Baybanks Inc – ‘8-K’ for 12/22/94 – EX-2.(B)

As of:  Wednesday, 1/4/95   ·   For:  12/22/94   ·   Accession #:  950135-95-2   ·   File #:  0-00959

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Baybanks, Inc.                                         5     16K 
 2: EX-2.(A)    Acquisition Agreement                                 59    265K 
 3: EX-2.(B)    Option Agreement                                      15     58K 

EX-2.(B)   —   Option Agreement

EX-2.(B)
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Exhibit 2(b) to Form 8-K
------------------------

THE TRANSFER OF THE OPTION GRANTED
----------------------------------
BY THIS AGREEMENT IS SUBJECT TO RESALE RESTRICTIONS 
--------------------------------------------------- 

OPTION AGREEMENT

        OPTION AGREEMENT, dated as of  December 22, 1994 (this
"Agreement"), between NFS FINANCIAL CORP., a Delaware corporation ("Issuer"),   
and BayBanks, Inc., a Massachusetts corporation ("Grantee").                    

WITNESSETH: 

               WHEREAS, Issuer, and Grantee have entered into an Acquisition
Agreement, dated as of December __, 1994 (the "Acquisition Agreement"), which   
was executed by the parties hereto prior to the execution of this Agreement;    
and                                                                             

              WHEREAS, as a condition and inducement to Grantee's entering
into the Acquisition Agreement and in consideration therefor, Issuer has agreed 
to grant Grantee the Option (as defined below).                                 

           NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Acquisition         
Agreement, the parties hereto agree as follows:                                 

               SECTION 1.  Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the terms hereof, up  
to 274,266 fully paid and non-assessable shares of common stock, par value $.01 
per share of Issuer ("Issuer Common Stock") (which number of shares is equal to 
9.9% of the number of outstanding shares of Issuer Common Stock on the date     
hereof), at a price of $21.50 per share (the "Initial Price"); PROVIDED,        
HOWEVER, that in the event Issuer issues or agrees to issue any additional      
shares of Issuer Common Stock at a price less than the Initial Price (other     
than up to 204,286 shares pursuant to existing stock options), as adjusted      
pursuant to Section 5(b) hereof, such price shall be equal to such lesser price 
(such price, as adjusted, is hereinafter referred to as the "Option Price").    
The number of shares of Issuer Common Stock that may be received upon the       
exercise of the Option and the Option Price are subject to adjustment as herein 
set forth.                                                                      

               SECTION 2.  (a)  Grantee may exercise the Option, in whole or
part, at any time and from time to time following the occurrence of a Purchase  
Event (as defined below); PROVIDED that the Option shall terminate and be of no 
further force and effect upon the earliest to occur of (i) the time immediately 
prior to the effective time of the Merger pursuant to Section 8.1 of the        
Acquisition Agreement, (ii) 12 months after the first occurrence of a Purchase  
Event, (iii) 12 months after the termination of the Acquisition Agreement       
following the occurrence of a Preliminary Purchase Event (as defined below),    
(iv) upon the termination of the Acquisition Agreement in accordance with the   
terms thereof prior to the occurrence of a Purchase Event or a Preliminary      
Purchase Event (other than a termination of the Acquisition Agreement by        
Grantee pursuant to Sections 8.2.1(b), 8.2.2(a) or 8.2.2(c) thereof), (v) 12    
months after the termination of the Acquisition                                 

EX-2.(B)
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Agreement by Grantee pursuant to Sections 8.2.1(b), 8.2.2(a) or 8.2.2(c)        
thereof as a result of any material breach of the Acquisition Agreement by      
Issuer, if such breach was not a willful or intentional breach of the           
Acquisition Agreement by Issuer, or (vi) 18 months after the termination of the 
Acquisition Agreement by Grantee pursuant to Sections 8.2.1(b), 8.2.2(a)        
or 8.2.2(c) thereof as a result of any material breach of the Acquisition       
Agreement by Issuer, if such breach was a willful or intentional breach of the  
Acquisition Agreement by Issuer; provided, however, that if within the period   
specified in either clause (v) or (vi), whichever is applicable, a Preliminary  
Purchase Event shall occur then, notwithstanding anything to the contrary       
contained herein, the Option shall terminate on the later of 12 months after    
the occurrence of such Preliminary Purchase Event or the termination date       
specified in clause (v) or (vi), as applicable.  The events described in        
clauses (i) - (vi) in the preceding sentence are hereinafter collectively       
referred to as an "Exercise Termination Event."                                 

    (b)      The term "Preliminary Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and      
prior to an Exercise Termination Event, and which are not in violation of       
Issuer's certificate of incorporation:                                          

       (i)    Issuer without having received Grantee's prior
  written consent, shall have entered into any letter of intent or
  definitive agreement to engage in an Acquisition Transaction (as
      defined below) with any person (as defined below) other than Grantee
       or any of its subsidiaries (each a "Grantee Subsidiary") or the Board
        of Directors of Issuer shall have recommended that the shareholders of
      Issuer approve or accept any Acquisition Transaction with any Person
       (as the term "person" is defined in Section 3(a)9 and 13(d)(3) of the
        Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
       regulations thereunder) other than Grantee or any Grantee Subsidiary.
      For purposes of this Agreement, "Acquisition Transaction" shall mean
     (x) a merger, consolidation or other business combination involving
  Issuer or either of the NFS Banks (as defined in the Acquisition
     Agreement), (y) a purchase, lease or other acquisition of more than
     25% of the consolidated assets of Issuer and NFS Banks, in a single
   transaction or series of transactions, or (z) a purchase or other
        acquisition (including by way of merger, consolidation, share exchange
or otherwise) of Beneficial Ownership (as the term "beneficial
   ownership" is defined in Regulation 13d-3(a) of the Exchange Act,
        except that for purposes of this Agreement such term shall not include
        voting stock held by a reporting person meeting the requirements for a
filing under Schedule 13G of the Exchange Act) of securities  
     representing 10% or more of the voting power of Issuer or either of
the NFS Banks;                                                

      (ii)   Any Person (other than Grantee or any Grantee
        Subsidiary) shall have acquired Beneficial Ownership of 15% or more of
      the outstanding shares of Issuer Common Stock or the voting stock of
either of the NFS Banks ("Bank Stock");                       

      (iii)  Any Person (other than Grantee or any Grantee
     Subsidiary) shall have made a BONA FIDE proposal to Issuer or, by a
public announcement or                                        

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EX-2.(B)
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written communication that is or becomes the subject of public
  disclosure, to Issuer's shareholders 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 Exchange
     Act), or shall have made a filing under applicable securities laws,
  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 have Beneficial Ownership of 15% 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));                                               

       (iv)   There shall exist a Default (as defined in the
 Acquisition Agreement) by Issuer and such Default would entitle
Grantee to terminate the Acquisition Agreement;               

          (v)    The holders of Issuer Common Stock shall not have
        approved the Acquisition Agreement at the meeting of such shareholders
      held for the purpose of voting on the Acquisition Agreement, or such
     meeting of shareholders shall not have been held or shall have been
canceled prior to termination of the Acquisition 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 that Issuer's shareholders approve the Acquisition  
Agreement; or                                                 

      (vi)   Any Person (other than Grantee or any Grantee
   Subsidiary) shall have filed an application or notice in draft or
        final form with the Office of Thrift Supervision ("OTS"), or the Board
    of Governors of The Federal Reserve System ("FRB") for approval to
engage in an Acquisition Transaction.                         

        (c)    The term "Purchase Event" shall mean any of the
following events or transactions occurring on or after the date hereof and      
prior to an Exercise Termination Event:                                         

             (i)    The acquisition by any Person (other than Grantee or
       any Grantee Subsidiary) of Beneficial Ownership (other than on behalf
     of the Issuer) of 20% or more of the then outstanding Issuer Common
Stock or Bank Stock; or                                       

       (ii)   The occurrence of a Preliminary Purchase Event
        described in Section 2(b)(i) except that the percentage referred to in
clause (z) thereof shall be 20%; or                           

             (iii)  The breach by Issuer of Section 7(d) or 8(a) hereof.

           (d)    Issuer shall notify Grantee promptly in writing of
the occurrence of any Preliminary Purchase Event or Purchase Event; PROVIDED,   
HOWEVER, that the giving of such notice by Issuer shall not be a condition to   
the right of Grantee to exercise the Option.                                    

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EX-2.(B)
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            (e)    In the event that Grantee is entitled to and wishes
to exercise the Option, it shall send to Issuer a written notice (the "Option   
Notice" and the date of which being hereinafter referred to as the "Notice      
Date") specifying (i) the total number of shares of Issuer Common Stock it will 
purchase pursuant to such exercise and (ii) the time (which shall be on a       
business day that is not less than three nor more than ten business days from   
the Notice Date) on which the closing of such purchase shall take place (the    
"Closing Date"); such closing to take place at the principal office of the      
Issuer; PROVIDED, THAT, if prior notification to or approval of the OTS, the    
FRB, the Federal Deposit Insurance Corporation ("FDIC") or any other            
Governmental Authority is required in connection with such purchase (each, a    
"Notification" or an "Approval," as the case may be), (a) Grantee shall         
promptly file the required notice or application for approval                   
("Notice/Application"), (b) Grantee shall expeditiously process the             
Notice/Application and (c) for the purpose of determining the Closing Date      
pursuant to clause (ii) of this sentence, the period of time that otherwise     
would run from the Notice Date shall instead run from the later of (x) in       
connection with any Notification, the date on which any required notification   
periods have expired or been terminated and (y) in connection with any          
Approval, the date on which such approval has been obtained and any requisite   
waiting period or periods shall have expired.  For purposes of Section 2(a)     
hereof, any exercise of the Option shall be deemed to occur on the Notice Date  
relating thereto.  On or prior to the Closing Date, Grantee shall have the      
right to revoke its exercise of the Option by written notice to the Issuer      
given not less than three business days prior to the Closing Date.              

           (f)    At the closing referred to in Section 2(e) hereof,
Grantee shall pay to Issuer the aggregate purchase price for the number of      
shares of Issuer Common Stock specified in the Option Notice in immediately     
available funds by wire transfer to a bank account designated by Issuer;        
PROVIDED, HOWEVER, that failure or refusal of Issuer to designate such a bank   
account shall not preclude Grantee from exercising the Option.                  

             (g)    At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(f) hereof, Issuer shall    
deliver to Grantee a certificate or certificates representing the number of     
shares of Issuer Common Stock specified in the Option Notice and, if the Option 
should be exercised in part only, a new Option evidencing the rights of Grantee 
thereof to purchase the balance of the shares of Issuer Common Stock            
purchasable hereunder.                                                          

            (h)    Certificates for Issuer Common Stock delivered at a
closing hereunder shall be endorsed with a restrictive legend substantially as  
follows:                                                                        

               The transfer of the shares represented by this certificate is
     subject to resale restrictions arising under applicable federal and
   state securities laws and to certain provisions of an Acquisition
       Agreement by and between NFS Financial Corp. and BayBanks, Inc. dated
      as of December 22, 1994.  A copy of such agreement is on file at the
     principal office of NFS Financial Corp. and will be provided to the
       holder hereof without charge upon receipt by NFS Financial Corp. of a
written request therefor.                                     

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It is understood and agreed that:  (i) the reference to the resale restrictions 
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 the          
Governmental Authority responsible for administering any applicable state       
securities laws or an opinion of counsel to the effect that such legend is not  
required for purposes of applicable federal or state securities laws; (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  
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.                                                                            

          (i)    Upon the giving by Grantee to Issuer of an Option
Notice and the tender of the applicable purchase price in immediately available 
funds on the Closing Date, unless prohibited by applicable law, Grantee shall   
be deemed to be the holder of record of the number of shares of Issuer Common   
Stock specified in the Option Notice, notwithstanding that the stock transfer   
books of Issuer shall then be closed or that certificates representing such     
shares of Issuer Common Stock shall not then actually be delivered to Grantee.  
Issuer shall pay all expenses and  other charges that may be payable in         
connection with the preparation, issuance and delivery of stock certificates    
under this Section 2 in the name of Grantee.                                    

            SECTION 3.  Issuer agrees:  (i) that it shall at all times
until the termination of this Agreement have reserved for issuance upon the     
exercise of the Option that number of authorized and reserved shares of Issuer  
Common Stock equal to the maximum number of shares of Issuer Common Stock at    
any time and from time to time issuable hereunder, all of which shares will,    
upon issuance pursuant hereto, be duly authorized, validly issued, fully paid,  
non-assessable, and delivered free and clear of all claims, liens, encumbrances 
and security interests and not subject to any preemptive rights; (ii) that it   
will not, by amendment of its certificate of incorporation or through           
reorganization, 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 reasonable action as may from   
time to time be requested by the Grantee, at Grantee's expense (including (x)   
complying with all premerger notification, reporting and waiting period         
requirements specified in 15 U.S.C. Section 18a and regulations promulgated     
thereunder and (y) in the event prior approval of or notice to the OTS, the     
FRB, the FDIC or any other Governmental Authority, under the Home Owners' Loan  
Act of 1933, as amended, the Bank Holding Company Act of 1956, as amended, the  
Change in Bank Control Act of 1978, as amended, or any other applicable federal 
or state banking law, is necessary before the Option may be exercised,          
cooperating with Grantee in preparing such applications or notices and          
providing such information to each such Governmental Authority as it may        
require in order to permit Grantee to exercise the Option and Issuer duly and   
effectively to issue shares of Issuer Common Stock pursuant hereto; and (iv) to 
take all action provided herein to protect the rights of Grantee against        
dilution.                                                                       

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                SECTION 4.  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, on the same terms and subject to the same           
conditions as are set forth herein, in the aggregate the same number of shares  
of Issuer Common Stock purchasable hereunder.  The terms "Agreement" and        
"Option" as used herein include any agreements and related Options and 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.                             

         SECTION 5.  The number of shares of Issuer Common Stock
purchasable upon the exercise of the Option shall be subject to adjustment from 
time to time as follows:                                                        

              (a)    In the event of any change in the Issuer Common Stock
      by reason of stock dividends, split-ups, mergers, recapitalizations,
     combinations, subdivisions, conversions, exchanges of shares or the
        like, the type and number of shares of Issuer Common Stock purchasable
 upon exercise hereof shall be appropriately adjusted and proper
   provision shall be made so that, in the event that any additional
    shares of Issuer Common Stock are to be issued or otherwise become
       outstanding as a result of any such change (other than pursuant to an
      exercise of the Option or pursuant to the exercise of options for up
to 204,286 shares of Issuer Common Stock pursuant to presently
   outstanding stock options), the number of shares of Issuer Common
     Stock that remain subject to the Option shall be increased so that,
     after such issuance and together with shares of Issuer Common Stock
       previously issued pursuant to the exercise of the Option (as adjusted
 on account of any of the foregoing changes in the Issuer Common
       Stock), it equals 9.9% of the number of shares of Issuer Common Stock
then issued and outstanding.                                  

             (b)    Whenever the number of shares of Issuer Common Stock
  purchasable upon exercise hereof is adjusted as provided in this
  Section 5, the Option Price shall be adjusted by multiplying the
      Option Price by a fraction, the numerator of which shall be equal to
      the number of shares of Issuer Common Stock purchasable prior to the
      adjustment and the denominator of which shall be equal to the number
    of shares of Issuer Common Stock purchasable after the adjustment.

               SECTION 6.  (a)  Following the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, Issuer shall, at the        
request of Grantee (whether on its own behalf or on behalf of any subsequent    
holder of the Option (or part thereof) or of any of the shares of Issuer Common 
Stock issued pursuant hereto), promptly prepare, file and keep current a shelf  
registration statement under the Securities Act covering any shares issued and  
issuable pursuant to the Option and shall use its best efforts to cause such    
registration statement to become effective, and to remain current and effective 
for a period                                                                    

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not in excess of 180 days from the day such registration statement first        
becomes effective, in order to permit the sale or other disposition of any      
shares of Issuer Common Stock issued upon total or partial exercise of the      
Option ("Option Shares") in accordance with any plan of disposition requested   
by Grantee; PROVIDED, HOWEVER, that Issuer may postpone filing a registration   
statement relating to a registration request by Grantee under this Section 6(a) 
for a period of time (not in excess of 30 days) if in its judgment such filing  
would require the disclosure of material information that Issuer has a BONA     
FIDE business purpose for preserving as confidential.  Grantee shall have the   
right to obtain two such registrations.  In addition to the foregoing, if, at   
the time of any request by Grantee for registration of Option Shares as         
provided above, Issuer is in the process of registration with respect to an     
underwritten public offering of shares of Issuer Common Stock, Grantee shall    
have the right to have the Option Shares included in the registration statement 
with respect to such offering; PROVIDED, HOWEVER, that if in the good faith     
judgment of the managing underwriter or managing underwriters, or, if none, the 
sole underwriter or underwriters, of such offering, the inclusion of the Option 
Shares in such registration would interfere materially with the successful      
marketing of the shares of Issuer Common Stock offered by Issuer, the number of 
Option Shares otherwise to be covered in the registration statement             
contemplated hereby may be reduced; PROVIDED, HOWEVER, that after any such      
required reduction the number of Option Shares to be included in such offering  
for the account of Grantee shall constitute at least 20% of the total number of 
shares of Grantee and Issuer covered in such registration statement; PROVIDED   
FURTHER, HOWEVER, that if such reduction occurs, then Issuer shall file a       
registration statement for the balance as promptly as practicable thereafter as 
to which no reduction pursuant to this Section 6(a) shall be permitted or occur 
and the Grantee shall thereafter be entitled to one additional registration     
statement.  Grantee shall provide all information reasonably requested by       
Issuer for inclusion in any registration statement to be filed hereunder.  In   
connection with any such registration, Issuer and Grantee shall provide each    
other with representations, warranties, indemnities and other agreements        
customarily given in connection with such registrations.  If requested by       
Grantee in connection with such registration, Issuer and Grantee shall become a 
party to any underwriting agreement relating to the sale of such shares, but    
only to the extent of obligating themselves in respect of representations,      
warranties, indemnities and other agreements customarily included in such       
underwriting agreements.  Notwithstanding the foregoing, if Grantee revokes any 
exercise notice or fails to exercise any Option with respect to any exercise    
notice pursuant to Section 2(e) hereof, Issuer shall not be obligated to        
continue any registration process with respect to the sale of Option Shares     
issuable upon the exercise of such Option and Grantee shall not be deemed to    
have demanded registration of Option Shares.                                    

            (b)    In the event that Grantee requests Issuer to file a
registration statement following the failure to obtain any approval required to 
exercise the Option as described in Section 9 hereof, the closing of the sale   
or other disposition of the Issuer Common Stock or other securities pursuant to 
such registration statement shall occur substantially simultaneously with the   
exercise of the Option.                                                         

       (c)    Concurrently with the filing of a registration
statement under Section 6(a) hereof, Issuer shall also make all filings         
required to comply with state securities laws in such states as Grantee may     
reasonably request.                                                             

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             (d)    The expenses of any registration or state securities
law compliance under this Section 6, except for underwriting discounts,         
broker's fees and commissions and fees and disbursements of Grantee's counsel   
related thereto, shall be borne by Issuer.                                      

               SECTION 7.  (a)  Following the occurrence of a Purchase Event
that occurs prior to an Exercise Termination Event, (i) at the request (the     
date of such request being the "Option Repurchase Request Date") of Grantee,    
Issuer shall repurchase the Option from Grantee at a price (the "Option         
Repurchase Price") equal to the amount by which (A) the market/offer price (as  
defined below) exceeds (B) the Option Price, multiplied by the number of shares 
for which the Option may then be exercised and (ii) at the request (the date of 
such request being the "Option Share Repurchase Request Date") of the owner of  
Option Shares from time to time (the "Owner"), Issuer shall repurchase such     
number of the Option Shares from the Owner as the Owner shall designate at a    
price (the "Option Share Repurchase Price") equal to the market/offer price     
multiplied by the number of Option Shares so designated.  The term              
"market/offer price" shall mean the highest of (i) the price per share of       
Issuer Common Stock at which a tender offer or exchange offer therefor has been 
made after the date hereof and on or prior to the Option Repurchase Request     
Date or the Option Share Repurchase Request Date, as the case may be, (ii) the  
price per share of Issuer Common Stock paid or to be paid by any third party    
pursuant to an agreement with Issuer (whether by way of a merger, consolidation 
or otherwise), (iii) the average of the highest last sale prices for shares of  
Issuer Common Stock as reported on the Nasdaq Stock Market for the 20-day       
period ending on the Option Repurchase Request Date or the Option Share         
Repurchase Request Date, as the case may be, and (iv) in the event of a sale of 
all or substantially all of Issuer's assets, the sum of the price paid in such  
sale for such assets and the current market value of the remaining assets of    
Issuer as determined by an investment banking firm selected by Grantee or the   
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the  
number of shares of Issuer Common Stock outstanding at the time of such sale.   
In determining the market/offer price, the value of consideration other than    
cash shall be the value determined by an investment banking firm selected by    
Grantee or the Owner, as the case may be, and reasonably acceptable to Issuer.  
The investment banking firm's determination shall be conclusive and binding on  
all parties.                                                                    

        (b)      Grantee or the Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option and/or any Option 
Shares pursuant to this Section 7 by surrendering for such purpose to Issuer,   
at its principal office, a copy of this Agreement or certificates for Option    
Shares, as applicable, accompanied by a written notice or notices stating that  
Grantee or the Owner, as the case may be, elects to require Issuer to           
repurchase the Option and/or the Option Shares in accordance with the           
provisions of this Section 7.  As promptly as practicable, and in any event     
within 30 business days after the surrender of the Option and/or certificates   
representing Option Shares and the receipt of such notice or notices relating   
thereto, Issuer shall deliver or cause to be delivered to Grantee the Option    
Repurchase Price or to the Owner the Option Share Repurchase Price or the       
portion thereof that Issuer is not then prohibited from so delivering under     
applicable law and regulation or as a consequence of administrative policy      
(including policies relating to the maintenance of capital levels and a sound   
financial condition).                                                           

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            (c)    Issuer hereby undertakes to use its best efforts to
obtain all required regulatory, shareholder and legal approvals and to file any 
required notices as promptly as practicable in order to accomplish any          
repurchase contemplated by this Section 7.  Nonetheless, to the extent that     
Issuer is prohibited under applicable law or regulation, or as a consequence of 
administrative policy (including policies relating to the maintenance of        
capital levels and a sound financial condition), from repurchasing any Option   
and/or any Option Shares in full, Issuer shall promptly so notify Grantee       
and/or the Owner and thereafter deliver or cause to be delivered, from time to  
time, to Grantee and/or the Owner, as appropriate, the portion of the Option    
Repurchase Price and the Option Share Repurchase Price, respectively, that it   
is no longer prohibited from delivering, within five business days after the    
date on which Issuer is no longer so prohibited; PROVIDED, HOWEVER, that if     
Issuer at any time after delivery of a notice of repurchase pursuant to Section 
7(b) hereof is prohibited under applicable law or regulation, or as a           
consequence of administrative policy (including policies relating to the        
maintenance of capital levels and a sound financial condition), from delivering 
to Grantee and/or the Owner, as appropriate, the Option Repurchase Price or the 
Option Share Repurchase Price, respectively, in full, Grantee or the Owner, as  
appropriate, may revoke its notice of repurchase of the Option or the Option    
Shares either in whole or in part whereupon, in the case of a revocation in     
part, Issuer shall promptly (i) deliver to Grantee and/or the Owner, as         
appropriate, that portion of the Option Purchase Price or the Option Share      
Repurchase Price that Issuer is not prohibited from delivering after taking     
into account any such revocation and (ii) deliver, as appropriate, either (A)   
to Grantee, a new Agreement evidencing the right of Grantee to purchase that    
number of shares of Issuer Common Stock equal to the number of shares of Issuer 
Common Stock purchasable immediately prior to the delivery of the notice of     
repurchase less the number of shares of Issuer Common Stock covered by the      
portion of the Option repurchased or (B) to the Owner, a certificate for the    
number of Option Shares covered by the revocation.                              

           (d)    Issuer shall not enter into any agreement with any
Person (other than Grantee or a Grantee Subsidiary) for an Acquisition          
Transaction unless the other Person assumes all the obligations of Issuer       
pursuant to this Section 7 in the event that Grantee or the Owner elects, in    
its sole discretion, to require such other Person to perform such obligations.  

         (e)    Notwithstanding anything to the contrary in this
Section 7, the maximum aggregate Option Repurchase Price or Option Share        
Repurchase Price to be paid by Issuer pursuant to this Section 7 shall be       
$4,500,000.                                                                     

         SECTION 8.  (a)  In the event that prior to an Exercise
Termination Event, Issuer shall enter into a letter of intent or definitive     
agreement (i) to consolidate or merge with any Person (other than Grantee or a  
Grantee Subsidiary), and Issuer shall not be the continuing or surviving        
corporation of such consolidation or merger, (ii) to permit any Person (other   
than Grantee or a Grantee Subsidiary) 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 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                                

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EX-2.(B)
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outstanding shares and share equivalents of the merged company, or (iii) to     
sell or otherwise transfer all or substantially all of its assets to any Person 
(other than Grantee or a Grantee Subsidiary) then, and in each such case, such  
letter of intent or definitive agreement governing such transaction shall make  
proper provision so that the Option shall, upon the consummation of 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 (x) the Acquiring Corporation (as defined below) or (y) any  
person that controls the Acquiring Corporation (the Acquiring Corporation and   
any such controlling person being hereinafter referred to as the "Substitute    
Option Issuer").                                                                

            (b)    The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock (as is hereinafter defined) as is   
equal to the market/offer price (as defined in Section 7 hereof) multiplied by  
the number of shares of Issuer Common Stock for which the Option was            
theretofore exercisable, divided by the Average Price (as hereinafter defined). 
The exercise price of the Substitute Option per share of the Substitute Common  
Stock (the "Substitute Purchase Price") 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 was theretofore exercisable and the    
denominator is the number of shares for which the Substitute Option is          
exercisable.                                                                    

            (c)    The Substitute Option shall otherwise 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, PROVIDED      
FURTHER that the terms of the Substitute Option shall include (by way of        
example and not limitation) provisions for the repurchase of the Substitute     
Option and Substitute Common Stock by the Substitute Option Issuer on the same  
terms and conditions as provided in Section 7 hereof.                           

         (d)    The following terms have the meanings indicated:

              (i)    "Acquiring Corporation" shall mean (i) the continuing
       or surviving corporation of a consolidation or merger with Issuer (if
    other than Issuer), (ii) Issuer in a merger in which Issuer is the
      continuing or surviving corporation, and (iii) the transferee of all
or any substantial part of Issuer's assets.                   

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

             (iii)  "Average Price" shall mean the average closing price
    of a share of 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 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 Issuer
    Common Stock issued by Issuer, the corporation merging into Issuer

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EX-2.(B)
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   or by any company which controls or is controlled by such merging
corporation, as Grantee may elect.                            

      (e)    In no event, pursuant to any of the foregoing
paragraphs, shall the Substitute Option be exercisable for more than 9.9% of    
the aggregate of the shares of Substitute Common Stock outstanding immediately  
prior to the issuance of the Substitute Option.  In the event that the          
Substitute Option would be exercisable for more than 9.9% of the aggregate of   
the shares of Substitute Common Stock but for this clause (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 clause (e) over (ii) the value of the Substitute Option after giving       
effect to the limitation in this clause (e).  This difference in value shall be 
determined by a nationally recognized investment banking firm selected by       
Grantee and the Substitute Option Issuer.  In addition, the provisions of       
Section 5(a) hereof shall not apply to the issuance of any Substitute Option    
and for purposes of applying Section 5(a) hereof thereafter to any Substitute   
Option the percentage referred to in Section 5(a) hereof shall thereafter equal 
the percentage that the percentage of the shares of Substitute Common Stock     
subject to the Substitute Option bears to the number of shares of Substitute    
Common Stock outstanding.                                                       

            SECTION 9.  Notwithstanding Sections 2, 6 and 7 hereof, if
Grantee has given the notice referred to in one or more of such Sections, the   
exercise of the rights specified in any such Section shall be extended (a) if   
the exercise of such rights requires obtaining regulatory approvals (including  
any required waiting periods) to the extent necessary to obtain all regulatory  
approvals for the exercise of such rights, and (b) to the extent necessary to   
avoid liability under Section 16(b) of the Exchange Act by reason of such       
exercise; PROVIDED that in no event shall any closing date occur more than 12   
months after the related notice date, and, if the closing date shall not have   
occurred within such period due to the failure to obtain any required approval  
by the OTS, the FRB, the FDIC or any other Governmental Authority despite the   
best efforts of Issuer or the Substitute Option Issuer, as the case may be, to  
obtain such approvals, the exercise of the rights shall be deemed to have been  
rescinded as of the related notice date.  In the event (a) Grantee receives     
official notice that an approval of the OTS, the FRB, the FDIC or any other     
Governmental Authority required for the purchase and sale of the Option Shares  
will not be issued or granted or (b) a closing date has not occurred within 12  
months after the related notice date due to the failure to obtain any such      
required approval, Grantee shall be entitled to exercise the Option in          
connection with the concurrent resale of the Option Shares pursuant to a        
registration statement as provided in Section 6 hereof.  Nothing contained in   
this Agreement shall restrict Grantee from specifying alternative means of      
exercising rights pursuant to Sections 2, 6 or 7 hereof in the event that the   
exercising of any such rights shall not have occurred due to the failure to     
obtain any required approval referred to in this Section 9.                     

               SECTION 10.  Issuer hereby represents and warrants to Grantee
as follows:                                                                     

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

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EX-2.(B)
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contemplated hereby have been duly approved by the Board of Directors of Issuer 
and no other corporate proceedings on the part of Issuer are necessary to       
authorize this Agreement or to consummate the transactions so contemplated.     
This Agreement has been duly executed and delivered by, and constitutes a valid 
and binding obligation of, Issuer, enforceable against Issuer in accordance     
with its terms, subject to any required Governmental Approval, and except as    
enforceability thereof may be limited by applicable bankruptcy, insolvency,     
reorganization, moratorium and other similar laws affecting the enforcement of  
creditors' rights generally and except that the availability of the equitable   
remedy of specific performance or injunctive relief is subject to the           
discretion of the court before which any proceeding may be brought.             

           (b)    Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date 
hereof through the termination of this Agreement in accordance with its terms   
will have reserved for issuance upon the exercise of the Option, that number of 
shares of Issuer Common Stock equal to the maximum number of shares of Issuer   
Common Stock at any time and from time to time issuable hereunder, and all such 
shares, upon issuance pursuant hereto, will be duly authorized, validly issued, 
fully paid, non-assessable, and will be delivered free and clear of all claims, 
liens, encumbrances and security interests and not subject to any preemptive    
rights.                                                                         

             (c)    The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby will not, conflict 
with or violate any provision of the certiticate of incorporation or By-laws of 
Issuer or the equivalent organizational documents of any subsidiary of Issuer   
or, subject to obtaining any of the Regulatory Approvals, violate, conflict     
with or result in any breach of any provisions of, constitute a default (or an  
event which with notice or lapse of time or both would constitute a default)    
under, result in the termination of, accelerate the performance required by, or 
result in the creation of any lien, security interest, charge or other          
encumbrance upon any of the respective properties or assets of the Issuer or    
any such subsidiary under any of the terms, conditions or provisions of any     
note, bond, capital note, debenture, mortgage, indenture, deed of trust,        
license, lease, agreement, obligation, instrument, permit, concession,          
franchise, judgment, order, decree, statute, law, ordinance, rule or regulation 
applicable to Issuer or any such subsidiary or their respective properties or   
assets.                                                                         

     SECTION 11.  (a)  Neither of the parties hereto may
assign any of its rights or delegate any of its obligations under this          
Agreement or the Option created hereunder to any other Person without the       
express written consent of the other party, except that Grantee may assign this 
Agreement to a wholly owned subsidiary of Grantee and Grantee may assign its    
rights hereunder in whole or in part after the occurrence of a Preliminary      
Purchase Event.  The term "Grantee" as used in this Agreement shall also be     
deemed to refer to Grantee's permitted assigns.                                 

             (b)    Any assignment of rights of Grantee to any permitted
assignee of Grantee hereunder shall bear the restrictive legend at the          
beginning thereof substantially as follows:                                     

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EX-2.(B)
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               The transfer of the option represented by this assignment and
        the related option agreement is subject to resale restrictions arising
   under applicable federal and state securities laws and to certain
     provisions of an Acquisition Agreement by and between NFS Financial
    Corp. and BayBanks, Inc. dated as of December 22, 1994.  A copy of
    such agreement is on file at the principal office of NFS Financial
    Corp. and will be provided to any permitted assignee of the Option
without charge upon receipt of a written request therefor.    

      SECTION 12.  Each of Grantee and Issuer will use its
reasonable efforts to make all filings with, and to obtain consents of, all     
third parties and Governmental Authorities necessary to the consummation of the 
transactions contemplated by this Agreement, including, without limitation,     
applying to the OTS, the FRB, the FDIC and any other Governmental Authority for 
approval to acquire the shares issuable hereunder.                              

                SECTION 13.  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 injunctive or other equitable relief.  Both parties        
further agree to waive any requirement for the securing or posting of any bond  
in connection with the obtaining of any such equitable relief and that this     
provision is without prejudice to any other rights that the parties hereto may  
have for any failure to perform this Agreement.                                 

              SECTION 14.  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 and 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 7 hereof, the full number of shares 
of Issuer Common Stock provided in Section 1(a) hereof (as adjusted pursuant    
hereto), it is the express intention of Issuer to allow Grantee to acquire or   
to require Issuer to repurchase the greatest number of shares as may be         
permissible, without any amendment or modification hereof.                      

               SECTION 15.  All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered 
in person, by cable, telegram, telecopy or telex, or by registered or certified 
mail (postage prepaid, return receipt requested) at the respective addresses of 
the parties set forth in the Acquisition Agreement.                             

                SECTION 16.  This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed   
by and construed in accordance with the laws of the State of Delaware (but not  
including the choice of law rules thereof).                                     

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            SECTION 17.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which 
shall constitute one and the same agreement and shall be effective at the time  
of execution and delivery.                                                      

             SECTION 18.  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.                                                                      

               SECTION 19.  Except as otherwise expressly provided herein or
in the Acquisition Agreement, this Agreement 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.  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.  Nothing in this Agreement, expressed or      
implied, is intended to confer upon any party, other than the parties hereto,   
and their respective successors except as assigns, any rights, remedies,        
obligations or liabilities under or by reason of this Agreement, except as      
expressly provided herein.                                                      

               SECTION 20.  Capitalized terms used in this Agreement and not
defined herein but defined in the Acquisition Agreement shall have the meanings 
assigned thereto in the Acquisition Agreement.                                  

           SECTION 21.  Nothing contained in this Agreement shall be
deemed to authorize or require Issuer or Grantee to breach any provision of the 
Acquisition Agreement or any provision of law applicable to the Grantee or      
Issuer.                                                                         

               SECTION 22.  In the event that any selection or determination
is to be made by Grantee or the Owner hereunder and at the time of such         
selection or determination there is more than one Grantee or Owner, such        
selection shall be made by a majority in interest of such Grantees or Owners.   

            SECTION 23.  In the event of any exercise of the option by
Grantee, Issuer and such Grantee shall execute and deliver all other documents  
and instruments and take all other action that may be reasonably necessary in   
order to consummate the transactions provided for by such exercise.             

         SECTION 24.  Except to the extent Grantee exercises the
Option, Grantee shall have no rights to vote or receive dividends or have any   
other rights as a shareholder with respect to shares of Issuer Common Stock     
covered hereby.                                                                 

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

                   NFS FINANCIAL CORP.

                        By:   /s/ James H. Adams
                                        ----------------------------
                        Name:     James H. Adams
                         Title:    President / CEO

              BAYBANKS, INC.

                           By:   /s/ Michael W. Vasily
                                        ----------------------------
                           Name:     Michael W. Vasily
                                  Title:    Executive Vice President

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Dates Referenced Herein

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
Filed on:		1/4/95							None on these Dates
For Period End:		12/22/94		1		13
									List all Filings