance of Obligations of the Company . . . . . . . . . . . . . . 33
(c) Burdensome Condition . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Company Stock Options and Company Stock Plans . . . . . . . . . . . . 34
(e) Letter of the Company's Independent Accountants; Results of Audit . . . 34
(f) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(g) Litigation, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(h) No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . 34
(i) Certain Expense Reports . . . . . . . . . . . . . . . . . . . . . . . 34
(j) Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 34
(k) Certain Other Approvals . . . . . . . . . . . . . . . . . . . . . . . 35
(l) Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . 35
(m) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . 35
(n) Headquarters and Administrative Offices . . . . . . . . . . . . . . . 35
(o) Certificates re Financial Data . . . . . . . . . . . . . . . . . . . . 35
SECTION 6.03. Conditions to Obligations of the Company . . . . . . . . . . . . . . . 35
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . 35
(b) Performance of Obligations of Parent and Sub . . . . . . . . . . . . . 36
(c) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . 36

ARTICLE VII Termination and Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 7.02. Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.04. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver . . . . . . 38

ARTICLE VIII General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.01. Nonsurvival of Representations and Warranties . . . . . . . . . . . . 38
SECTION 8.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.03. Definitions; Interpretation . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.04. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.05. Entire Agreement; No Third-Party Beneficiaries; Rights of Ownership . . 41
SECTION 8.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.07. Limitations on Remedies . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.08. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.09. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.10. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 8.11. Certain Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.12. Director Health Coverage . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 8.13. Employee Retention . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8.14. Subsequent Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of Trust Agreement
</TABLE>

-iii-
<PAGE> 41
<TABLE>
<S> <C>
EXHIBIT C Opinion of Company Counsel
EXHIBIT D Individuals to Execute Non-Competition Agreements
EXHIBIT E Opinion of Parent Counsel
EXHIBIT F Individuals Furnishing Proxies
EXHIBIT G Form of Merger Agreement (Parent and Surviving Corporation)
EXHIBIT H Form of Merger Agreement (Parent and NSB)
</TABLE>

-iv-
<PAGE> 42

AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1995, among BANK OF
THE WEST, a California banking corporation ("Parent"), NF ACQUISITION CO., a
Delaware corporation and a wholly owned first-tier subsidiary of Parent ("Sub"),
and NORTHBAY FINANCIAL CORPORATION, a Delaware corporation (the "Company").

WHEREAS, the Company is a registered savings and loan holding company under
the Savings and Loan Holding Company Act of 1956, as amended (the "SLHCA");

WHEREAS, Parent is a commercial bank organized and existing under
California law;

WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved the merger of Sub into the Company as set forth below (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each of the 2,750,522 issued and outstanding shares of common
stock, par value U.S.$.10 per share, of the Company ("Company Common Stock"),
not owned directly or indirectly by Parent or the Company, will be converted
into the right to receive U.S.$15.75 in cash (subject to adjustment as herein
provided);

WHEREAS, as a condition and inducement to Parent's and Sub's willingness to
enter into this Agreement, Parent, Sub and the Company are entering into a Stock
Option Agreement dated as of the date hereof in the form of Exhibit A hereto
(the "Stock Option Agreement") pursuant to which the Company has granted to
Parent an option to purchase shares of Company Common Stock constituting 19.9%
of the presently outstanding shares of Company Common Stock;

WHEREAS, the Merger requires the approval by an affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock entitled
to vote thereon ("Company Stockholder Approval"); and

WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Stock Option Agreement, the parties hereto agree as follows:

ARTICLE I

The Merger

SECTION 1.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 1.03). Following the Merger, the separate corporate
existence of Sub shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL.

SECTION 1.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., California time, on the first Business Day (as defined in
Section 8.03(c)) which is the last Business Day of the month following the
satisfaction (or waiver) of all the conditions set forth in Article VI (the
"Closing Date"), at the offices of Pillsbury Madison & Sutro, 235 Montgomery
Street, San Francisco, California 94104, unless another time, date or place is
agreed to in writing by the parties hereto; provided, however, in the event that
the Closing does not occur on or before 11:59 p.m. June 30, 1996, then in that
event the Closing shall take place within ten days after the satisfaction of the
conditions referred to in this sentence.

-1-
<PAGE> 43

SECTION 1.03. Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") shall be
duly prepared, executed, acknowledged and filed by the parties in accordance
with the relevant provisions of the DGCL with the Secretary of State of the
State of Delaware. Unless Parent shall specify differently, the Certificate of
Merger shall provide that the Merger shall be effective at 12:01 a.m.,
California time, on the calendar day following the Closing Date (the time the
Merger becomes effective being hereinafter referred to as the "Effective Time").

SECTION 1.04. Effects of the Merger. At and after the Effective Time, the
Merger shall have the effects set forth in Section 259 of the DGCL.

SECTION 1.05. Certificate of Incorporation and By-laws. (a) The certificate
of incorporation of the Company as in effect immediately prior to the Effective
Time shall be the certificate of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.

(b) The by-laws of the Company as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.

SECTION 1.06. Directors. The directors of Sub at 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.

SECTION 1.07. Officers. The officers of Sub immediately prior to the
Effective Time 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.

SECTION 1.08. Absence of Control. Subject to any provisions of this
Agreement, it is the intent of the parties that Parent by reason of this
Agreement shall not (until consummation of the transactions contemplated hereby)
control, and shall not be deemed to control, directly or indirectly, the Company
or any of its Subsidiaries (as defined in Section 8.03(c)) and shall not
exercise, or be deemed to exercise, directly or indirectly, a controlling
influence over the management or policies of the Company or any of its
Subsidiaries.

SECTION 1.09. Alternative Structure. Notwithstanding anything contained in
this Agreement to the contrary, Parent may specify that, before or after the
Merger, Parent, Sub, the Company, Northbay Savings Bank, F.S.B. ("NSB") and any
other Subsidiary or Affiliate (as such terms are defined in Section 8.03(c))
shall enter into transactions other than those described in this Article I in
order to effect the purposes of this Agreement, and the Company and Parent shall
take all action necessary and appropriate to effect, or cause to be effected,
such transactions, provided, however, that no such specification may (a)
materially and adversely affect the timing of the consummation of the
transactions contemplated herein or (b) adversely affect the tax effect or
economic benefits of the Merger to the holders of Company Common Stock.

-2-
<PAGE> 44

ARTICLE II

Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates

SECTION 2.01. 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
Company Common Stock or any shares of capital stock of Sub:

(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value U.S.$.01 per share, of the Surviving
Corporation.

(b) Cancellation of Company and Parent Owned Stock. Each share of Company
Common Stock that is owned by the Company or by any Subsidiary of the Company
(which shall not include any shares owned by the Company's employee stock
ownership plan and trust (the "ESOP")) and each share of Company Common Stock
that is owned by Parent, Sub or any other Subsidiary of Parent (other than, in
each case, shares in trust accounts, managed accounts, custodial accounts and
the like that are beneficially owned by third parties (any such shares, "Trust
Account Shares")) shall be automatically canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.

(c) Conversion of Company Common Stock. Each issued and outstanding share
of Company Common Stock (other than shares to be canceled in accordance with
Section 2.01(b)) shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, U.S.$15.75, subject to adjustment as
hereinafter provided in this Section (the "Merger Consideration"). As of the
Effective Time, all such shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate previously representing any such shares
shall cease to have any rights with respect thereto, except the right to receive
the Merger Consideration, without interest. Notwithstanding the foregoing
provisions of this Section, the Merger Consideration shall be adjusted downward
if, at the Effective Time, the Company Net Worth (as defined in Section 8.03(c)
and as determined in accordance with Section 5.16) shall be less than the Net
Worth Floor (as defined in Section 8.03(c)), by an amount equal to the product
of (i) the dollar amount by which the Company Net Worth at such time is less
than such amount and (ii) 1.125, divided by 2,987,705. Notwithstanding the
foregoing provisions of this Section, in no event shall the Merger Consideration
be adjusted downward to less than U.S.$15.375 per share of Company Common Stock.

(d) Outstanding options. Each Company Employee Option (as defined in
Section 3.01(b)) outstanding as of the Effective Time shall be treated in
accordance with Section 5.06.

(e) Appraisal rights. Each outstanding share of Company Common Stock as to
which a written demand for appraisal is filed in accordance with Section 262 of
the DGCL at or prior to the Company Stockholders' Meeting (as defined in Section
3.01(c)) and not withdrawn at or prior to the Stockholders' Meeting and which is
not voted in favor of the Merger shall not be converted into or represent a
right to receive the Merger Consideration unless and until the holder shall have
failed to perfect, or shall have effectively withdrawn or lost his or her right
to appraisal of and payment for his or her Company Common Stock under such
Section 262, at which time his or her shares shall be converted into the Merger
Consideration in accordance with the terms hereof. All such shares of Company
Common Stock as to which a written demand for appraisal is so filed and not
withdrawn at or prior to the time of such vote and which are not voted in favor
of the Merger, except any such shares of Company Common Stock the holder of
which, prior to the Effective Time shall have effectively withdrawn or lost his
or her right to appraisal in respect of his or her shares of Company Common
Stock under Section 262, are herein called "Dissenting Shares." The Company
shall give Parent prompt notice upon receipt by the Company of any demand for
appraisal rights, withdrawal of such demands, and any other instruments served
pursuant to Section 262 of the DGCL, and the Company shall give Parent the
opportunity to direct all negotiations and proceedings with

-3-
<PAGE> 45

respect to such demands. The Company shall not voluntarily make any payment with
respect to any demands for appraisal rights and shall not, except with the prior
written consent of Parent, settle or offer to settle any such demands. Each
holder of Company Common Stock who becomes entitled, pursuant to the provisions
of said Section 262, to payment for his or her shares of Company Common Stock
under the provisions of said section shall receive payment therefor from the
Surviving Corporation and such shares of Company Common Stock shall be canceled.

(f) Conversion of Dissenting Shares. If, prior to the Effective Time, any
stockholder of the Company shall fail to perfect, or shall effectively withdraw
or lose, his or her right to appraisal of and payment for his or her Dissenting
Shares under section 262 of the DGCL, the Dissenting Shares of such holder shall
be treated for purposes of this Article II like any other shares of outstanding
Company Common Stock. If, after the Effective Time, any holder of Company Common
Stock shall fail to perfect, or shall effectively withdraw or lose, his or her
right to appraisal of and payment for his or her Dissenting Shares under Section
262 of the DGCL, each such Dissenting Share of such holder shall be converted
into cash pursuant to this Article II and in accordance with the procedures, and
subject to the conditions, set forth in this Article II and elsewhere herein.

(g) Closure of Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed as to holders of Company Common
Stock immediately prior to the Effective Time and no transfer of Company Common
Stock by any such holder shall thereafter be made or recognized. If, after the
Effective Time, Certificates (as defined in Section 2.02(c)) are properly
presented in accordance with Section 2.02 to the Paying Agent (as defined in
Section 2.02(a)), such Certificates shall be canceled, and exchanged for a check
representing the amount of cash into which the Company Common Stock represented
thereby was converted in the Merger.

(h) Adjustments for Dilution and Other Matters. If prior to the Effective
Time, the Company shall declare a stock dividend or distribution upon or
subdivide, split up, reclassify or combine Company Common Stock, or declare a
dividend, or make a distribution, on Company Common Stock in any security
convertible into Company Common Stock (provided that no such action may be taken
by the Company without Parent's prior written consent as so provided in Article
IV), appropriate adjustment or adjustments as reasonably determined by Parent
will be made to the Merger Consideration to reflect the change in the capital
stock of the Company as a result thereof. If at the Effective Time, the Company
shall have outstanding more shares of Company Common Stock than are contemplated
to be outstanding or subject to option pursuant to the Company's representation
and warranty in Section 3.01(b), then, at Parent's election and notwithstanding
other provisions hereof, and without limiting any of its other rights hereunder,
the Merger Consideration shall be adjusted downward so as to reflect the total
number of shares of Company Common Stock outstanding over the amount
contemplated pursuant to the Company's representation and warranty in Section
3.01(b).

SECTION 2.02. Exchange of Certificates. (a) Paying Agent. The trust
department of Parent is hereby designated to act as paying agent (in such
capacity, the "Paying Agent") for the payment of the Merger Consideration upon
surrender of certificates representing Company Common Stock.

(b) Parent To Provide Funds. Parent shall take all steps necessary to
enable and cause Sub, or the Surviving Corporation, to provide to the Paying
Agent on a timely basis, as and when needed on and after the Effective Time,
funds necessary to pay the Merger Consideration in respect of the shares of
Company Common Stock as part of the Merger pursuant to Section 2.01(c) or to pay
any amount required under Section 2.01(e).

(c) Exchange Procedures. As soon as reasonably practicable (and in any
event no later than 10 days) after the Effective Time, Parent shall mail to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") whose shares were converted into the right to receive the Merger
Consideration pursuant to Section 2.01(c) (i) a letter of

-4-
<PAGE> 46

transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in such form and have such other
customary provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other customary
documents as may be reasonably required by the Paying Agent, the holder of such
Certificate shall be entitled to receive promptly in exchange therefor the
amount of cash into which the shares of Company Common Stock theretofore
represented by such Certificate shall have been converted pursuant to Section
2.01(c), and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Company Common Stock which is not registered
in the transfer records of the Company, payment shall be made to a person other
than the person in whose name the Certificate so surrendered is registered, if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.02(c), each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of Company
Common Stock theretofore represented by such Certificate shall have been
converted pursuant to Section 2.01(c). No interest will be paid or will accrue
on the cash payable upon the surrender of any Certificate under any provision of
this Agreement.

(d) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of Certificates in accordance with the terms hereof shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares of Company Common Stock theretofore represented by such Certificates,
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the Effective Time
which may have been declared or made by the Company on such shares of Company
Common Stock in accordance with the terms of this Agreement on or prior to the
Effective Time and which remain unpaid at the Effective Time, and there shall be
no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.

(e) No Liability. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article II would otherwise escheat to or become the
property of any Governmental Entity (as defined in Section 3.01(c))), the cash
payment in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interests of any person previously entitled thereto.

(f) Withholding Rights. The Paying Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Common Stock such amounts as the Paying Agent is
required to deduct, hold and, if applicable, pay over to a taxing authority with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code") or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by the Paying Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by the Paying Agent.

-5-
<PAGE> 47

ARTICLE III

Representations and Warranties

The Company has heretofore delivered to Parent a disclosure schedule with
respect to the representations and warranties set forth below (the "Company
Disclosure Schedule"). The Company Disclosure Schedule contains section and
subsection references which in each case are references to sections or
subsections of this Agreement. The Company Disclosure Schedule shall in each
case describe the nature of the exception, if any, in reasonable detail and
shall specifically refer to the section or subsection of this Agreement to which
any exception set forth therein to a representation and warranty contained in
this Article III applies (disclosure in any section or subsection of the Company
Disclosure Schedule shall apply only to the corresponding section or subsection
of this Agreement).

SECTION 3.00. Materiality. No representation or warranty of the Company or
Parent contained in Section 3.01 (other than Sections 3.01(b), (c)(i), (l), (m),
(q), (r), (s), (u), (x), (cc), (ff)) or 3.02, respectively, shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have breached any
such representation or warranty, on account of the existence of any fact,
circumstance or event unless, as a consequence of such fact, circumstance or
event, individually or taken together with all other facts, circumstances or
events inconsistent with any such paragraph of Section 3.01 or 3.02, as
applicable, there is reasonably likely to occur a Material Adverse Effect as
defined in Section 8.03(a).

SECTION 3.01. Representations and Warranties of the Company. Except as
specified on the Company Disclosure Schedule, the Company represents and
warrants to Parent and Sub as follows:

(a) Organization and Authority. The Company is a savings and loan holding
company duly registered with the Office of Thrift Supervision ("OTS") under the
SLHCA. NSB is a directly held wholly owned Subsidiary of the Company. Each of
the Company and its Subsidiaries is a savings bank or corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary except
where the failure so to qualify would not have a Material Adverse Effect (as
defined in Section 8.03(a)) on the Company. The deposit accounts of NSB are
insured up to applicable limits by the Savings Association Insurance Fund (the
"SAIF") of the Federal Deposit Insurance Corporation (the "FDIC").

(b) Capital Structure. (i) The authorized capital stock of the Company
consists of 4,000,000 shares of Company Common Stock and 1,000,000 shares of
serial preferred stock, par value U.S.$.10 per share ("Company Preferred
Stock"). At the date hereof, (A) 2,750,522 shares of Company Common Stock were
outstanding, (B) 547,354 shares of Company Common Stock were reserved for
issuance under the Stock Option Agreement, (C) 237,183 shares of Company Common
Stock were reserved for issuance with respect to outstanding options (the
"Company Employee Options") issued under the Company's stock option, stock bonus
and incentive plans, including the 1988 Stock Option and Incentive Plan (the
"Incentive Plan"), a list of which is set forth on the Company Disclosure
Schedule, and (D) no shares of Company Preferred Stock were outstanding. Except
as set forth above, at the date hereof, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. The Company Disclosure Schedule sets forth the name of each holder
of an option or other right outstanding under the Incentive Plan, a description
of the exercise or purchase prices, vesting schedules, expiration dates, and the
number of shares of the Company Common Stock subject to each Company Employee
Option, together with a specification of all Company Employee Options which
shall vest at the Effective Time as a result of the Merger. Except for the
Company Employee Options listed on the Company Disclosure Schedule, there will
not be outstanding at any time up to and including the Effective Time any stock
options, stock appreciation rights, restricted stock grants or any other such
right to acquire any shares of the

-6-
<PAGE> 48

Company Common Stock from the Company. Except for shares of Company Common Stock
which may be issued pursuant to the exercise of Company Employee Options, there
will be no increase in the outstanding shares of Company Common Stock and no
issuance of any shares of Company Preferred Stock after the execution and
delivery of this Agreement. Without limiting the foregoing provisions of this
Section 3.01(b)(i), the Company has issued no "rights" or other securities
commonly referred to as "poison pill" or similar securities and there will be no
issuance of any such securities after the execution and delivery of this
Agreement.

(ii) No bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exchangeable for securities having the right to
vote) on any matters on which stockholders may vote ("Voting Debt") of the
Company are issued or outstanding.

(iii) All outstanding shares of the Company Common Stock are, and any shares
of Company Common Stock which may be issued pursuant to the Stock Option
Agreement or upon exercise of Company Employee Options will be, validly issued,
fully paid and nonassessable and will be delivered free and clear of all claims,
liens, encumbrances, charges, pledges or security interests of any kind or
nature whatsoever (collectively, "Liens"), subject to repayment of the Company's
ESOP loan, and not subject to preemptive rights.

(iv) Except for this Agreement, the Incentive Plan and the ESOP
(the "Company Stock Plans"), the Company Employee Options and the Stock Option
Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any Subsidiary of the Company is a party or by which it is
bound obligating the Company or any Subsidiary of the Company to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock or any Voting Debt of the Company or of any Subsidiary of the Company or
obligating the Company or any Subsidiary of the Company to issue, grant, extend
or enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking.

(v) There are no outstanding contractual obligations (A) of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries, other than the Stock
Option Agreement and the purchase of shares in the market pursuant to the
Employee Stock Purchase Plan and 401(k) plan, or (B) of the Company to vote or
to dispose of or encumber any shares of the capital stock of any of its
Subsidiaries.

(c) Authorization. (i) The Company has all requisite corporate power and
authority to enter into this Agreement and the Stock Option Agreement and,
subject in the case of this Agreement to the Company Stockholder Approval, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company, subject in the case
of this Agreement to the Company Stockholder Approval. Without limiting the
foregoing, (A) this Agreement and the Stock Option Agreement have been approved
by the unanimous vote of all members of the Board of Directors of the Company,
which approval includes a resolution to the effect that the Board of Directors,
subject to its fiduciary duties, recommends that this Agreement and the
transactions contemplated hereby and thereby be approved by the stockholders of
the Company, and (B) the Company has taken all necessary corporate action to
authorize and reserve for issuance that number of shares of Company Common Stock
equal to the maximum number of shares of Company Common Stock issuable upon
exercise of the option granted pursuant to the Stock Option Agreement. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by the Company and each constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its respective terms,
except as such enforcement may be limited by bankruptcy, insolvency and other
similar laws affecting creditors' rights generally or the rights of creditors of
financial institutions and to general equity principles.

(ii) The execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby will not, and

-7-
<PAGE> 49

compliance by the Company with any of the provisions hereof or thereof will
not, (A) conflict with, or result in any breach or violation of, or default
(with or without notice or lapse of time or both) under, or result in the
termination of, or accelerate the performance required by, or give rise to a
right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit under, or the creation of a Lien (any such conflict,
breach, violation, default, termination, acceleration, right of termination,
cancellation or acceleration, loss or creation, a "Violation") pursuant to, any
provision of the certificate or articles of incorporation or by-laws of the
Company, NSB or any other Subsidiary of the Company or (B) subject to obtaining
or making the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below and except as set
forth in the Company Disclosure Schedule, result in any Violation of any loan
or credit agreement, note, mortgage, indenture, lease, Company Benefit Plan (as
defined in Section 3.01(j)) or other agreement, obligation, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company, NSB or any other
Subsidiary of the Company or their respective properties or assets, which
Violation under this clause (B) could reasonably be expected to have,
individually or in the aggregate with other such Violations, a Material Adverse
Effect on the Company.

(iii) To the best knowledge of the Company, after consultation with counsel,
no consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company, NSB or any other
Subsidiary of the Company in connection with the execution and delivery of this
Agreement and the Stock Option Agreement by the Company, or the consummation by
the Company of the transactions contemplated hereby and thereby, the failure to
obtain such which could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, except for (A) the
filing with the Securities and Exchange Commission ("SEC") of (1) a proxy
statement (as amended or supplemented from time to time, the "Proxy Statement")
relating to the meeting of the Company's stockholders at which a vote is held on
the Merger (the "Company Stockholders Meeting") and (2) such reports under
Sections 13(a), 13(d), 13(g) and 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as may be required in connection with this
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby and the obtaining from the SEC of such orders as may be required in
connection therewith, (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (C) the filing of such notices, applications, filings, authorizations,
orders and approvals as may be required under federal and state thrift and
banking laws, and with and of federal and state thrift and banking authorities
and approval of same (collectively, the "Banking Approvals"), and (D) consents,
authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of the rules of the American Stock Exchange (the
"Amex"), or which are required under consumer finance, mortgage banking and
other similar laws.

(d) SEC Documents; Financial Statements; Reports. (i) The Company has
delivered to Parent a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by the Company with
the SEC (other than reports filed pursuant to Section 13(d) or 13(g) of the
Exchange Act) since January 1, 1992 (the "Company SEC Documents"), which are all
the documents (other than preliminary material and reports required pursuant to
Section 13(d) or 13(g) of the Exchange Act) that the Company was required to
file with the SEC since such date. The Company will promptly deliver to Parent a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC (other than reports
filed pursuant to Section 13(d) or 13(g) of the Exchange Act) after the date of
this Agreement (the "Future Company SEC Documents"). As of their respective
dates, the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC thereunder applicable thereto. As of their respective dates, the Future
Company SEC Documents will comply in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable thereto. All

-8-
<PAGE> 50
material agreements, contracts and other documents required to be filed as
exhibits to any of the Company SEC Documents have been so filed, and in respect
of the Future Company SEC Documents, will be so filed. Except to the extent
that information contained in any Company SEC Document has been revised or
superseded by a later Company SEC Document, none of the Company SEC Documents
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. None
of the Future Company SEC Documents will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

(ii) The financial statements of the Company included in the Company SEC
Documents or to be included in the Future Company SEC Documents comply or will
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared or will be prepared in accordance with GAAP
(as defined in Section 8.03(c)) during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present or will fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.

(iii) Since January 1, 1992, each of the Company and its Subsidiaries,
including NSB, has filed all material reports, registrations and statements,
together with any required material amendments thereto ("Company Regulatory
Reports"), and has paid all fees and assessments due and payable therewith, that
it was required to file with the FDIC, the OTS, all applicable state banking and
other regulatory authorities and other relevant Governmental Entities or self
regulatory agencies charged with the supervision or regulation of the Company or
any of its Subsidiaries (collectively, "Regulatory Authorities") and with the
Federal Home Loan Bank of San Francisco ("FHLBSF"). As of their respective
dates, each such Company Regulatory Report complied in all material respects
with all the rules and regulations promulgated by the applicable Regulatory
Authority (including regulatory accounting practices) and, except as revised or
superseded by a later filed Company Regulatory Report, does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The Company has
delivered to Parent true and complete copies of the Company Regulatory Reports.

(e) Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement will, at the date of mailing to stockholders and at the time of the
Company Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein. All documents that the Company is
responsible for filing with any Governmental Entity in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable law, including applicable provisions of the
Securities Act and Exchange Act. Without limiting any of the representations and
warranties contained herein, no representation or warranty to Parent by the
Company herein, and no statement by the Company or other information contained
in the Company Disclosure Schedule or any document incorporated by reference
therein, as the date of such document, contains or contained or will contain,
any untrue statement of material fact, or, at the date thereof, omitted or shall
omit to state a material fact necessary in order to make the statements
contained therein, in light of the circumstances under which such statements are
or will be made, not misleading.

-9-
<PAGE> 51

(f) Compliance with Applicable Laws. (i) The Company and its Subsidiaries
hold all permits, licenses, variances, exemptions, authorizations, orders and
approvals of all Governmental Entities (the "Company Permits") that are required
for them to own, lease or operate their properties and assets and to carry on
their businesses as presently conducted, and there has occurred no default under
any such Company Permit, except for the lack of Company Permits and for defaults
under Company Permits which lack or default individually or in the aggregate
would not have a Material Adverse Effect on the Company. Except as disclosed in
the Company SEC Documents filed and publicly available prior to the date of this
Agreement, the Company and its Subsidiaries are in compliance in all material
respects with all applicable statutes, laws, ordinances, rules, orders and
regulations of any Governmental Entity, and with their material internal
policies and procedures.

(ii) Neither the Company nor any of its Subsidiaries has received any
notification or communication which has not been fully and finally resolved from
any Regulatory Authorities (A) asserting that any of the Company or any of its
Subsidiaries is not in substantial compliance with any of the statutes,
regulations, ordinances or guidelines which such Regulatory Authority enforces
or administers, or the internal policies and procedures of such company, (B)
threatening to revoke any material Company Permit, including such company's
status as an insured depositary institution under the Federal Deposit Insurance
Act ("FDIA"), (C) requiring or threatening to require the Company or any of its
Subsidiaries, or indicating that the Company or any of its Subsidiaries may be
required, to enter into a cease and desist order, agreement or memorandum of
understanding or any other agreement, to be subject to any directive or
supervisory letter, or to adopt resolutions of its board of directors, in each
case restricting or limiting or purporting to restrict or limit in any material
respect the operations of the Company or any of its Subsidiaries, including any
restriction on the payment of dividends, or relating to its capital adequacy,
its credit policies or its management, or (D) except as set forth in the Company
Disclosure Schedule, directing, restricting or limiting, or purporting to
direct, restrict or limit, in any material respect the operations of the Company
or any of its Subsidiaries, including any restriction on the payment of
dividends, or relating to its capital adequacy, its credit policies or its
management (any such notification, communication, order, agreement, memorandum
of understanding, directive, supervisory letter or required board resolutions
being referred to herein as a "Regulatory Agreement"). Neither the Company nor
any of its Subsidiaries has received, consented to or entered into, or is
subject to, any Regulatory Agreement, nor has the Company or any of its
Subsidiaries been advised by any Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such Regulatory Agreement. The
Company has advised Parent of the substance of any and all criminal referrals it
has filed with the OTS.

(iii) Neither the Company nor any of its Subsidiaries is required by
Section 32 of the FDIA to give prior notice to a Regulatory Authority of the
proposed addition of an individual to its board of directors or the employment
of an individual as a senior executive officer.

(iv) To the best knowledge of the Company, each of the Company and its
Subsidiaries is, and has been, and each of the Company's former Subsidiaries,
while Subsidiaries of the Company, was in compliance with all applicable
Environmental Laws (as defined below), except for possible noncompliance which
individually or in the aggregate would not have a Material Adverse Effect on the
Company. The term "Environmental Laws" means any Federal, state, local or
foreign statute, ordinance, rule, regulation, policy, permit, consent, approval,
license, judgment, order, decree, injunction or other authorization relating to:
(A) Releases (as defined in 42 U.S.C. Section 9601(22)) or threatened Releases
of Hazardous Material (as defined below) into the environment; or (B) the
generation, treatment, storage, disposal, use, handling, manufacturing,
transportation or shipment of any Hazardous Material. The term "Environmental
Laws" also includes any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
injuries or damage to, or threatened as a result of, the presence of or exposure
to any Hazardous Material. The term "Hazardous Material" means (1) hazardous
substances (as defined in 42 U.S.C. Section 9601(14)), (2) petroleum, including
crude oil and any fractions thereof, (3) natural gas, synthetic gas and

-10-
<PAGE> 52

any mixtures thereof, (4) asbestos and/or asbestos-containing material and (5)
polychlorinated biphenyls ("PCBs"), or materials containing PCBs in excess of 50
ppm.

(v) To the best knowledge of the Company, during the period of ownership or
operation by the Company and its Subsidiaries of any of their respective current
or previously owned or leased properties (including for purposes of this
paragraph any such properties acquired in foreclosures or otherwise in
connection with extensions of credit), there have been no Releases of Hazardous
Material in, on, under or affecting such properties or any surrounding site, and
none of the Company or its Subsidiaries have disposed of any Hazardous Material
or any other substance in a manner that has led, or could reasonably be
anticipated to lead, to a Release, except in each case for those which
individually or in the aggregate would not have a Material Adverse Effect on the
Company. Prior to the period of ownership or operation by the Company and its
Subsidiaries of any of their respective current or previously owned or leased
properties, no Hazardous Material was generated, treated, stored, disposed of,
used, handled or manufactured at, or transported, shipped or disposed of from,
such current or previously owned properties, and there were no Releases of
Hazardous Material in, on, under or affecting any such property or any
surrounding site, except in each case for those which individually or in the
aggregate would not have a Material Adverse Effect on the Company.

(vi) To the best knowledge of the Company, the Company and its Subsidiaries
are not subject to any judgment, decree or order relating to compliance with any
Environmental Law or to investigation or cleanup under any Environmental Law
(collectively, "Environmental Enforcement Actions"), except with respect to
Environmental Enforcement Actions which, individually or in the aggregate, would
not have a Material Adverse Effect on the Company and which, in any event, are
listed and described on the Company Disclosure Schedule. To the best knowledge
of the Company, neither the Company nor any of its Subsidiaries has any
contingent liabilities in connection with any Hazardous Materials, including
claims of liability for cleanup of Hazardous Materials related to any of the
Company, its Subsidiaries or any of the Company's former Subsidiaries that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company.

(vii) Except as set forth in the Company Disclosure Schedule, to the best
knowledge of the Company, neither the Company nor any Subsidiary participates in
the management of a Loan Property or Participation Facility to an extent that it
would be deemed an "owner or operator" as defined in 42 U.S.C. Section 9601 or
any similar Environmental Law. As used herein, the term "Loan Property" means
any property in which the applicable party (or a subsidiary of it) holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property, and the term
"Participation Facility" means any facility in which the applicable party (or a
subsidiary of it) participates in the management (including all property held as
trustee or in any other fiduciary capacity) and, where required by the context,
includes the owner or operator of such property.

(g) Litigation. Except as disclosed in the Company SEC Documents, there is
no claim, suit, action or proceeding pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any Subsidiary of the
Company (including any such suit, action or proceeding under the Securities Act,
the Exchange Act, the Community Reinvestment Act of 1977, as amended, or fair
lending laws or by any stockholder or former stockholder of the Company or any
Subsidiary of the Company) that could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
that could reasonably be expected to threaten, impede or delay the consummation
of the Merger, nor is there any judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against the Company or any
Subsidiary of the Company having, or which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
that could reasonably be expected to threaten, impede or delay the consummation
of the Merger. The Company Disclosure Schedule contains a true, correct and
complete list as of the date hereof of all pending suits, claims, actions,
investigations or proceedings of any nature involving claims against it or any
of its subsidiaries in the amount of $25,000 or more or involving claims for a
specific performance or injunctive relief and suits, claims, actions and other
matters that have been brought and are pending or have been

-11-
<PAGE> 53

threatened to be brought by or on behalf of the Company or any of its
Subsidiaries, as plaintiff or other claimant in the amount of $25,000 or more
(excluding loan foreclosures and similar collection actions in the ordinary
course of business).

(h) Taxes. (i) (A) The Company and its Subsidiaries have filed, been
included in or sent all returns, declarations and reports and information
returns and statements required to be filed or sent (including in each case
extensions) by or relating to any of them relating to any taxes with respect to
any income, properties or operations of the Company or any such subsidiary prior
to the Effective Time (collectively, "Company Returns"), (B) as of the time of
filing, the Company Returns correctly reflected in all material respects the
facts regarding the income, business, assets, tax bases, operations, activities
and status of the Company and its Subsidiaries and any other information
required to be shown therein, (C) the Company and its Subsidiaries have timely
paid or made provision for all taxes that have been shown as due and payable on
the Company Returns that have been filed, (D) the Company and its Subsidiaries
have made or will make provision for all taxes payable for any periods ending on
or before the last day of the calendar month preceding the Effective Time for
which no Company Returns have yet been filed and for any periods that begin
before the Effective Time and end after the Effective Time to the extent such
taxes are attributable to the portion of any such period ending at the Effective
Time, (E) the charges, accruals and reserves for taxes reflected on the books of
the Company and its Subsidiaries do not in the aggregate materially fail to
provide for the tax liabilities accruing or payable by the Company and its
Subsidiaries in respect of periods prior to the date hereof, (F) except as set
forth in the Company Disclosure Schedule, neither the Company nor any
Subsidiaries are delinquent in the payment of any taxes or has requested any
extension of time within which to file or send any Company Return, which Company
Return has not since been filed or sent, (G) no deficiency for any taxes has
been proposed, asserted or assessed in writing against the Company or any of its
Subsidiaries other than those taxes being contested in good faith which have
heretofore been advised in writing by the Company to Parent and other than taxes
individually or in the aggregate which do not exceed more than $50,000 in
asserted liability, (H) the Federal income tax returns of the Company or any
consolidated group to which it belongs have been examined by and/or settled with
the United States Internal Revenue Service (the "IRS") for all fiscal years
through June 30, 1991, (I) neither the Company nor any of its Subsidiaries have
granted any extension of the limitation period applicable to any tax claims
(which period has not since lapsed), other than those taxes being contested in
good faith, and (J) neither the Company nor any Subsidiary have any contractual
obligations under any tax sharing agreement with any corporation which, as of
the Effective Time, is not a member of a consolidated group of which all of and
only the Company and its Subsidiaries are members.

(ii) Any amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Company or any of its
affiliates who is a "disqualified individual" (as such term is defined in
Section 280G(c) of the Code) under any employment, severance or termination
agreement, other compensation arrangement or Company Benefit Plan currently in
effect would not be characterized as a "parachute payment" (as such term is
defined in Section 280G(b)(2) of the Code).

(iii) The disallowance of a deduction under Section 162(m) of the Code for
employee remuneration will not apply to any amount paid or payable by the
Company or any of its Subsidiaries of the Company under any contract, plan,
program, arrangement or understanding.

(iv) For the purpose of this Agreement, the term "tax" (including, with
correlative meaning, the terms "taxes" and "taxable") shall include, except
where the context otherwise requires, all Federal, state, local and foreign
income, profits, franchise, gross receipts, payroll, sales, employment, use,
property, withholding, excise, occupancy and other taxes, duties or assessments
of any nature whatsoever (including the California franchise and income tax),
together with all interest, penalties and additions imposed with respect to such
amounts.

(i) Absence of Changes in Benefit Plans. Except as disclosed in the Company
SEC Documents or the Company Disclosure Schedule, there has not been any
adoption or amendment

-12-
<PAGE> 54

by the Company or any of its Subsidiaries of any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its Subsidiaries. Except
as disclosed in the Company SEC Documents or the Company Disclosure Schedule,
there exists (and will not exist at any time prior to the Effective Time) no
employment, bonus, consulting, severance, termination or indemnification
agreements, arrangements or understandings between the Company or any of its
Subsidiaries and any current or former employee, officer or director of the
Company or any of its Subsidiaries. Without limiting the generality of the
foregoing, (A) the aggregate salary and termination benefits payable to each of
the senior officers of the Company under existing employment agreements are as
detailed in the Company Disclosure Schedule, (B) the termination benefits
payable to additional officers and employees under the Company's severance plan
are as detailed in the Company Disclosure Schedule, and (C) no individuals other
than those referred to in clauses (A) and (B) of this sentence are, or will be
at the Effective Time, entitled to salary, severance, termination, bonus or
other such benefits from the Company or NSB. True and correct copies of all
items referred to in this Section 3.01(i) have been heretofore delivered by the
Company to Parent.

(j) ERISA Compliance. (i) The Company Disclosure Schedule contains a list
and brief description of each "employee pension benefit plan" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as a "Pension Plan"), each "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA) and each stock
option, stock purchase, deferred compensation plan or arrangement and each other
employee fringe benefit plan or arrangement maintained, contributed to or
required to be maintained or contributed to by the Company, any of its
subsidiaries or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, a "Commonly Controlled Entity"), for the benefit of any current or former
employees, officers, agents, directors or independent contractors of the Company
or any of its subsidiaries (collectively, "Company Benefit Plans"). The Company
has delivered or made available to Parent true, complete and correct copies of
(A) each Company Benefit Plan (or, in the case of any unwritten Company Benefit
Plans, descriptions thereof) and any related trust agreement, (B) the most
recent annual report on Form 5500 filed with the IRS with respect to each
Company Benefit Plan (if any such report was required) and (C) the most recent
summary plan description (or similar document) for each Company Benefit Plan for
which such summary plan description is required or was provided to plan
participants or beneficiaries.

(ii) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms. The Company, its Subsidiaries and all the
Company Benefit Plans are all in compliance in all material respects with the
applicable provisions of ERISA and the Code. To the best knowledge of the
Company, there are no investigations, proceedings or other claims involving any
Company Benefit Plan that could give rise to any material liability.

(iii) All Pension Plans intended to be qualified under Section 401(a) of the
Code have been the subject of determination letters from the IRS to the effect
that such Pension Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, and, to the knowledge of
the Company, all such letters are valid and effective as of the date hereof.

(iv) No Pension Plan, other than any Pension Plan that is a "multiemployer
plan" (as such term is defined in Section 4001(a)(3) of ERISA; collectively, the
"Multiemployer Pension Plans"), had, as of the respective last annual valuation
date for each such Pension Plan, an "unfunded benefit liability" (as such term
is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions
which have been furnished to Parent, and neither the Company nor any of its
Subsidiaries is aware of any facts or circumstances that would materially change
the funded status of any such Company Benefit Plans. None of the Pension Plans
has an "accumulated funding deficiency" (as such term is defined in Section 302
of ERISA or Section 412 of the Code), and there has been no application for a
waiver of the minimum funding standards imposed by Section 412 of the Code with
respect to any Company Benefit Plan that is a Pension

-13-
<PAGE> 55

Plan. No Commonly Controlled Entity has incurred any material liability to a
Pension Plan (other than for contributions not yet due) or to the Pension
Benefit Guaranty Corporation (the "PBGC") (other than for premiums not yet due).

(v) There have been no non-exempt "prohibited transactions" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) or any other
breach of fiduciary responsibility with respect to the Company Benefit Plans
that could subject the Company, any of its subsidiaries or any officer of the
Company or any of its Subsidiaries to tax or penalty under ERISA, the Code or
other applicable law. Neither any of such Company Benefit Plans nor any of such
trusts has been terminated, nor has there been any "reportable event" (as that
term is defined in Section 4043 of ERISA) with respect thereto, during the last
five years.

(vi) Neither the Company nor any Commonly Controlled Entity (A) maintains
or contributes to a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA) or has maintained, contributed to or had an obligation to maintain or
contribute to such a plan within the five full plan years of any such plan
immediately prior to the date hereof, or (B) has incurred any liability to the
PBGC or a Company Benefit Plan upon the termination of or withdrawal from a
Company Benefit Plan, which liability remains unpaid as of the date hereof.

(vii) With respect to any Company Benefit Plan that is an employee welfare
benefit plan, (A) no such Company Benefit Plan is funded through a "welfare
benefit fund", as such term is defined in Section 419(e) of the Code, (B) each
such Company Benefit Plan that is a "group health plan", as such term is defined
in Section 5000(b)(1) of the Code, complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code and (C) except as set
forth in the Company Disclosure Schedule, each such Company Benefit Plan
(including any such Plan covering retirees or other former employees) may be
amended or terminated without material liability to the Company or any of its
subsidiaries on or at any time after the consummation of the Merger.

(viii) Except as disclosed in the Company Disclosure Schedule, no employee of
the Company or any Subsidiary of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Company Benefit Plan as a result of the transactions contemplated by
this Agreement or by the Stock Option Agreement.

(k) Subsidiaries. The Company Disclosure Schedule sets forth all the
Subsidiaries of the Company and indicates for each such Subsidiary the
jurisdiction and date of incorporation. Each of the Company's subsidiaries that
is a savings bank is an "insured bank" as defined in the FDIA and applicable
regulations thereunder. Except as set forth on the Company Disclosure Schedule,
all the shares of capital stock of each of the Subsidiaries of the Company are
fully paid and nonassessable and are owned by the Company or another Subsidiary
of the Company free and clear of all Liens. The Company Disclosure Schedule sets
forth the equity interest of any person other than the Company or any of its
Subsidiaries in any of the Subsidiaries of the Company and also sets forth the
identity and address of any such person. Except for the capital stock of its
Subsidiaries and as set forth in the Company Disclosure Schedule, the Company
does not own, directly or indirectly, any capital stock or other ownership
interest in any corporation, bank, partnership, joint venture or other entity.

(l) State Takeover Statutes. The Board of Directors of the Company has
approved the Merger, this Agreement and the Stock Option Agreement and/ or has
taken such other action, and such approval and/or action is sufficient, to
render inapplicable to the Merger, this Agreement, the Stock Option Agreement
and the transactions contemplated by this Agreement and the Stock Option
Agreement the provisions of Section 203 of the DGCL. No other state takeover
statute or similar statute or regulation applies or purports to apply to the
Merger, this Agreement, the Stock Option Agreement and the transactions
contemplated by this Agreement and the Stock Option Agreement.

-14-
<PAGE> 56

(m) Vote Required. The Company Stockholder Approval is the only vote of the
holders of any class or series of the Company capital stock necessary to approve
this Agreement and the transactions contemplated hereby.

(n) Other Activities of the Company and its Subsidiaries. (i) Neither the
Company nor any of its Subsidiaries that is not a federal savings bank directly
or indirectly engages in any activity prohibited by the OTS. Without limiting
the generality of the foregoing, any equity investment of the Company and each
Subsidiary that is not a federal savings bank is not prohibited by the OTS. NSB
engages only in activities permissible for federal savings banks under
applicable OTS and FDIC regulations. Neither the Company nor any Subsidiary
directly or indirectly engages in any activity not permitted to a bank holding
company or its subsidiaries under the Bank Holding Company Act of 1956, as
amended (the "BHCA").

(ii) Neither the Company nor any Subsidiary engages in any insurance
activities other than acting as a principal, agent or broker for insurance that
is directly related to an extension of credit by the Company or any Subsidiary
and limited to assuring the repayment of the balance due on the extension of
credit in the event of the death, disability or involuntary unemployment of the
debtor. The Company Disclosure Schedule describes all licenses and approvals
held by the Company and any Subsidiary (and any officer, director or employee of
any of them) to conduct any insurance activities, whether as principal, agent,
broker or otherwise.

(iii) Neither the Company nor any Subsidiary, in connection with its
activities relating to funds transfers, (A) is in default under any agreement to
which it is a party relating to the transfer of funds or settlement with respect
to such transfers; or (B) has agreed to be or is liable for consequential
damages for its error or delay in acting on requests for the transfer of funds.
Each of the Company and its Subsidiaries, as applicable, has adopted and
followed procedures reasonably adapted to avoid such errors and delay, has
adopted commercially reasonable security procedures (as such term is defined in
section 4A-202 of the Uniform Commercial Code) for verifying the authenticity of
requests received for the transfer of funds, and is in compliance with
applicable laws of Governmental Entities relating to the transfer of funds and
settlement with respect thereto with the applicable operating rules of each
funds transfer system of which it is a member or by which it is bound.

(o) Properties. Except as disclosed in the Company SEC Documents, the
Company and its Subsidiaries (i) have good, clear and marketable title to all
the properties and assets which are material to the Company's business on a
consolidated basis and are reflected in the latest audited statement of
condition included in the Company SEC Documents as being owned by the Company
and its Subsidiaries or acquired after the date thereof (except properties sold
or otherwise disposed of since the date thereof in the ordinary course of
business), free and clear of all Liens except (A) statutory Liens securing
payments not yet due, (B) Liens on assets of Subsidiaries of the Company
incurred in the ordinary course of their business and (C) such imperfections or
irregularities of title or Liens as do not affect the use of the properties or
assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, in either case in such a manner as to
have a Material Adverse Effect on the Company, and (ii) are collectively the
lessee of all leasehold estates which are material to the Company's business on
a consolidated basis and are reflected in the latest audited financial
statements included in the Company SEC Documents or acquired after the date
thereof (except for leases that have expired by their terms or as to which the
Company has agreed to terminate or convey since the date thereof) and is in
possession of the properties purported to be leased thereunder, and each such
lease is valid without default thereunder by the lessee or, to the Company's
knowledge, the lessor, other than defaults that would not have a Material
Adverse Effect on the Company. The Company Disclosure Schedule lists all of the
owned or leased real property of the Company and its Subsidiaries, except for
real property acquired after the date hereof as a result of foreclosures or
transfers in lieu of foreclosure in the ordinary course of business. Each of the
Company and its Subsidiaries enjoys peaceful and undisturbed possession under
all such leases. All the Company's and its Subsidiaries' owned buildings,
structures and equipment have been well maintained and are in good and
serviceable condition, normal wear and tear excepted.

-15-
<PAGE> 57

(p) Insurance. The Company and its Subsidiaries are presently insured, and
during each of the last five years have been insured, for reasonable amounts
against such risks as companies engaged in similar businesses would, in
accordance with good business practice, customarily be insured. The Company
Disclosure Schedule sets forth a true and complete list and brief description of
all insurance policies (and fidelity or similar bonds) maintained by or for the
benefit of the Company, its subsidiaries or their directors, officers, employees
or agents.

(q) Material Interests of Certain Persons. Except as disclosed in the
Company's Proxy Statement for its 1995 Annual Meeting of Stockholders, no
executive officer or director of the Company or any "associate" (as such term is
defined in Rule 14a-1 under the Exchange Act) of any such executive officer or
director has any material interest in any material contract or property, real or
personal, tangible or intangible, that is used in or pertains to the business of
the Company or any of its subsidiaries.

(r) Brokers and Finders; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Kaplan
Associates, Inc., the fees and expenses of which will be paid by the Company
prior to the Effective Time, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The estimated fees and expenses incurred and to be incurred by the
Company in connection with this Agreement and the Stock Option Agreement and the
transactions contemplated by this Agreement and the Stock Option Agreement
(including the fees of the Company's legal counsel) are set forth in the Company
Disclosure Schedule.

(s) Opinion of Financial Advisor. The Company has received the opinion of
Kaplan Associates, Inc., dated the date of this Agreement, to the effect that,
as of such date, the Merger Consideration to be received by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a signed copy of such opinion has been delivered to Parent.

(t) Allowance for Loan Losses. The allowance for loan losses shown on the
consolidated statement of condition of the Company and its Subsidiaries
reflected in the Company's latest audited financial statements included in the
Company Filed SEC Documents was, and the allowance for loan losses shown on the
consolidated statements of condition of the Company and its subsidiaries
reflected in the Company's financial statements as of dates subsequent to the
date hereof will be, in each case as of the dates thereof, in the opinion of
management, adequate to provide for losses relating to or inherent in the loan
and lease portfolios (including accrued interest receivables) of the Company and
its Subsidiaries and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the Company and its Subsidiaries.

(u) Certain Agreements. Except as disclosed in the Company Disclosure
Schedule or the Company SEC Documents and except for this Agreement and the
Stock Option Agreement, as of the date of this Agreement, neither the Company
nor any of its Subsidiaries is a party to any written or, to the Company's
knowledge, oral (i) consulting or independent contractor agreement (other than
contracts entered into in the ordinary course of business) not terminable on 30
days' or less notice or involving the payment of more than $25,000 per annum, or
union, guild or collective bargaining agreement, (ii) material joint venture,
(iii) noncompetition or similar agreement that restricts the Company or its
Subsidiaries from engaging in a line of business, (iv) agreement with any
executive officer or other employee of the Company or any Subsidiary of the
Company the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or NSB of the nature contemplated by this Agreement or the Stock Option
Agreement, (v) agreement with any executive officer or other employee of the
Company or any Subsidiary of the Company providing for other than at-will
employment, other than individuals who are treated as employed for purposes of
vesting with respect to benefits under any Company Benefit Plan and who (A) have
such status for not more than three years and (B) in respect to which the
Company's obligation to make any payments do not exceed $25,000 per annum, (vi)
agreement or plan, including any severance or "golden parachute" agreement, or
any stock option plan,

-16-
<PAGE> 58

retirement or Pension Plan, stock appreciation rights plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be payable or
increased, or the vesting of the benefits of which will be accelerated, as a
result of the occurrence of any of the transactions contemplated by this
Agreement or the Stock Option Agreement, or the value of any of the benefits of
which will be calculated on the basis of any of the transactions contemplated by
this Agreement or the Stock Option Agreement, (vii) any real property lease with
annual rental payments aggregating $25,000 or more, (viii) any other contract or
agreement which would be required to be disclosed as an exhibit to the Company's
annual report to the SEC on Form 10-K and which has not been so disclosed, (ix)
any agreement, arrangement or commitment not made in the ordinary course of
business consistent with past practice (and not otherwise disclosed in the
Company Disclosure Schedule) that is material to the Company on a consolidated
basis, or any contract, agreement or understanding relating to the sale or
disposition by the Company or any of its Subsidiaries of significant assets or
businesses of the Company or any of its Subsidiaries, (x) any material
agreement, indenture, credit agreement or other instrument relating to the
borrowing of money by the Company or any of its Subsidiaries (other than
certificates of deposit and customary savings bank funding instruments) or the
guarantee by the Company or any such Subsidiary of any such obligation. Neither
the Company nor any of its Subsidiaries is in default under any material
agreement, commitment, arrangement, lease, insurance policy or other instrument,
whether entered into in the ordinary course of business or otherwise and whether
written or oral and there has not occurred any event that, with the giving of
notice or the lapse of time or both, which constitutes such a default, except in
all cases where such default would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Neither the Company or any of its
Subsidiaries has received any notice or has any knowledge that any other party
is in default in any respect under any contract, agreement, commitment,
arrangement, lease, insurance policy other instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
Subsidiaries or the assets, business or operations thereof may be bound or
affected or under which it or its respective assets, business or operations
receives benefits, except for those defaults which have not had, or cannot
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, and there has not occurred any event that with the lapse of time
or the giving of notice or both would constitute such a default. True and
correct copies of all such agreements referred to above in this Section 3.01(u),
have been delivered or otherwise made available to Parent by the Company.

(v) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed prior to the date hereof, since June 30, 1995, the
Company and its Subsidiaries have not incurred any material liability, except in
the ordinary course of their business consistent with their past practices, nor
has there been any change, or any event involving a prospective change, in the
Condition of the Company or any of its Subsidiaries which has had, or is
reasonably likely to have, a Material Adverse Effect on the Company. Without
limiting the generality of the foregoing, since such date, except as set forth
in the Company Disclosure Schedule, there has not been any change in any of the
licenses, permits or franchises of the Company or any Subsidiary thereof that
has had or can reasonably be expected to have a Material Adverse Effect on the
Company individually or in the aggregate, or any damage, destruction or other
casualty loss (whether or not covered by insurance) that has had or can
reasonably be expected to have a Material Adverse Effect on the Company, except
in the ordinary course of business, any amendment, modification or termination
of any existing, or entering into any new contract, agreement, plan, lease,
license, permit or franchise that is material to the Condition of the Company,
any disposition by the Company or a Subsidiary thereof, of an asset that is
material to the Company, except sales of properties in the ordinary course of
business, or entering into any new employment agreement or bonus arrangement or
Company Benefit Plan by the Company or any Subsidiary thereof, or any increase
by the Company or any Subsidiary in the rate of compensation or the benefits
payable or to become payable to any officer or other employee in excess of 5%
per annum or to any agent or consultant in excess of the current customary
practice of the Company and its Subsidiaries (except as otherwise expressly
contemplated by the terms of this Agreement).

(w) Labor and Employment Matters. Except to the extent set forth in the
Company Disclosure Schedule, (i) the Company and its Subsidiaries are and have
been in compliance in all

-17-
<PAGE> 59

material respects with all applicable laws of Governmental Entities respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including, without limitation, the Immigration Reform and
Control Act ("IRCA"), the Worker Adjustment and Retraining Notification Act
("WARN"), any such laws respecting employment discrimination, disability rights
or benefits, equal opportunity, plant closure issues, affirmative action,
workers' compensation, employee benefits, severance payments, labor relations,
employee leave issues, wage and hour standards, occupational safety and health
requirements and unemployment insurance and related matters, and are not engaged
in and have not engaged in any unfair labor practice; (ii) to the best knowledge
of the Company, no investigation or review by or before any Governmental Entity
concerning any possible conflicts with or violations of any such applicable laws
is pending, nor is any such investigation threatened, nor has any such
investigation occurred during the last three years, and no Governmental Entity
has provided any notice to the Company or any of its Subsidiaries or otherwise
asserted an intention to conduct any such investigation or review, nor is there
any basis for any such investigation or review; (iii) there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or directly
affecting the Company or any of its Subsidiaries; (iv) no union representation
question or union organizational activity exists respecting the employees of the
Company or any of its Subsidiaries; (v) no collective bargaining agreement
exists which is binding on the Company or any of its Subsidiaries; (vi) neither
the Company nor any of its Subsidiaries has experienced any material work
stoppage or other material labor difficulty since December 31, 1991; (vii)
neither the Company nor any of its Subsidiaries is delinquent in payments to any
of its officers, directors, employees or agents for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them or amounts required to be reimbursed to such officers, directors, employees
or agents; (viii) in the event of termination of the employment of any of said
officers, directors, employees or agents for any reason, neither the Company,
any of its Subsidiaries, Parent, Sub, nor any other Subsidiaries of Parent,
will, pursuant to any agreement or by reason of anything done prior to the
Effective Time by the Company or any of its Subsidiaries or predecessors, be
liable to any of said officers, directors, employees or agents for so-called
"severance pay" or any other similar payments or benefits, including, without
limitation, post-employment health care (other than pursuant to COBRA) or
insurance benefits; (ix) all benefits payable to current, terminated or retired
employees, including, without limitation, post-employment health care or
insurance benefits, may be modified or terminated by the Company at any time;
(x) within the three-year period prior to the date hereof there has not been any
termination of employment of any officer, director, employee or agent of the
Company or any of its Subsidiaries who receives salary or compensation in excess
of $60,000 per annum or any termination of any officer, director, employee or
agent of the Company or its Subsidiaries that could result in a liability to
Parent in excess of $60,000; and (xi) all employees of the Company and its
Subsidiaries are employed at will. Except as set forth in the Company Disclosure
Schedule, there are no pending or, to the Company's knowledge, threatened suits,
claims, actions, charges, investigations or proceedings of any material nature
respecting employment and employment practices, terms and conditions of
employment and wages and hours, including without limitation (i) under or
alleging violation of IRCA, NLRA, FLSA, WARN or any applicable law respecting
employment discrimination, equal opportunity, labor relations, affirmative
action, disability rights or benefits, employee leave issues or wage and hour
standards, workers' compensation, plant closure issues, employee benefits,
severance payments, occupational safety and health requirements or unemployment
insurance and related matters, or (ii) relating to alleged unfair labor
practices (or the equivalent thereof under any applicable law).

(x) Registration Obligations. Except as set forth in the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is under any
obligation, contingent or otherwise, which will survive the Merger by reason of
any agreement to register any of its securities under the Securities Act.

(y) Accounting Records.

(i) Each of the Company and its Subsidiaries maintains records that
accurately, validly and fairly reflect its transactions and dispositions of
assets and maintains a system of internal accounting controls, policies and
procedures sufficient to make it reasonable to expect that

-18-
<PAGE> 60

(A) such transactions are executed in accordance with its management's general
or specific authorization, (B) such transactions are recorded in conformity with
GAAP and in such a manner as to permit preparation of financial statements in
accordance with GAAP and any other criteria applicable to such statements and to
maintain accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization, (D) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, and
(E) except as set forth in the Company Disclosure Schedule, records of such
transactions are retained, protected and duplicated in accordance with prudent
banking practices and applicable regulatory requirements.

(ii) The data processing equipment, data transmission equipment, related
peripheral equipment and software used by the Company and its Subsidiaries in
the operation of their businesses (including any disaster recovery facility) to
generate and retrieve such records (whether owned or leased by the Company or
any Subsidiaries, or provided under any agreement or other arrangement with a
third party for data processing services) are adequate for the needs of the
Company and its Subsidiaries.

(iii) The Company has delivered to Parent true, correct and complete copies
of all annual management letters and opinions, and has made available to Parent
for inspection all reviews, correspondence, and other documents in the files of
the Company and NSB, prepared by any certified public accounting firm and
delivered to the Company or NSB since January 1, 1989.

(z) Undisclosed Liabilities. Except as disclosed in the Company Disclosure
Schedule or as disclosed or provided for in the Company SEC Documents, neither
the Company nor any of its Subsidiaries is subject to any liabilities of any
nature (whether or not required to be accrued or disclosed under SFAS No. 5)
which have had or can reasonably be expected to have a Material Adverse Effect
with respect to the Company.

(aa) Investment Securities. Each of the Company and its Subsidiaries has
good and marketable title to all securities held by it (except securities sold
under repurchase agreements or held in any fiduciary or agency capacity), free
and clear of any mortgage, lien, pledge or encumbrance, except to the extent
such securities are pledged in the ordinary course of business consistent with
prudent banking practice to secure obligations of the Company or any of its
Subsidiaries. Such securities are valued on the books of the Company in
accordance with GAAP.

(bb) Loans.

(i) Except as disclosed in the Company Disclosure Schedule, (A) each
outstanding loan, lease or other extension of credit or commitment to extend
credit exceeding $50,000 of the Company or any of its Subsidiaries is a legal,
valid and binding obligation, is in full force and effect and is enforceable in
accordance with its terms except as may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the rights of creditors
generally or equitable principles limiting the right to obtain specific
performance or other similar relief; (B) each of the Company and its
Subsidiaries has duly performed in all material respects all of its respective
obligations thereunder to the extent that such obligations to perform have
accrued; (C) all documents and agreements necessary for the Company or any
Subsidiary that is a party thereto to enforce such loan, lease or other
extension of credit are in existence; (D) no claims, counterclaims, set-off
rights or other rights exist, nor do the grounds for any such claim,
counterclaim, set-off right or other right exist, with respect to any such
loans, leases or other extensions of credit which could impair the
collectibility thereof; and (E) each such loan, lease and extension of credit
has been, in all material respects, originated and serviced in accordance with
the Company's or a Subsidiary's then applicable underwriting guidelines, the
terms of the relevant credit documents and agreements and applicable laws of
Governmental Entities.

(ii) The Company Disclosure Schedule lists all loan commitments exceeding
$50,000 of the Company and its Subsidiaries (with single-family loan commitments
and consumer commit-

-19-
<PAGE> 61

ments listed in the aggregate only) outstanding as of the date hereof. Except as
set forth in the Company Disclosure Schedule (with single-family loan
commitments and consumer commitments viewed in the aggregate only), as of the
date hereof, (A) there are no loans, leases, other extensions of credit or
commitments to extend credit of the Company or any of its Subsidiaries that have
been or, to the Company's knowledge, should have been classified by the Company
and its Subsidiaries as "Other Assets Especially Mentioned," "Substandard,"
"Doubtful," "Loss" or any comparable classification, and (B) there are no loans
due to the Company or its Subsidiaries as to which any payment of principal,
interest or any other amount is 30 days or more past due. The Company shall
promptly after the end of any month inform Parent of any such classification
arrived at any time after the date hereof. There is no material disagreement
with any Regulatory Authority as to the classifications referred to in the
second sentence of this Section 3.01(b)(ii). The Company has provided to Parent
true, correct and complete information concerning the loan portfolios of the
Company and each of its Subsidiaries, and no material information with respect
to the loan portfolios has been withheld from Parent.

(iii) All loans and extensions of credit that have been made by the Company
and that are subject to Section 11 of the Home Owners' Loan Act comply
therewith.

(cc) Interest Rate Risk Management Instruments; Structured Notes.

(i) The Company Disclosure Schedule contains a true, correct and complete
list of all interest rate swaps, caps, floors, and option agreements and other
interest rate risk management arrangements to which the Company or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound. The Company has delivered to Parent true, correct and complete copies of
all such interest rate risk management agreements and arrangements.

(ii) All interest rate swaps, caps, floors and option agreements and other
interest rate risk management arrangements to which the Company or any of its
Subsidiaries is a party or by which any of their properties or assets may be
bound were entered into in the ordinary course of business and, to the Company's
knowledge, in accordance with prudent banking practice and applicable rules,
regulations and policies of the Regulatory Authorities and with counterparties
believed to be financially responsible and are legal, valid and binding
obligations enforceable in accordance with their terms (except as may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar laws affecting
the rights of creditors generally and the availability of equitable remedies),
and are in full force and effect. The Company and each of its Subsidiaries has
duly performed in all material respects all of its obligations thereunder to the
extent that such obligations to perform have accrued; and to the Company's
knowledge, there are no breaches, violations or defaults or allegations or
assertions of such by any party thereunder.

(iii) The Company and its Subsidiaries own no securities that are referred
to generically as "structured notes," "high risk mortgage derivatives," "capped
floating rate notes," or "capped floating rate mortgage derivatives" or that are
likely to have changes in value as a result of interest or exchange rage changes
that significantly exceed normal changes in value attributable to interest or
exchange rate changes, except for those securities and other instruments legally
purchased or entered into in the ordinary course of business, consistent with
safe and sound banking practices, and disclosed in the Company Disclosure
Schedule or disclosed in the Company SEC Documents.

(dd) Compliance with Policies. Since January 1, 1994, the Company has
followed in all material respects its applicable internal credit, risk
management, trust, trading, equity investing and similar policies and procedures
in conducting the operations which are subject to such policies.

(ee) Community Reinvestment Act. NSB is in material compliance with the
applicable provisions of the Community Reinvestment Act (the "CRA") and the
regulations promulgated thereunder, and NSB currently has a CRA rating of
satisfactory or better from the OTS. To the best knowledge of the Company, there
is no fact or circumstance or set of facts or circumstances which would cause
NSB to fail to comply with such provisions or cause the CRA rating of NSB to
fall below satisfactory.

-20-
<PAGE> 62

(ff) Certain Circumstances. The Company knows of no facts or circumstances
that would delay, impede or otherwise adversely affect its ability to promptly
secure all necessary regulatory and other approvals and consents to the Merger
and the transactions contemplated by this Agreement and to promptly consummate
the Merger.

SECTION 3.02. Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:

(a) Organization and Authority. Each of Parent and Sub is a bank or
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated or organized and has the
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of Parent and Sub and
each of Parent's other subsidiaries is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary except
where the failure so to qualify would not have a Material Adverse Effect on
Parent. Sub is a direct wholly owned subsidiary of Parent.

(b) Authorization. (i) Parent and Sub have all requisite corporate power
and authority to enter into this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and Sub. All of the
outstanding shares of voting common stock of Parent are beneficially owned,
directly or indirectly, by Banque Nationale de Paris, a banking corporation
organized and existing under the laws of the Republic of France ("BNP"). No
corporate action on the part of BNP is required for the consummation of the
transactions contemplated by this Agreement and the Stock Option Agreement. This
Agreement and the Stock Option Agreement have been duly executed and delivered
by Parent and Sub and each constitutes a valid and binding obligation of Parent
and Sub, enforceable against Parent and Sub in accordance with its terms, except
as such enforcement may be limited by bankruptcy, insolvency and other similar
laws affecting creditors' rights generally or the rights of creditors of
financial institutions and to general equity principles.

(ii) The execution and delivery of this Agreement and the Stock Option
Agreement do not, and the consummation of the transactions contemplated hereby
and thereby will not, and compliance by Parent and Sub with any of the
provisions hereof or thereof will not, (A) result in any Violation pursuant to
any provision of the articles or certificate of incorporation (or similar
constitutive document) or by-laws of Parent, Sub or any other subsidiary of
Parent or (B) subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in paragraph
(iii) below, result in any Violation of any loan or credit agreement, note,
mortgage, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent, Sub or any
other subsidiary of Parent or their respective properties or assets which
Violation under this clause (B) could reasonably be expected to have,
individually or in the aggregate with other such Violations, a Material Adverse
Effect on Parent.

(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent, Sub or any other subsidiary of Parent or any other Affiliate
(as defined in Section 8.03(c) hereof) of Parent in connection with the
execution and delivery of this Agreement and the Stock Option Agreement by
Parent and Sub, or the consummation by Parent and Sub of the transactions
contemplated hereby and thereby, the failure to obtain which could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent, except for (A) the filing of applications with the FDIC under 12 U.S.C.
Section 1815(d)(3) (the "Oakar statute") and with the OTS under the SLHCA and
the applicable regulations of the OTS and with the FDIC under the FDIA and
approval of the same, (B) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which Parent is qualified to do
business, (C) the Banking Approvals, (D) consents,

-21-
<PAGE> 63

authorizations, approvals, filings or exemptions in connection with compliance
with the applicable provisions of consumer finance, mortgage banking and other
similar laws, and (E) the receipt of a waiver from the Board of Governors of the
Federal Reserve System (the "FRB") of the applicability of the BHCA to the
transactions contemplated hereby.

(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date of mailing to stockholders and at the time of
the Company Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, except that no representation or warranty is
made by Parent or Sub with respect to statements made or incorporated by
reference therein based on information supplied by the Company specifically for
inclusion or incorporation by reference therein.

(d) Ownership of Company Common Stock. Other than pursuant to the Stock
Option Agreement, as of the date hereof, neither Parent nor any of its
affiliates (as such term is defined under the Exchange Act), (i) beneficially
owns, directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of, in
each case, shares of capital stock of the Company, which in the aggregate
represent 10% or more of the outstanding shares of Company Common Stock entitled
to vote generally in the election of directors (other than Trust Account
Shares).

(e) Brokers and Finders. No broker, investment banker, financial advisor or
other person, other than the fees and expenses of which will be paid by Parent,
is entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by this Agreement
and the Stock Option Agreement based upon arrangements made by or on behalf of
Parent or Sub.

(f) Financing. Parent has available funds sufficient to consummate the
Merger on the terms contemplated by this Agreement, and at the Effective Time,
Parent will have available all the funds necessary to perform its obligations
under this Agreement, including consummating the Merger on the terms
contemplated hereby.

(g) Litigation. There is no suit, action or proceeding pending or, to the
knowledge of Parent, threatened against or affecting Parent or any of its
Subsidiaries that individually or in the aggregate could reasonably be expected
to (i) impair the ability of Parent to perform its obligations under this
Agreement or (ii) threaten, impede or delay the consummation of the Merger, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Parent or any of its Subsidiaries
having, or which is reasonably likely to have, individually or in the aggregate,
any effect referred to in clause (i) or (ii) above.

(h) Community Reinvestment Act Compliance. Parent is in material compliance
with the applicable provisions of the CRA and the regulations promulgated
thereunder, and Parent currently has a CRA rating of satisfactory or better from
the FDIC. To the best knowledge of Parent, there is no fact or circumstance or
set of facts or circumstances which would cause Parent to fail to comply with
such provisions or cause the CRA rating of Parent to fall below satisfactory.

(i) Certain Circumstances. Parent knows of no facts or circumstances that
would delay, impede or otherwise adversely affect its ability to promptly secure
all necessary regulatory and other approvals and consents to the Merger and the
transactions contemplated by this Agreement and to promptly consummate the
Merger.

-22-
<PAGE> 64
ARTICLE IV

Covenants Relating to Conduct of the Company's Business

SECTION 4.01. Covenants of the Company. During the period from the date of
this Agreement until the Effective Time, the Company agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or the Stock Option Agreement):

(a) Ordinary Course. The Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course consistent with
sound banking and thrift industry practices and use their best efforts to
preserve intact their present business organizations, maintain their rights and
franchises, keep available the services of their current officers and employees
and preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect at the Effective Time.
The Company shall not, nor shall it permit any of its Subsidiaries to, (i) enter
into any new material line of business; (ii) except as required by law,
regulation, GAAP or regulatory policies or guidelines, change its or its
Subsidiaries' lending, credit, investment, liability management, deposit
interest rate or service charge and other material banking policies in any
respect which is material to the Company; or (iii) except as required by any
applicable Regulatory Authorities, incur or commit to any capital expenditures,
or any obligations or liabilities in connection therewith, other than capital
expenditures and obligations or liabilities incurred or committed to that are
approved in accordance with the Company's capital expenditure approval policies
and that are not (A) individually in excess of U.S.$25,000 and (B) in the
aggregate in excess of U.S.$100,000. Neither the Company nor any of its
Subsidiaries will form any new Subsidiaries.

(b) Dividends; Changes in Stock. The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it propose to, (i) declare, set aside or
pay any dividends on or make other distributions in respect of, directly or
indirectly, any of its capital stock, except (A) in the event the Effective Time
has not occurred by April 30, 1996, other than by reason of any breach or
default hereunder on the part of the Company, then the Company may declare and
pay a special cash dividend in an amount up to but not exceeding the Company Net
Income after April 30, 1996 (as defined in Section 8.03(c)), provided, however,
that (x) the Company shall not have, nor shall it have permitted any of its
Subsidiaries to have, conducted its operations other than in the ordinary course
of business and consistent with past practices and policies, including without
limitation, its practices and policies for the recognition of income and expense
items, and (y) the Company shall have furnished to Parent on the date of the
declaration of such dividend a certificate of the chief financial officer of the
Company, in form reasonably satisfactory to Parent, and dated as of such date,
to the effect that the Company has duly complied with the provisions of clause
(x) of this proviso, and (B) for dividends by a direct or indirect wholly owned
(other than directors' qualifying shares) Subsidiary of the Company, (ii)
adjust, split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, except for the issuance
of shares upon the exercise of options presently outstanding under the Incentive
Plan, or (iii) repurchase, redeem or otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire (except for the acquisition of Trust Account
Shares and the acquisition of shares to be used to satisfy obligations under
Company Stock Plans), any shares of its capital stock or any securities
convertible into or exchangeable for any shares of its capital stock.

(c) Issuance of Securities. The Company shall not, nor shall it permit any
of its Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its or any of its Subsidiaries'
capital stock of any class, any Voting Debt or any securities convertible into
or exchangeable for, or any rights, warrants or options to acquire, any such
shares or Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than (i) pursuant to the Stock Option Agreement, (ii) issuances
by a direct or indirect wholly owned (other than directors' qualifying shares)
Subsidiary of its capital stock to

-23-
<PAGE> 65

its parent, and (iii) pursuant to options or rights presently outstanding under
the Incentive Plan or the Employee Stock Purchase Plan.

(d) Governing Documents. The Company shall not amend or propose to amend,
nor shall it permit any of its Subsidiaries to amend, the articles or
certificate of incorporation (or similar constitutive documents) or by-laws of
the Company or any of its Subsidiaries.

(e) No Acquisitions. The Company shall not, nor shall it permit any of its
Subsidiaries to, acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or 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 or
otherwise acquire or agree to acquire any assets, in each case which are
material, individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole. Without limiting the generality of the foregoing, the Company
shall not, nor shall it permit any of its Subsidiaries to, make any investment
either by purchase of stock or securities, contributions to capital, property
transfers or purchase of any property or assets of any other individual,
corporation or other entity, except, subject to Section 4.01(p), for investments
in the ordinary course of business consistent with past practice.

(f) No Dispositions. Other than (i) activities in the ordinary course of
business consistent with sound banking and thrift industry practice or (ii) as
set forth on the Company Disclosure Schedule, the Company shall not, nor shall
it permit any of its Subsidiaries to, sell, lease, mortgage, encumber or
otherwise dispose of, any of its assets (including capital stock of
Subsidiaries).

(g) Indebtedness. The Company shall not, nor shall it permit any of its
Subsidiaries to, incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Company or any of its Subsidiaries or
guarantee any debt securities of others, other than in the ordinary courses of
business consistent with past practice (i) short-term indebtedness incurred to
refinance existing short-term indebtedness, (ii) short-term indebtedness of any
Subsidiary of the Company to the Company or another Subsidiary of the Company or
(iii) in the case of NSB, short-term indebtedness consistent with sound banking
and thrift industry practice. Without limiting the foregoing, NSB shall not
extend the maturities beyond one year or otherwise materially change the terms
of its advances from the Federal Home Loan Bank of San Francisco (the "FHLB").

(h) Other Actions. The Company shall not, nor shall it permit any of its
Subsidiaries to, knowingly or wilfully take any action that would, or reasonably
could be expected to, result in any of its representations and warranties set
forth in this Agreement that are qualified as to materiality being or becoming
untrue, any of such representations and warranties that are not so qualified
being or becoming untrue in any material respect, any of the conditions to the
Merger set forth in Article VI not being satisfied or a material Violation of
any provision of the Stock Option Agreement, or (unless such action is required
by applicable law or sound banking and thrift industry practice) which could
reasonably be expected to adversely affect or delay the ability of any of
Parent, Sub or the Company or their Subsidiaries to obtain any of the Requisite
Regulatory Approvals (as defined in Section 6.01(b)) without imposition of a
condition or restriction of the type referred to in Section 6.02(c).

(i) Advice of Changes; Government Filings. The Company shall confer on a
regular and frequent basis with Parent, report on operational matters and
promptly advise Parent orally and in writing of any change or event having, or
which, insofar as can reasonably be foreseen, could have, individually or in the
aggregate a Material Adverse Effect on the Company or which would cause or
constitute a material breach of any of the representations, warranties or
covenants of the Company contained herein. The Company shall file all reports
required to be filed by it with the SEC or the Amex between the date of this
Agreement and the Effective Time and shall deliver to Parent copies of all such
reports promptly after the same are filed. The Company and each Subsidiary of
the Company that is a savings bank shall file all reports, applications and
other documents required to be filed with the OTS and any other Regulatory
Authorities between the date hereof and the Effective Time and shall make
available to Parent

-24-
<PAGE> 66

copies of all such reports and other items promptly after the same are filed.
Except where prohibited by applicable statutes and regulations, the Company
shall promptly provide Parent with copies of all other filings made by the
Company with any Governmental Entity in connection with this Agreement, the
Stock Option Agreement or the transactions contemplated hereby or thereby.

(j) Accounting Methods. Except as contemplated by Section 5.09, the Company
shall not change its fiscal year or its methods of accounting in effect at July
1, 1995, except as required by changes in GAAP or regulatory accounting
practices as concurred in by the Company's independent auditors.

(k) Compensation; Benefit Plans Employment Agreement. Except as
contemplated by this Agreement, neither the Company nor any of its Subsidiaries
will (i) declare or pay (or agree to declare or pay) any bonuses or other
special compensation to any directors or officers, (ii) enter into, adopt, amend
or terminate any Company Benefit Plan or any other employee benefit plan or any
agreement, arrangement, plan or policy between such party and one or more of its
directors, officers or employees, (iii) increase in any manner the compensation
or fringe benefits of any of its directors, officers or employees or provide any
other benefit not required by any plan and arrangement as in effect as of the
date hereof (including the granting of bonuses or stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares), except for normal salary increases in the ordinary course of
business consistent with past practice, (iv) create or, except as required by
law or regulation, amend any Company Stock Plan or grant any equity based award
pursuant to any Company Stock Plan or otherwise, (v) enter into or renew any
contract, agreement, commitment or arrangement providing for the payment to any
director, officer or employee of such party of compensation or benefits
contingent, or the terms of which are materially altered, upon the occurrence of
any of the transactions contemplated by this Agreement or the Stock Option
Agreement (except for those agreements that are set forth on the Company
Disclosure Schedule, which may be renewed on the same terms and conditions as
contained therein), or (vi) enter into or amend any employment agreement with
any employee or director, hire any new employee at the level of Vice President
or above or fill any vacancy created by the departure (for any reason) of any
employee at the level of Vice President or above, in each case, without
previously consulting with Parent.

(l) Tax Matters. From the date hereof until the Effective Time, (i) the
Company and its Subsidiaries will file all Company Returns required to be filed
with any taxing authority in accordance with all applicable laws, (ii) the
Company and its Subsidiaries will timely pay all taxes shown as due and payable
on the respective Company Returns that are so filed and as of the time of
filing, the Company Returns will correctly reflect the facts regarding the
income, business, assets, operations, activities and the status of the Company
and its Subsidiaries in all material respects, and (iii) the Company and its
Subsidiaries will promptly notify Parent of any action, suit, proceeding,
investigation, audit or claim pending against or with respect to the Company or
any Subsidiary in respect of any tax where there is a reasonable possibility of
a determination or decision which would reasonably be expected to have a
significant adverse effect on the Company's tax liabilities or other tax
attributes. The Company shall not, nor shall it permit any of its Subsidiaries
to, make any tax election or settle or compromise any income tax liability.

(m) Settlements, Etc. The Company shall not, nor shall it permit any of its
Subsidiaries to, pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with sound banking and thrift
industry practice or in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Company SEC
Documents or incurred since the date of such financial statements in the
ordinary course of business consistent with sound banking and thrift industry
practice.

-25-
<PAGE> 67

(n) Material Contracts. Except in the ordinary course of business
consistent with sound banking and thrift industry practice or as required by the
terms of this Agreement, the Company shall not, nor shall it permit any of its
Subsidiaries to, modify, amend or terminate any material contract, lease or
agreement to which the Company or any Subsidiary is a party or waive, release or
assign any material rights or claims thereunder. Without limiting the generality
of the foregoing, without the prior written consent of Parent, the Company shall
not waive any standstill provision contained in any confidentiality agreement in
existence as of the date hereof between the Company and any other person.
Without the prior written consent of Parent (which shall not be unreasonably
withheld), the Company shall not, nor shall it permit any of its Subsidiaries
to, enter into any contract, agreement or arrangement which, if entered into
prior to the date hereof, would have been covered by Section 3.01(u) or Section
3.01(cc).

(o) Loans and Commitments. The Company shall not, nor shall it permit any
of its Subsidiaries to, without prior consultation with Parent, make,
renegotiate, renew, increase, extend or purchase any loans, advances or loan
commitments (and the Company and such Subsidiaries shall not make any loans,
advances or commitments to which Parent has reasonably objected), except loans,
advances or commitments of less than U.S.$1,000,000 made in the ordinary course
of business.

(p) Investments. The Company shall not, nor shall it permit any of its
Subsidiaries to, without prior consultation of Parent, make or purchase any
investment of any kind (and the Company and such Subsidiaries shall not make or
purchase any investments to which Parent has reasonably objected), except
investments of less than U.S.$1,000,000 made in the ordinary course of business.

(q) No Change in Rates. The Company shall not, nor shall it permit any of
its Subsidiaries to, without the prior consent of Parent, offer interest rates
or terms on any category of deposits at any of its branches which are not
consistent with recent practice as disclosed by the Company to Parent, except as
may be necessary in the good faith judgment of the Company in response to
competitive market developments.

(r) General. The Company shall not, nor shall it permit any of its
Subsidiaries to, authorize any of, or commit or agree to take any of, the
foregoing actions described in this Section 4.01.

SECTION 4.02. No Solicitation. (a) The Company agrees that neither it nor
any of its Subsidiaries nor any of the respective officers and directors of the
Company or any of its Subsidiaries shall, and the Company shall direct and cause
its employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, initiate, solicit, encourage or
otherwise facilitate any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to stockholders of the
Company) with respect to a merger, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets,
deposits or any equity securities of, the Company or any of its Subsidiaries
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or, except to the extent legally required for the discharge by the
Company's board of directors of its fiduciary duties as advised by such board's
counsel with respect to an unsolicited offer from a third party, 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 otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties (other than the Parent)
conducted heretofore with respect to any of the foregoing. The Company will take
the necessary steps to inform promptly the appropriate individuals or entities
referred to in the first sentence hereof of the obligations undertaken in this
Section 4.02(a). The Company agrees that it will notify the Parent immediately
if any such inquiries, proposals or offers are received by, any such information
is requested from, or any such negotiations or discussions are sought to be
initiated or continued with the Company or any of its Subsidiaries. The Company
also agrees that it promptly shall request each other person (other than the
Parent) that has heretofore executed a confidentiality agreement in

-26-
<PAGE> 68

connection with its consideration of acquiring the Company or any of its
Subsidiaries to return all confidential information heretofore furnished to such
person by or on behalf of the Company or any of Subsidiaries.

(b) Except to the extent legally required for the discharge by the
Company's board of directors of its fiduciary duties as advised by such board's
counsel, neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Sub, the approval or recommendation by such Board of
Directors of this Agreement or the Merger, (ii) approve or recommend, or propose
to approve or recommend, any takeover proposal or (iii) enter into any agreement
with respect to any takeover proposal.

(c) In addition to the obligations of the Company set forth in Section
4.02(b), the Company promptly shall advise Parent orally and in writing of any
request for information or of any takeover proposal, or any inquiry with respect
to or which could lead to any takeover proposal, the material terms and
conditions of such request, takeover proposal or inquiry and the identity of the
person making any such request, takeover proposal or inquiry. The Company will
keep Parent fully informed of the status and details (including amendments or
proposed amendments) of any such request, takeover proposal or inquiry.

(d) Nothing contained in this Section 4.02 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's stockholders if, in the good faith judgment of the Board of Directors
of the Company based on the written opinion of independent counsel, failure to
do so would be inconsistent with applicable laws; provided that the Company does
not, withdraw or modify, its position with respect to the Merger or approve or
recommend, or propose to approve or recommend, a takeover proposal, except as
permitted by the last sentence of Section 5.03.

ARTICLE V

Additional Agreements

SECTION 5.01. Preparation of the Proxy Statement. The Company will use all
reasonable efforts to prepare and file promptly a preliminary Proxy Statement
with the SEC and will use all reasonable efforts to respond to any comments of
the SEC or its staff and to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after responding to all such
comments to the satisfaction of the SEC or its staff. The Company will notify
Parent promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the Company Stockholders
Meeting there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company will promptly prepare and mail to
its stockholders such an amendment or supplement. The Company will not mail any
Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects.

SECTION 5.02. Access to Information. The Company shall, and shall cause
each of its Subsidiaries to, afford to Parent and to the officers, employees,
accountants, counsel and other representatives and advisors of Parent,
reasonable access, during normal business hours during the period prior to the
Effective Time, to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, the Company shall,
and shall cause each of its Subsidiaries to, furnish promptly to Parent (a) a
copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of Federal or
state securities laws or Federal or state banking or thrift laws (other than
reports or documents which the Company or subsidiary is not permitted to
disclose under applicable law) and (b) all other information concerning its
business, properties and

-27-
<PAGE> 69

personnel as Parent may reasonably request. Parent will, and will cause its
advisors and representatives to, hold any such information which is nonpublic
in confidence to the extent required by, and in accordance with, the terms of
the Confidentiality Agreement dated as of January 17, 1995, between the Company
and Parent (the "Confidentiality Agreement"). No investigation by either
Parent or Sub shall affect the representations and warranties of the Company,
and each such representation and warranty shall survive such investigation.
During the period from the date of this Agreement to the Effective Time, the
Company shall promptly furnish to Parent as the same become available and shall
cause one or more of its designated representatives with appropriate knowledge
of the details reflected in or underlying such financial statements and budgets
to confer on a regular and frequent basis with Parent: (w) copies of all
monthly and quarterly interim financial statements (including budgets and
variances from budgets), (x) detailed information regarding monthly deposit
flow and FHLB funding, (y) copies of monthly loan production reports, and (z)
copies of monthly reports regarding sales of securities products. The Company
shall promptly notify Parent of any material change in its business or
operations and of any complaints, investigations or hearings (or communications
indicating that the same may be contemplated) by any Governmental Entity, or
the institution of the threat of material litigation involving the Company or
its Subsidiaries, and shall keep Parent fully informed of all such events.

SECTION 5.03. Company Stockholders Meeting. The Company shall duly call,
give notice of, convene and hold the Company Stockholders Meeting for the
purpose of obtaining the Company Stockholder Approval as soon as practicable
after the date on which the definitive Proxy Statement has been mailed to the
Company's stockholders. In any event, the Company will use all reasonable
efforts to promptly cause the Stockholders Meeting to be held. The Company will,
through its Board of Directors, recommend to its stockholders that they grant
the Company Stockholder Approval, unless, as a result of an unsolicited
Acquisition Proposal, the board of directors determines in good faith after
consultation with independent counsel and Kaplan Associates, Inc. or an
investment banking firm of recognized standing, that to so recommend would
constitute a breach of the fiduciary obligations of the board of directors of
the Company to the stockholders of the Company.

SECTION 5.04. Legal Conditions to Merger. Subject to the terms and
conditions of this Agreement, each of the Company and Parent shall, and shall
cause its Subsidiaries to, use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including (a)
the obtaining of any necessary consent, authorization, order or approval of, or
any exemption by, any Governmental Entity and/or any other public or private
third party which is required to be obtained by such party or any of its
Subsidiaries in connection with the Merger and the other transactions
contemplated by this Agreement (including any subsequent merger or other
combination of the Company and NSB with and into Parent) and the Stock Option
Agreement and the making or obtaining of all necessary filings and registrations
with respect thereto, (b) the defending of any lawsuits or other legal
proceedings, whether judicial, administrative or regulatory, challenging this
Agreement or the Stock Option Agreement, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (c) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement and the Stock Option Agreement;
provided, however, that a party shall not be obligated to take any action
pursuant to the foregoing if the taking of such action or such compliance or the
obtaining of such consent, authorization, order, approval or exemption would, in
such party's reasonable opinion, (A) be materially burdensome to such party and
its Subsidiaries taken as a whole in the context of the transactions
contemplated by this Agreement or impact in such a materially adverse manner the
economic or business benefits of the transactions contemplated by this Agreement
as to render inadvisable the consummation of the Merger or (B) result in the
imposition of a condition or restriction on such party or on the Surviving
Corporation of the type referred to in Section 6.02(c). Each of the Company and
Parent will promptly cooperate with and furnish information to the other in
connection with any such burden suffered by, or requirement imposed upon, any of
them or any of their Subsidiaries in connection with the

-28-
<PAGE> 70

foregoing. The Company will use all commercially reasonable efforts to operate
the Company and the Subsidiaries and their respective businesses in a manner
designed to achieve satisfaction of all of the conditions precedent set forth in
Sections 6.01 and 6.02. In connection with and without limiting the foregoing,
the Company and its Board of Directors shall (x) take all action necessary to
ensure that any state takeover statute or similar statute or regulation
(including Section 203 of the DGCL) is not applicable to the Merger, this
Agreement, the Stock Option Agreement or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement and (y) if any
state takeover statute or similar statute or regulation becomes applicable to
the Merger, this Agreement, the Stock Option Agreement or any of the other
transactions contemplated by this Agreement or the Stock Option Agreement, take
all action necessary to ensure that the Merger and the other transactions
contemplated by this Agreement and the Stock Option Agreement may be consummated
as promptly as practicable on the terms contemplated by this Agreement and
otherwise to minimize the effect of such statute or regulation on the Merger,
this Agreement, the Stock Option Agreement or any of the other transactions
contemplated by this Agreement or the Stock Option Agreement.

SECTION 5.05. Employee Matters. (a) Parent shall honor in accordance with
their terms the employment, salary continuation, severance and other contracts
to which employees of the Company are a party that are set forth on the Company
Disclosure Schedule and shall also honor the terms and provisions of the
Company's severance policy for its employees as heretofore furnished to Parent,
and shall honor all provisions for vested benefits and rights existing as of the
Effective Time under the Company Benefit Plans. Notwithstanding the foregoing,
Parent shall be obligated at the Effective Time to make payments with respect to
the separation from employment in connection with a change of control of the
Company under employment and severance contracts to the following employees only
in the respective amounts set forth in the Company Disclosure Schedule --
Granville Stark, Greg Jahn, Bertha Balfour and Cathy Simondi. In addition,
notwithstanding the foregoing, Parent shall be obligated at the Effective Time
to make payments to Alfred Alys with respect to his consulting and
non-competition agreement and employment agreements only in the amount set forth
in the Company Disclosure Schedule. At the Effective Time, Parent shall enter
into a Consulting Agreement with Alfred Alys in substantially the form
heretofore agreed upon by the parties. Concurrently with the execution and
delivery of this Agreement, the Company has delivered to Parent the written
agreement of each of the individuals specified in the preceding sentence that
their maximum entitlement under such contracts is as specified in the Company
Disclosure Schedule.

(b) Parent agrees to pay former employees of the Company and its
Subsidiaries who are retained following completion of the Merger by Parent
("Continuing Employees") at their base salaries (excluding bonus plans) in
effect on the Closing Date, subject to Parent's regular performance review
process applicable to Parent's employees generally. Nothing herein shall create
any obligation on the part of Parent to retain any such employees or to refrain
from reassigning any such employee as Parent shall determine is necessary or
appropriate.

(c) Continuing Employees will participate in the employee benefit, welfare
and related plans and programs of Parent and its Subsidiaries on the same basis
as other similarly situated employees of Parent and its Subsidiaries with the
Continuing Employees (i) receiving past service credit for their employment with
the Company and its Subsidiaries (and predecessors thereto) for eligibility,
participation and vesting in the plans, programs and arrangements of Parent and
its Subsidiaries including, but not limited to, qualified retirement plans,
vacation, sick time and leave, with past service credit applicable to
eligibility and vesting excluded from consideration for purposes of benefit
determination, and (ii) not being subject to any waiting period or preexisting
condition exclusion in connection with medical, dental, life and disability
coverage and receiving full credit for their prior co-payments and deductibles.

(d) Notwithstanding any other provisions contained in this Agreement, the
Company may effect repayment prior to the Effective Time, in full or in part, of
the ESOP Debt, provided, however, that to the extent any ESOP Debt is
outstanding and not so repaid at the Effective Time, cash received by the ESOP
Trustee as a result of the Merger with respect to unallocated shares of Company
shall be applied by the trustee to the repayment of ESOP Debt

-29-
<PAGE> 71

and the balance of the cash received by the ESOP Trustee as a result of the
Merger with respect to unallocated shares of Company shall be allocated to the
accounts of all participants and beneficiaries in the ESOP who have accounts
under the ESOP in proportion to the account balances of such participants and
beneficiaries as they existed as of the Effective Time. Prior to the Effective
Time, the ESOP may be amended to provide for (i) full vesting of benefits by
participants and (ii) elimination of any requirement for a participant to be
employed on the last day of the Plan Year to receive an employer contribution or
other annual additions or allocations. Upon the making of all allocations
herein, the ESOP shall be terminated and the account balances therein will be
distributed to participants or their beneficiaries, with the right of tax-free
rollover, to the extent permitted by law, to an individual retirement account or
another tax-qualified plan of Parent that accepts such a rollover, at the
election of the distributee.

(e) Prior to the Effective Time, the Company may establish and fund for the
benefit of Alfred Alys a rabbi trust sufficient to fund fully the Company's
obligations under the Salary Continuation Agreement for Alfred Alys. Such trust
shall be established pursuant to the execution and delivery of a trust agreement
substantially in the form of Exhibit B hereto. Mr. Alys may designate the
trustee and depository for such trust.

SECTION 5.06. Stock Options and the ESOP; Profit Sharing Plan. (a) As soon
as practicable following the date of this Agreement, the Board of Directors of
the Company (or, if appropriate, any committee administering the Company Stock
Plans) shall adopt such resolutions or take such other actions as are required
to provide for the cancellation of all outstanding Company Employee Options upon
the Effective Time, in exchange for a cash payment by the Company of an amount
equal to (i) the excess, if any, of (x) the Merger Consideration per share over
(y) the exercise price per share of Company Common Stock subject to such Company
Employee Option, multiplied by (ii) the number of shares of Company Common Stock
subject to such Company Employee Option for which such Company Employee Option
shall not theretofore have been exercised, whether or not then exercisable.

(b) All amounts payable pursuant to this Section 5.06 shall be subject to
any required withholding of taxes and shall be paid without interest.

(c) The Board of Directors of the Company (or, if appropriate, any
committee administering the Company Stock Plans) shall adopt such resolutions or
take such actions as are required to terminate the Company Stock Plans other
than the ESOP as of the Effective Time, to delete as of the Effective Time the
provision in any other Company Benefit Plan providing for the issuance, transfer
or grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company and to ensure that following the Effective Time no
holder of a Company Stock Option or any participant in any Company Stock Plan or
other Company Benefit Plan shall have any right thereunder to acquire any
capital stock of the Company or the Surviving Corporation.

(d) In addition, the 401(k) and profit sharing plan may be terminated prior
to the Effective Time and the account balances therein may be distributed to
participants or their beneficiaries, with the right of tax free rollover, to the
extent permitted by law, to an individual retirement account or another
tax-qualified plan of Parent that accepts such a rollover, at the election of
the distributee.

SECTION 5.07. Fees and Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expense, except that in the case of a
termination pursuant to Section 7.01(b)(ii), 7.01(c)(iv) or 7.01(c)(v), the non-
terminating party shall pay on demand to the terminating party in immediately
available funds all of the terminating party's out of pocket expenses incurred
in connection with the transactions contemplated by this Agreement up to but not
exceeding $250,000.

-30-
<PAGE> 72

SECTION 5.08. Indemnification, Exculpation and Insurance. (a) Parent and
Sub agree that, for a period of six years (or the period of the applicable
statute of limitations, if longer) from the Effective Time, all rights to
indemnification and exculpation from liability for acts or omissions occurring
at or prior to the Effective Time now existing in favor of the current or former
directors or officers of the Company and its subsidiaries (such persons,
"Indemnified Persons") as provided in their respective certificate or articles
of incorporation (or similar constitutive documents) or by-laws or otherwise
shall survive the Merger and shall not be amended, repealed or otherwise
modified in any manner that would adversely affect the rights thereunder of any
such Indemnified Persons. Parent will cause to be maintained for a period of six
years from the Effective Time the Company's current directors' and officers'
insurance and indemnification policy (a copy of which has heretofore been
delivered to Parent) to the extent that it provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") for all persons who
are directors and officers of the Company or its Subsidiaries on the date of
this Agreement, so long as the aggregate premium therefor would not exceed
$75,000 over said six year period (the "Maximum Aggregate Premium") provided,
however, that Parent may, in lieu of maintaining such existing D&O Insurance as
provided above, cause comparable coverage to be provided under any policy
maintained for the benefit of Parent or any of its subsidiaries, so long as the
material terms thereof are no less advantageous than the existing D&O Insurance.
If the existing D&O Insurance expires, is terminated or canceled during such
six-year period, Parent will use all commercially reasonable efforts to cause to
be obtained as much D&O Insurance as can be obtained for the remainder of such
period for an annualized premium not in excess of the Maximum Aggregate Premium,
on terms and conditions no less advantageous than the existing D&O Insurance.

(b) The provisions of this Section 5.08 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and each Indemnified
Party's heirs and representatives.

SECTION 5.09. Company Accruals and Reserves. Prior to the Closing Date, at
the request of Parent, the Company shall review and, to the extent consistent
with GAAP and the accounting rules, regulations and interpretations of the SEC
and its staff, modify and change its loan, accrual and reserve policies and
practices (including loan classifications and levels of reserves and accruals)
to (a) reflect the Surviving Corporation's and Parent's plans with respect to
the conduct of the Company's business following the Merger and (b) make adequate
provision for the costs and expenses relating thereto. Notwithstanding the
foregoing, the Company shall not be obligated to take in any respect any such
action pursuant to this Section 5.09 unless and until Parent acknowledges that
all conditions to its obligation to consummate the Merger have been satisfied.

SECTION 5.10. Letters of Accountants to the Company. The Company shall use
all reasonable efforts to cause to be delivered to Parent letters of KPMG Peat
Marwick LLP ("PM"), the Company's independent auditors, dated a date within two
business days (as defined in Section 8.03(c)) before the date on which the Proxy
Statement relating to the Company Stockholders Meeting is mailed to the
stockholders of the Company and two business days before the Closing Date, and
addressed to Parent, in form and substance reasonably satisfactory to Parent,
and in scope and substance consistent with applicable professional standards for
letters delivered by independent public accountants in connection with proxy
statements similar to the Proxy Statement sent to the Company's stockholders in
connection with the transactions contemplated hereby.

SECTION 5.11. Additional Agreements. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
either of the Company or Parent, the proper officers and directors of each party
to this Agreement shall take all such necessary action.

SECTION 5.12. Parent Covenants; Other Actions. Parent shall not, nor shall
it permit any of its Subsidiaries to, take any action that would, or reasonably
could be expected to, result in any of its representations and warranties set
forth in this Agreement that are qualified as to

-31-
<PAGE> 73

materiality being or becoming untrue, any of such representations and warranties
that are not so qualified being or becoming untrue in any material respect, any
of the conditions to the Merger set forth in Article VI not being satisfied or a
material Violation of any provision of the Stock Option Agreement, or (unless
such action is required by applicable law or sound banking or thrift industry
practice) which could reasonably be expected to adversely affect or delay the
ability of any of Parent, Sub or the Company or their Subsidiaries to obtain any
of the Requisite Regulatory Approvals without imposition of a condition or
restriction of the type referred to in Section 6.02(c).

SECTION 5.13 Joint Implementation Team. Promptly following the execution of
this Agreement, Parent and the Company shall each identify a selected group of
their respective personnel that shall constitute a "Joint Implementation Team"
who shall be available to Parent and the Company, respectively, at reasonable
times (limited to normal operating hours) to provide information and assistance
in connection with Parent's investigation of matters relating to the Company and
the Subsidiaries, as well as consultation regarding the combined operations of
the parties following the Closing.

SECTION 5.14 Employee Training. Not later than 30 days prior to the Closing
Date, the Company shall permit Parent to train and conduct orientation sessions
for the employees of the Company and the Subsidiaries in respect of Parent's
systems, policies and procedures and the Company shall, as scheduled by Parent
for reasonable periods of time and subject to the Company's reasonable approval,
such that the Company's ongoing operations shall not be materially disrupted,
excuse such employees from their duties for the purpose of training and
orientation by Parent.

SECTION 5.15 Environmental, ADA and Seismic Investigations. Promptly
following the execution of this Agreement, the Company shall (a) provide Parent
and Parent's consultants with access to each of the properties of the Company
and the Subsidiaries, including all real property and the improvements thereon
(the "Properties") and to pertinent information, records or documents within the
possession, custody or control of the Company or the Subsidiaries, at times
reasonably satisfactory to the Company, (b) permit Parent's consultants to
investigate the Properties in order to prepare Preliminary Environmental
Assessment Reports of a scope reasonably satisfactory to Parent (and such
additional environmental reports as Parent may reasonably request in light of
the findings in the Preliminary Environmental Assessment Reports) regarding each
of the Properties owned by the Company or the Subsidiaries, (b) permit Parent
and its consultants to conduct an investigation of each of the Properties as to
the compliance thereof with the Americans With Disabilities Act of 1990 and
applicable regulations promulgated in accordance therewith (the "ADA"), and (c)
permit Parent and its consultants to conduct an investigation of each of the
Properties as to the compliance thereof with applicable seismic guidelines,
standards, laws and regulations. The first $20,000 of the cost of the
investigations and reports contemplated by this Section 5.15 shall be borne
equally by the Company and Parent, with the excess over $20,000 being borne
solely by Parent. Parent will provide the Company with copies of any reports it
receives pursuant to this Section.

-32-
<PAGE> 74

SECTION 5.16. Certificates re Financial Data. The Company shall deliver to
Parent, no later than 15 days after the end of the month to which each such
certificate relates, certificates in form, substance and detail reasonably
satisfactory to Parent, dated as of the last day of each month after the date
hereof to the Effective Time (and, for delivery on the Closing Date, a
certificate dated as of the Closing Date), each signed on behalf of the Company
by its Chairman or Chief Executive Officer and its Chief Financial Officer or
other executive officer performing duties equivalent to those of a "chief
financial officer" certifying reasonably and in good faith as of such dates (i)
the Company Net Worth (as defined in Section 8.03(c)(v)) and (ii) the Deposit
Balance (as defined in Section 7.01(c)(iv)).

ARTICLE VI

Conditions Precedent

SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction or waiver
at or prior to the Effective Time of the following conditions:

(a) Company Stockholder Approval. The Company Stockholder Approval shall
have been obtained.

(b) Other Approvals. Other than the filing provided for by Section 1.03,
all authorizations, consents, orders or approvals of, or declarations or filings
with, and all expirations of waiting periods imposed by, any Governmental Entity
(all the foregoing, "Consents") which are necessary for the consummation of the
Merger, other than Consents the failure to obtain which would not, individually
or in the aggregate, have a Material Adverse Effect on the Surviving Corporation
or Parent or which would not, individually or in the aggregate, materially
adversely affect the consummation of the transactions contemplated hereby, shall
have been filed, occurred or been obtained (all such Consents and the lapse of
all such waiting periods being referred to as the "Requisite Regulatory
Approvals"), and all such Requisite Regulatory Approvals shall be in full force
and effect.

(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order or decree issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided, however,
that each of the parties shall have used reasonable efforts to prevent the entry
of any such injunction or other order or restraint and to appeal as promptly as
possible any injunction or other order or restraint that may be entered. There
shall not be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.

SECTION 6.02. Conditions to Obligations of Parent. The obligations of
Parent and Sub to effect the Merger are subject to the satisfaction of the
following conditions unless waived by Parent and Sub:

(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct (subject to
Section 3.00) in all material respects both as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date as though made on and as of the Closing Date,
except as otherwise contemplated by this Agreement, and Parent shall have
received a certificate signed on behalf of the Company by its Chairman or Chief
Executive Officer and its Chief Financial Officer or other executive officer
performing duties equivalent to those of a "chief financial officer" to such
effect.

(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received a certificate signed on behalf of the

-33-
<PAGE> 75

Company by its Chairman or Chief Executive Officer and its Chief Financial
Officer or other executive officer performing duties equivalent to these of a
"chief financial officer" to such effect.

(c) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, by any Governmental Entity which, in connection with
the grant of a Requisite Regulatory Approval, imposes any requirement upon
Parent, the Company or the Surviving Corporation or their Affiliates which,
individually or in the aggregate, would (i) result in a Material Adverse Effect
on Parent, the Surviving Corporation or their Affiliates, or (ii) would reduce
the benefits of the transactions contemplated by this Agreement to Parent in so
significant a manner that Parent, in its reasonable good faith judgment, would
not have entered into this Agreement had such condition or requirement been
known at the time hereof.

(d) Company Stock Options and Company Stock Plans. The Company shall have
duly effected, as of the Effective Time, the cancellation of all outstanding
Company Stock Options, whether vested or not, the termination of the Company
Stock Plans and the deletion of any provision in any other Company Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any subsidiary of the Company or any interest in respect of any
capital stock of the Company or any Subsidiary of the Company.

(e) Letter of the Company's Independent Accountants; Results of Audit.
Parent shall have received in accordance with the terms hereof the duly executed
letters of PM, prepared pursuant to the provisions of Section 5.10.

(f) Opinion of Counsel. Parent shall have received the duly executed
opinion of Silver, Freedman & Taff, or other counsel to the Company, dated the
Closing Date, covering the matters set forth in Exhibit C hereto and reasonably
satisfactory to Parent and such other customary closing documents for
transactions of this type as Parent shall reasonably request.

(g) Litigation, Etc. There shall be no pending or threatened material
actions or proceedings by any person against the Parent, the Sub, the Company,
or any Subsidiary of the Company, or any director, officer or employee of any of
the foregoing challenging or in any way or in any manner seeking to restrict or
prohibit the transactions contemplated hereby or seeking to obtain any damages
against any person as a result of the transactions contemplated hereby.

(h) No Material Adverse Effect. Since the date of this Agreement, there
shall have occurred no Material Adverse Effect with respect to the Company.

(i) Certain Expense Reports. At least two business days prior to the
Effective Time, all attorneys, accountants, investment bankers and other
advisors and agents of the Company and its Subsidiaries shall have submitted to
the Company (with a copy to the Parent) estimates of their fees and expense for
all services rendered in any respect in connection with the transactions
contemplated hereby to the extent not already paid, and based on such estimates,
the Company shall have prepared and submitted to Parent a summary of such fees
and expenses with respect to the transactions contemplated hereby. At the
Effective Time, such advisors shall have submitted their final bills for such
fees and expenses to the Company and its Subsidiaries for services rendered,
with a copy delivered to Parent, and based on such summary, the Company shall
have prepared and submitted to Parent a final calculation of such fees and
expenses.

(j) Contingent Liabilities. Except for matters described in the Company
Disclosure Schedule (and as to such matters only to the extent of facts made
available to Parent on or prior to the date of this Agreement), the Company, at
the time of the Closing, shall not be subject to any suit, action or proceeding,
or any investigation or inquiry by any Government Entity (such suits, actions or
proceedings, or any such investigations or inquiries, being collectively
referred to herein as "proceedings"), which shall be pending or, to the
knowledge of the Company, threatened, against or affecting the Company or any
Subsidiary of the Company, nor shall there

-34-
<PAGE> 76

by any potential unasserted claim or liability not heretofore disclosed in the
Company Disclosure Schedule (whether or not such claim or liability is required
to be accrued or disclosed under SFAS Nos. 5) unless Parent shall have
determined, in the exercise of its reasonable business judgment, that each
proceeding, claim or liability likely would not have either individually or in
the aggregate with all other such proceedings, claims or liabilities, a Material
Adverse Effect on the Company.

(k) Certain Other Approvals. Parent shall have received the approval of the
FDIC under 12 U.S.C. Section 1815(d)(3), or under any successor provision, (the
"Oakar" statute) so that the "exit fee" provided for therein shall not be
applicable to the transactions contemplated hereby or to any subsequent merger
or other combination of NSB with and into Parent and shall also have received
all requisite approvals from the California State Banking Department, the FDIC
and the OTS and any other Governmental Entities having jurisdiction for the
merger or other combination of the Company and NSB with and into Parent promptly
following the Effective Time.

(l) Non-Competition Agreements. Parent shall have received duly executed
non-competition agreements, in substantially the form heretofore agreed to
between Parent and the Company, from those individuals listed on Exhibit D
hereto.

(m) Consents Under Agreements. The consent, approval or waiver of each
person (other than Governmental Entities) whose consent or approval shall be
required in order to permit the succession by Parent and the Surviving
Corporation in connection with the Merger (and any subsequent merger or other
combination of NSB with and into Parent) to any material obligation, right or
interest of the Company and its Subsidiaries under any material loan or credit
agreement, note, mortgage, indenture, lease (and all branch leases shall be
deemed to be material for purposes of this Section), license or other agreement
or instrument shall have been obtained.

(n) Headquarters and Administrative Offices. The existing leases of the
Company's properties at (i) 20 Petaluma Boulevard South, Petaluma, California,
(ii) 450 Center Street, Healdsburg, California, and (iii) 6301 State Farm Drive,
Rohnert Park, California shall be amended on terms satisfactory to Parent to
implement the modifications set forth in the letter agreement of even date
herewith between the Company and the lessors of such properties.

(o) Certificates re Financial Data. Parent shall have received certificates
dated as of the last day of each month after the date hereof to the Effective
Time and a certificate, dated as of the Closing Date, signed on behalf of the
Company by its Chairman or Chief Executive Officer and its Chief Financial
Officer or other executive officer performing duties equivalent to those of a
"chief financial officer" certifying as of such dates (i) the Company Net Worth
(as defined in Section 8.03(c)(v)) and (ii) the Deposit Balance (as defined in
Section 7.01(c)(iv)). The monthly certificates shall be received no later than
10 days after the end of the month to which each such certificate relates.

SECTION 6.03. Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger are subject to the satisfaction of the
following conditions unless waived by the Company:

(a) Representations and Warranties. The representations and warranties of
Parent and Sub set forth in this Agreement that are qualified as to materiality
shall be true and correct (subject to Section 3.00) in all material respects,
both as of the date of this Agreement and (except to the extent such
representations speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except as otherwise contemplated by this
Agreement, and the Company shall have received a certificate signed on behalf of
Parent and Sub by their respective Chairman or Chief Executive Officers and
their respective Chief Financial Officers or other executive officers performing
duties equivalent to these of a "chief financial officer" to such effect.

-35-
<PAGE> 77

(b) Performance of Obligations of Parent and Sub. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement and the Stock Option Agreement at or prior to the
Closing Date, and the Company shall have received a certificate signed on behalf
of Parent and Sub by their respective Chairman or Chief Executive Officers and
their respective Chief Financial Officers or other executive officers performing
duties equivalent to these of a "chief financial officer" to such effect.

(c) Opinion of Counsel. The Company shall have received the duly executed
opinion of Pillsbury Madison & Sutro, counsel to Parent, dated the Closing Date,
substantially in the form of Exhibit E hereto.

ARTICLE VII

Termination and Amendment

SECTION 7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval is received:

(a) by mutual written consent of Parent and the Company;

(b) by either Parent or the Company upon written notice to the other party:

(i) if (1) the OTS, or any other Governmental Entity the approval of
which is required to permit consummation of the Merger or the other
transactions contemplated hereby shall have issued an order denying
approval of the Merger or such other transactions or (2) any Governmental
Entity of competent jurisdiction shall have issued a final permanent order
enjoining or otherwise prohibiting the consummation of the Merger or the
other transactions contemplated hereby and in any such case under either
clause (1) or (2) the time for appeal or petition for reconsideration of
such order shall have expired without such appeal or petition being
granted;

(ii) if the Company, on the one hand, or Parent or Sub, on the other
hand, materially breaches any of its covenants and obligations or
representations and warranties hereunder or under the Stock Option
Agreement and such breach is not cured after 30 days' written notice
thereof is given to the party committing such breach by the other party;
provided, however, that neither party shall have the right to terminate
this Agreement pursuant to this Section 7.01(b)(ii) unless the breach of
covenant, obligation, representation or warranty, together with all other
such breaches, would entitle the party other than the party bound by such
covenant or obligation not to consummate the transactions contemplated
hereby or the party receiving such representation or warranty not to
consummate the transactions contemplated hereby under Section 6.02(a) (in
the case of a breach of representation or warranty by the Company) or
Section 6.03(a) (in the case of a breach of representation or warranty by
Parent and Sub);

(iii) if the Merger shall not have been consummated on or before August
31, 1996, unless the failure to consummate the Merger is the result of a
willful and material breach of this Agreement by the party seeking to
terminate this Agreement; or

(iv) if, upon a vote at a duly held Company Stockholders Meeting, the
Company Stockholder Approval shall not have been obtained;

-36-
<PAGE> 78
(i) if, prior to the Company Stockholders Meeting, a takeover proposal
is commenced, publicly proposed, publicly disclosed or communicated to the
Company (or the willingness of any person to make a takeover proposal is
publicly disclosed or communicated to the Company) and (A) the Company
Stockholder Approval is not obtained at the Company Stockholders Meeting,
(B) the Company Stockholders Meeting does not occur prior to June 30, 1996
or (C) the Board of Directors of the Company shall have withdrawn or
modified its approval or recommendation of the Merger or this Agreement, or
approved or recommended any takeover proposal;

(ii) if (A) the FDIC shall have issued an order denying approval of the
application of Parent for an order under the Oakar statute with respect to
any subsequent merger or other combination of NSB with and into Parent, (B)
any repeal or change to the Oakar statute occurs which has the effect of
making the exit fee provided therein or any comparable fee applicable to
the transactions contemplated hereby or to any subsequent merger or other
combination of NSB with and into Parent, (C) the California State Banking
Department or the OTS or the FDIC or any other Governmental Entity having
jurisdiction shall have issued an order under any other applicable statute
or regulation denying approval of any such merger or other combination of
NSB with and into Parent promptly following consummation of the
transactions contemplated hereby, or (D) the FRB shall have refused to
grant the waiver contemplated by Section 3.02(b)(iii)(G);

(iii) if, after the date hereof, there has occurred any Material
Adverse Effect (or any development or circumstance that might reasonably be
expected to result in a Material Adverse Effect) with respect to the
Company, provided that Parent shall have given 30 days' written notice of
such termination to the Company and the Company shall not have remedied
such event by the end of such 30 day period;

(iv) if, as of the Closing Date the principal balance of all deposit
liabilities, including, accounts accessible by negotiable orders of
withdrawal, demand deposits, passbook accounts, certificates of deposit,
but excluding all brokered deposits and depository accounts with balances
greater than U.S.$100,000, of the Company and its Subsidiaries ("Deposit
Balance") shall be less than U.S.$230,000,000; or

(v) if, as of the Closing Date, Company Net Worth shall be less than
U.S.$34,000,000.

SECTION 7.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect, and there shall be no
liability or obligation on the part of Parent, Sub, the Company or their
respective officers or directors, except that any such termination shall be
without prejudice to the rights of any party hereto arising out of the willful
breach by any other party of any covenant or obligation or willful breach of any
warranty or representation contained in this Agreement, and except (a) with
respect to Section 3.01(r), Section 3.02(e), Section 5.07, this Section 7.02 and
Section 8.05, and (b) with respect to the representations and warranties
contained in Sections 3.01 and 3.02 insofar as such representations and
warranties relate to the Stock Option Agreement (but only until the termination
of the Stock Option Agreement).

SECTION 7.03. Amendment. This Agreement may be amended by the parties
hereto at any time before or after the Company Stockholder Approval is received,
but, after receipt of the Company Stockholder Approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto; provided, however, that,
notwithstanding anything to the contrary contained in this Section

-37-
<PAGE> 79

7.03, Parent may from time to time without the consent of the Company increase
the amount (but not change the nature) of the Merger Consideration, and any
provisions inconsistent with such right herein or in any agreement referred to
herein are hereby deemed superseded to the extent of such inconsistency.

SECTION 7.04. Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (c) subject to
the proviso of Section 7.03, waive compliance with any of the covenants,
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.

SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver pursuant to Section
7.04 shall, in order to be effective, require, in the case of Parent, Sub or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.

ARTICLE VIII

General Provisions

SECTION 8.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.

SECTION 8.02. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, telecopied
(with confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

(a) if to Parent or Sub, to:

Bank of the West
180 Montgomery Street
San Francisco, CA 94104
Attention: President
Facsimile: (415) 837-1405

with copies to:

Rodney R. Peck, Esq.
Pillsbury Madison & Sutro
235 Montgomery Street
San Francisco, CA 94104
Facsimile: (415) 983-1200

-38-
<PAGE> 80
(b) if to the Company, to:

Northbay Financial Corporation
1360 Redwood Way
Petaluma, California 94954
Attention: Mr. Alfred A. Alys
President and Chief Executive Officer
Facsimile: (707) 792-7406

with a copy to:

Robert Lipsher, Esq.
Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor
Washington, D.C. 20005
Facsimile: (202) 682-0354

SECTION 8.03. Definitions; Interpretation. (a) As used in this Agreement,
(i) any reference to any event, change or effect being "material" with respect
to any entity means an event, change or effect which is material in relation to
the businesses, assets, properties, liabilities, results of operations,
financial condition or prospects of such entity and its Subsidiaries, taken as a
whole, (ii) the term "Material Adverse Effect" means, with respect to the
Company, Parent or Sub, a material adverse effect (whether or not required to be
accrued or disclosed under SFAS No. 5) on the Condition of such party and its
Subsidiaries, taken as a whole, or on the ability of such party to perform its
obligations hereunder or to consummate the transactions hereby contemplated by
June 30, 1996 or, except for purposes of determining satisfaction of the
conditions set forth in Section 6.02, under the other agreements contemplated
hereby (provided that in determining whether a Material Adverse Effect shall
have occurred, (A) the Transaction Costs and the Company Accruals and Reserves
(each as defined in Section 8.03(c)) shall be disregarded and (B) there shall be
excluded any effect the cause of which may result or shall have resulted from
changes to laws and regulations, generally accepted accounting principles or
regulatory accounting principles or changes in interest rates or economic
conditions applicable to depository institutions generally, or costs and
expenses relating to the transactions contemplated by this Agreement, the impact
on the Company's financial statements of the change in control, severance,
salary continuation and other benefits specified in Section 5.05 and set forth
in the Company Disclosure Schedule, any recapture of the Company's tax bad debt
reserve, any special assessment imposed on SAIF-insured institutions after the
date hereof), and (iii) the term "person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.

(b) When a reference is made in this Agreement to Articles, Sections,
Exhibits or Schedules, such reference shall be to an Article, Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined herein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.

-39-
<PAGE> 81

(i) "Affiliate" shall mean, with respect to any person, any person that,
directly or indirectly, controls or is controlled by or is under common control
with such person.

(ii) "Business Day" shall mean any day, other than Saturday or Sunday or
any other day on which commercial banks in the State of California are
authorized or required by law to be closed.

(iii) "Company Accruals and Reserves" shall mean any accruals and reserves
adopted by the Company pursuant to the request of Parent under the terms of
Section 5.09 or otherwise relating to the Merger or required pursuant to this
Agreement.

(iv) "Company Net Income after April 30, 1996" shall mean the consolidated
net income of the Company earned after April 30, 1996 and up to the day next
preceding the Effective Time as appearing on the financial statements of the
Company after April 30, 1996, determined in accordance with GAAP, provided that
in determining the amount of such net income, the amount of the Transaction
Costs, any special assessment imposed on SAIF-insured institutions, any
recapture of NSB's tax bad debt reserve, any costs or expenses relating to the
change in control, severance, salary continuation and other benefits specified
in Section 5.05 and any Company Accruals and Reserves shall be disregarded.

(v) "Company Net Worth" shall mean the sum of the Company Common Stock,
paid-in capital and retained earnings accounts as such accounts would appear on
a balance sheet of the Company prepared in accordance with GAAP, provided that
in determining the amount of such net worth, the amount of the Transaction
Costs, any special assessment imposed on SAIF-insured institutions, any
recapture of NSB's tax bad debt reserve, any costs or expenses relating to the
change in control, severance, salary continuation and other benefits specified
by Section 5.05 and any Company Accruals and Reserves shall be disregarded.

(vi) "Condition" shall mean the financial condition, assets, businesses,
results of operations or prospects of any party hereto.

(vii) "GAAP" shall mean generally accepted accounting principles in the
United States.

(viii) "Net Worth Floor" shall mean:

U.S.$35,000,000 in the event the Closing occurs on or after April
30, 1996;

U.S.$34,850,000 in the event the Closing occurs between March 31,
1996 and April 29, 1996 (dates inclusive);

U.S.$34,700,000 in the event the Closing occurs between February
29, 1996 and March 30, 1996 (dates inclusive);

U.S.$34,550,000 in the event the Closing occurs between January
31, 1996 and February 28, 1996 (dates inclusive);
and

U.S.$34,400,000 in the event the Closing occurs between December
31, 1995 and January 30, 1996 (dates inclusive).

(ix) "Subsidiary" shall mean, in the case of either Parent or the Company,
any corporation, association or other entity in which it owns or controls,
directly or indirectly, 25% or more of the outstanding voting securities or 25%
or more of the total equity interest.

(x) "Transaction Costs" shall mean the amount of the out-of-pocket expenses
incurred by the Company and its Subsidiaries in connection with the transactions
hereby contemplated (but not to exceed, for purposes of this definition,
U.S.$827,000.)

-40-
<PAGE> 82

SECTION 8.04. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.

SECTION 8.05. Entire Agreement; No Third-Party Beneficiaries; Rights of
Ownership. Except for the Confidentiality Agreement and the letter agreement
dated October 17, 1995 between Parent and the Company, this Agreement (including
the documents and the instruments referred to herein, including the Stock Option
Agreement, the Confidentiality Agreement, and any other agreement among the
parties entered into contemporaneously herewith) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and of the
Confidentiality Agreement, provided that the Confidentiality Agreement shall
survive the execution and delivery of this Agreement, and, except to the extent
specified in Sections 5.05, 5.06, 5.08 and 8.12, is not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder. The
parties hereby acknowledge that, except as otherwise specifically provided in
the Stock Option Agreement or as hereinafter agreed to in writing, neither
Parent nor Sub shall have the right to acquire or shall be deemed to have
acquired shares of Company Common Stock pursuant to the Merger until
consummation thereof.

SECTION 8.06. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of California, without regard to any
applicable principles of conflicts of law, except that the Merger and the effect
thereof shall be governed by the DGCL.

SECTION 8.07. Limitations on Remedies. Each party agrees that, should any
court or other competent authority hold any provision of this Agreement or the
Stock Option Agreement or part hereof or thereof to be null, void or
unenforceable, or order any party to take any action inconsistent herewith or
not to take any action required herein, the other party shall not be entitled to
specific performance of such provision or part hereof or thereof or to any other
remedy, including money damages, for breach hereof or thereof or of any other
provision of this Agreement or the Stock Option Agreement or part hereof or
thereof as a result of such holding or order. This provision is not intended to
render null or unenforceable any obligation hereunder that would be valid and
enforceable if this provision were not in this Agreement.

SECTION 8.08. Publicity. Except as otherwise required by law or the rules
of the American Stock Exchange, so long as this Agreement is in effect, neither
the Company nor Parent shall, or shall permit any of its subsidiaries to, issue
or cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement or the Stock Option
Agreement without the consent of the other party, which consent shall not be
unreasonably withheld. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement shall be
in the form heretofore agreed to by the parties.

SECTION 8.09. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties, and any such assignment that is not
so consented to shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

SECTION 8.10. Enforcement. Subject to Section 8.07, the parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that, subject to Section 8.07, the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of California or in any
California state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of

-41-
<PAGE> 83

any Federal court located in the State of California or any California state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court.

SECTION 8.11. Certain Proxies. Concurrently with the execution and delivery
of this Agreement, Parent has received irrevocable proxies from the directors
and executive officers of the Company listed on Exhibit F hereto authorizing the
voting by Parent or its designee of their shares of common stock of the Company
at the Company Stockholders' Meeting in favor of the transactions contemplated
hereby.

SECTION 8.12. Director Health Coverage. Parent and Sub agree that, for a
period of two years following the Effective Time, Parent will make or cause to
be made monthly payments in respect of the health insurance premiums for
medical, dental and vision care coverage for each of the directors of the
Company (and their spouses) in office at the time this Agreement is executed and
delivered, provided, however, that the maximum amount required to be paid by
Parent for all such directors and their spouses in any month during such
two-year

-42-
<PAGE> 84

period shall not exceed $3,000. At the end of such two year period, such
directors and their spouses will each be entitled to participate, at their own
expense for life, in the group health plan of Parent.

SECTION 8.13. Employee Retention. To the extent practicable, Parent will
give consideration to the retention after the Closing of employees of the
Company and its Subsidiaries in their current or comparable positions within the
Surviving Corporation, provided however, that, notwithstanding the foregoing or
any other provision hereof, it shall have no legal obligation to retain or offer
new employment to any such employees.

SECTION 8.14. Subsequent Mergers. The parties contemplate that, immediately
following the merger of Sub with and into the Company at the Effective Time as
contemplated by Section 1.01, the Surviving Corporation shall be merged with and
into the Parent, followed immediately by the merger of NSB with and into the
Parent. In each case, the Parent shall succeed to and assume all the rights and
obligations of the Surviving Corporation and NSB, respectively, in accordance
with merger agreements substantially in the forms attached as Exhibits G and H
hereto, respectively.

IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first above written.

BANK OF THE WEST

by
/s/ Don J. McGrath

Name: Don J. McGrath
Title: President and Chief Operating Officer

NF ACQUISITION CO.,

by
/s/ Douglas C. Grigsby

Name: Douglas C. Grigsby
Title: Treasurer

NORTHBAY FINANCIAL CORPORATION,

by
/s/ Alfred A. Alys

Name: Alfred A. Alys
Title: President and Chief Executive Officer

-43-
<PAGE> 85

CUSIP No. 663749 10 9 13D Page 85 of 89 Pages

EXHIBIT 3

Form of Proxy delivered
by Directors of Company to BW

<PAGE> 86

NORTHBAY FINANCIAL CORPORATION IRREVOCABLE PROXY

The undersigned stockholders of Northbay Financial Corporation, a Delaware
corporation (the "Company"), hereby irrevocably appoint Michel M. Larrouilh and
Don J. McGrath, acting singly or jointly, with full power of substitution,
proxies of the undersigned and hereby authorize them to vote, with all the
powers as the undersigned would possess if personally present, all of the shares
of common stock of the Company held of record and/or beneficially owned by the
undersigned as of the record date for the Company Stockholders Meeting (as such
term is defined in the Agreement and Plan of Merger (the "Merger Agreement")
dated as of November 9, 1995 among Bank of the West, a California corporation
("BW"), NF Acquisition Co., a Delaware corporation and a wholly-owned
subsidiary of BW ("Sub"), and the Company), at the Company Stockholders Meeting,
or any adjournments thereof, in favor of the transactions contemplated by the
Merger Agreement, including without limitation the merger of Sub with and into
the Company. This proxy is irrevocable to the fullest extent permitted by law
and is coupled with an interest. All authority herein conferred shall survive
the death or incapacity of the undersigned. This irrevocable Proxy shall expire
upon termination of the Merger Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Proxy as of the 9th
day of November, 1995.

---------------------------------------------
[Signature]

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

---------------------------------------------
[Signature]

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

Number of Shares:
---------
<PAGE> 87
CUSIP No. 663749 10 9 13D Page 87 of 89 Pages

EXHIBIT 4

Letter Agreement dated October 17, 1995
between the Company and BW

<PAGE> 88

[BANK OF THE WEST LETTERHEAD]

October 17, 1995

CONFIDENTIAL

Mr. Alfred A. Alys
President and Chief Executive Officer
Northbay Financial Corporation
1360 Redwood Way
Petaluma, CA 94975

Dear Mr. Alys:

We are pleased to consider the possibility of entering into a business
combination (the "Business Combination") between Bank of the West or one of its
affiliates ("BW") and Northbay Financial Corporation and/or Northbay Savings
Bank, F.S.B. (collectively the "Company"). Set forth below are the terms and
conditions under which BW would be willing to (i) continue its due diligence
investigation of the Company and (ii) commence negotiating with the Company with
respect to a mutually satisfactory definitive agreement relating to the Business
Combination.

Until the earliest of (i) determination by BW to terminate discussions
toward a definitive agreement, or (ii) November 16, 1995 if a definitive
agreement for the Business Combination shall not have been entered into (in each
event, a "Termination Date"), none of the Company or any of its subsidiaries or
affiliates nor any of such persons' or entities' directors, officers, employees,
agents, advisors or representatives will (a) solicit or encourage (including
without limitation by way of making a recommendation in support thereof to the
stockholders of the Company), directly or indirectly, any inquiries,
discussions, or proposals for, (b) continue, propose, or enter into discussions
or negotiations looking toward, or (c) enter into any agreement or understanding
providing for, any takeover proposal (as defined below) (other than the Business
Combination) nor will any of such persons or entities provide any information to
any person (other than BW and its representatives) for the purpose of evaluating
or determining whether to make or pursue any inquiries or proposals with respect
to any transaction such as a takeover proposal. Upon acceptance of this letter
agreement, the Company and its directors, officers, employees, agents, advisors
and representatives will immediately terminate any existing activities,
discussions or negotiations with any other party relating to any takeover
proposal and will immediately orally advise BW of, and communicate to BW in
writing, the details of any such inquiry or proposal that any person or the
Company or its subsidiaries, affiliates, directors, officers, employees, agents,
advisors and representatives may receive after the date hereof or of which any
of them may become aware after the date hereof. The Company will cause its
subsidiaries and affiliates and the directors, officers, employees, agents,
advisors and representatives of the Company and its subsidiaries and affiliates
to comply with the terms of this letter agreement.

In the event the Company, or its subsidiaries or affiliates or any of their
respective directors, officers, employees, agents, advisors or representatives,
breach or violate the foregoing provisions of this letter agreement and a
takeover proposal is consummated, then the Company will, upon demand, and as
liquidated damages, pay to BW (a) the sum of $400,000,

<PAGE> 89
Northbay Financial Corporation
October 17, 1995
Page 2

and (b) all of BW's third party expenses subsequent to the date hereof, and in
no event to exceed $50,000 in the aggregate, incurred in connection with its
review of the Company and a potential Business Combination. As used herein,
"takeover proposal" shall mean any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving the Company or any
proposal or offer to acquire in any manner a 15% or greater equity interest in,
or 15% or greater of the assets of, the Company or any other similar transaction
other than the Business Combination. However, the foregoing will not prohibit
the Company or its board of directors, prior to the signing of a definitive
agreement relating to the Business Combination, from furnishing information
regarding the Company to a third party which hereafter submits an unsolicited
takeover proposal to the Company if, the Board of Directors of the Company
determines, after receipt of written advice of the Company's counsel, failure to
do so under the circumstances would result in a breach of the fiduciary duty of
the directors of the Company to its stockholders.

Until the occurrence of a Termination Date, the Company and its
subsidiaries and affiliates, and their respective directors, officers,
employees, agents, advisors and representatives will negotiate in good faith
with BW in an effort to reach agreement on a definitive agreement for a Business
Combination and will continue to permit BW and its officers, employees, agents,
advisors and representatives to make a full and complete investigation of the
Company and its subsidiaries and to have full access to information related to
the Company and its subsidiaries subject to the confidentiality letter of
January 17, 1995.

If the foregoing provisions are acceptable to the Company, please execute
one of the enclosed copies of this letter agreement in the space provided below
and return one executed copy of this letter to us whereupon a binding agreement
will exist between the parties as to the matters herein set forth.

Very truly yours,

BANK OF THE WEST

By /s/ Douglas C. Grigsby
--------------------------------------
Its Executive Vice President and Chief
Financial Officer

Accepted and agreed to
this 17th day of
October, 1995.

NORTHBAY FINANCIAL
CORPORATION

By /s/ Alfred A. Alys
-----------------------------------------
Its President and Chief Executive Officer