EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 1st day of May, 2001 by and between Solano Bank, a California corporation
(the "Bank"), and Glen C. Terry (the "Employee").

                                   BACKGROUND

         WHEREAS,  the Employee is currently  employed by the Bank and possesses
valuable knowledge and skills that have contributed to the operation of the Bank
and its subsidiary banks;

         WHEREAS,  the Bank desires to continue  Employee's  employment  and the
Employee is willing to  continue to be employed by the Bank,  upon the terms and
subject to the conditions hereinafter set forth; and

         WHEREAS, the Bank is a wholly-owned  subsidiary of North Bay Bancorp, a
California corporation (the "Company").

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

         1.       Employment

                  1.1 General. The Bank hereby employs the Employee as President
and Chief Executive Officer on the terms and subject to the conditions contained
in this Agreement,  and the Employee hereby accepts such employment on the terms
and subject to the conditions contained in this Agreement.

                  1.2 Duties of Employee. During the Term of this Agreement, the
Employee shall  diligently  perform all duties and  responsibilities  reasonably
accorded to and expected of the  President  and Chief  Executive  Officer of the
Bank and as may be  assigned to him by the Board of  Directors  of the Bank (the
"Board of  Directors")  or the  President  and Chief  Executive  Officer  of the
Company, and shall exercise such power and authority as may from time to time be
delegated to him thereby.  The Employee  shall devote his full business time and
attention  to the  business  and affairs of the Bank as necessary to perform his
duties and responsibilities  hereunder,  render such services to the best of his
ability  and use his best  efforts to promote  the  interests  of the Bank.  The
Employee  shall   faithfully   adhere  to,  execute  and  fulfill  all  policies
established by the Bank.

                  1.3 Place of  Performance.  Except for required travel for the
Bank's business, the Employee shall perform his duties and responsibilities from
the offices of the Bank and its subsidiaries.

<PAGE>

         2. Term. Subject to the provisions of Section 4 of this Agreement,  the
initial term of Employee's  employment  hereunder  shall commence on the date of
this Agreement (the "Effective  Date") and shall continue  thereafter  until the
third  anniversary  of the  Effective  Date (the  "Initial  Term").  Unless  the
Employee  shall have  notified  the Bank,  or the Bank shall have  notified  the
Employee,  not less than sixty days prior to the  expiration of the Initial Term
of such  party's  election  not to  continue  the Term of this  Agreement,  upon
expiration  of the Initial  Term,  the  Employee's  employment  hereunder  shall
continue until the fourth anniversary of the Effective Date and thereafter shall
continue on a  year-to-year  basis unless either party  notifies the other,  not
less than sixty days prior to  expiration  of the then current  Renewal Term, of
such  party's  election not to continue  the Term of this  Agreement  (each such
additional  one-year  period, a "Renewal Term"; the Initial Term and any Renewal
Term are  collectively  referred to hereinafter as the "Term").  The election by
the Bank not to continue the Term of  Employee's  employment  for a Renewal Term
shall not be deemed a  termination  without  Cause  pursuant  to Section  4.1(b)
hereof except as expressly provided in Section 4.1(d) hereof.

         3.       Compensation.

                  3.1  Salary.  During  the  Term of the  Employee's  employment
hereunder,  the Employee  shall receive an annual  salary of one hundred  thirty
thousand  dollars  ($130,000)  payable at such  times and in such  manner as the
Bank's normal payroll schedule may from time to time provide.  Employee's annual
salary shall be subject to annual  adjustment  as may be determined by the Board
of Directors in its sole and absolute discretion.

                  3.2 Incentive Compensation.  The Employee shall be eligible to
receive as additional compensation each year during his employment hereunder, as
determined  by the Board of Directors or an  applicable  committee  thereof,  in
accordance with the terms of an Incentive  Compensation Plan adopted annually by
the Board of Directors.  Such additional  compensation  (if any) to be paid at a
time or times and in a manner  consistent  with the Bank's normal  practices for
the payment of bonuses, or as the Board of Directors or applicable committee may
otherwise determine.

                  3.3 Benefits.  During his employment  hereunder,  the Employee
shall be entitled to participate in all plans adopted for the general benefit of
the Bank's management employees, including medical plans and 401(k) plan, to the
extent  that the  Employee is and remains  eligible to  participate  therein and
subject to the eligibility provisions of such plans in effect from time to time.
In the event Employee's  employment  hereunder is terminated and the Employee is
entitled to  compensation  pursuant to Section  4.4(d),  the  Employee  shall be
entitled to continue to participate in the Bank's medical plan until the earlier
of (a)  expiration  of the  applicable  payment  period  set  forth  in  Section
4.4(d)(i) or (b) the date Employee obtains new employment.

                  3.4  Vacation.  During each  calendar  year of his  employment
hereunder,  the Employee shall be entitled to twenty (20) days of paid vacation,
prorated for any period of employment of less than an entire year, provided that
vacation time will

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<PAGE>

continue to accrue only so long as Employee's  total  accrued  vacation does not
exceed  twenty five (25) days.  Should  Employee's  accrued  vacation time reach
twenty five (25) days,  Employee  will cease to accrue  further  vacation  until
Employee's  accrued  vacation  time  falls  below  that  level.  Notwithstanding
anything contained in the foregoing,  Employee shall take not less than five (5)
consecutive  days of vacation  during each calendar year during the Term of this
Agreement.  Employee may be absent from his employment for vacation only at such
time as the President and Chief Executive Officer of the Company shall determine
from time to time.

                  3.5  Withholding.   Notwithstanding   any  provision  in  this
Agreement to the contrary,  all payments  required to be made by the Bank to the
Employee  hereunder or otherwise  arising out of, related or incidental to or in
connection  with  the  Employee's  employment  hereunder  shall  be  subject  to
withholding  of such  amounts  relating  to taxes  as the  Bank  may  reasonably
determine it should withhold pursuant to any applicable law or regulation.

                  3.6  Reimbursement  of Expenses.  The Bank agrees to reimburse
the Employee for all reasonable business travel and other out-of-pocket expenses
incurred by the Employee in the  discharge of his duties  hereunder,  subject to
the Bank's reimbursement  policies in effect from time to time. All reimbursable
expenses shall be appropriately  documented in reasonable detail by the Employee
upon  submission  of any request for  reimbursement,  and in a format and manner
consistent  with the Bank's  expense  reporting  policy,  as well as  applicable
federal and state record keeping requirements.

                  3.7.  Automobile.  The Bank will pay to Employee an automobile
allowance in the amount of five hundred  dollars ($500) per month.  The Employee
shall be responsible  for insurance and maintenance  costs  associated with such
automobile's operation.  The Employee shall not be entitled to reimbursement for
mileage.  Employee shall procure and maintain an automobile  liability insurance
policy  on the  automobile,  with  coverage  including  Employee  for at least a
minimum  of  $300,000  for  bodily  injury or death to any one person in any one
accident,  and $100,000 for property  damage in any one  accident.  The Employer
shall be named as an  additional  insured and Employee  shall  provide  Employer
copies  of  policies  evidencing   insurance  and  Employer's  inclusion  as  an
additional insured.

         4.       Termination

                  4.1      By Bank.

                           (a) With Cause. Notwithstanding any provision in this
Agreement to the contrary, the Employee's employment hereunder may be terminated
by the Bank at any time for  "Cause,"  and such  termination  shall be effective
immediately upon written notice to the Employee. For purposes of this Agreement,
"Cause" for the  termination of the  Employee's  employment  hereunder  shall be
deemed to exist if, in the  reasonable  judgment of the Board of Directors:  (i)
the Employee  commits  fraud,  theft or

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<PAGE>

embezzlement against the Bank, or any subsidiary or affiliate thereof;  (ii) the
Employee  commits  a felony  or a crime  involving  moral  turpitude;  (iii) the
Employee compromises trade secrets or other proprietary information of the Bank,
or  any  subsidiary  or  affiliate  thereof;  (iv)  the  Employee  breaches  any
non-solicitation  agreement  with  the  Bank,  or any  subsidiary  or  affiliate
thereof;  (v) the Employee  breaches any of the terms of this  Agreement  (other
than those  referenced  in clauses  (iii) and (iv) of this  Section  4.1(a)) and
fails to cure such  breach  within  ten (10) days  after the  receipt of written
notice of such breach from the Bank;  (vi) the  Employee  engages in any grossly
negligent act or willful misconduct that causes, or could be reasonably expected
to cause,  harm to the  business,  operations  or reputation of the Bank, or any
subsidiary  or  affiliate  thereof;  or (vii) the  Bank,  or any  subsidiary  or
affiliate  thereof,  is ordered to terminate this Agreement by any  governmental
regulatory agency with supervisory authority over the Bank, or any subsidiary or
affiliate thereof.

                           (b) Without  Cause.  The Bank may at any time, in its
sole and absolute discretion, terminate the employment of the Employee hereunder
without Cause, or otherwise without any cause, reason or justification, provided
that the Bank provides to the Employee written notice (the "Termination Notice")
of such  termination.  In the event of any such  termination  by the  Bank,  the
Employee's  employment  with the Bank  shall  cease  and  terminate  on the date
specified in the Termination Notice.

                           (c) For  Disability of the Employee.  If, as a result
of  incapacity  due to physical  or mental  illness or injury,  the  Employee is
determined to be disabled under any disability policy maintained by the Bank or,
in the event no such policy is maintained by the Bank,  the Employee  shall have
been unable to perform the essential functions of his position,  with or without
reasonable  accommodation,  on a  full-time  basis  for a period  of sixty  (60)
consecutive days, or for a total of ninety (90) days in any twelve-month  period
(a  "Disability"),  then thirty (30) days after  written  notice to the Employee
(which  notice  may be  given  before  or  after  the end of the  aforementioned
periods,  but which  shall  not be  effective  earlier  than the last day of the
applicable period),  the Bank may terminate the Employee's  employment hereunder
if the Employee is unable to resume his  full-time  duties at the  conclusion of
such notice period.

                  4.2 Death of the Employee.  This Agreement  shall  immediately
cease and terminate upon the death of Employee.

                  4.3  Termination  by Employee.  The Employee may terminate his
employment  under  this  Agreement  upon not less than  thirty  (30) days  prior
written notice to the Bank.  Upon learning that the Employee is terminating  his
employment  under  this  Agreement,  the Bank may,  in its sole  discretion  but
subject to its other obligations  under this Agreement,  relieve Employee of his
duties under this Employment  Agreement,  and assign  Employee other  reasonable
duties  and  responsibilities  to be  performed  until the  termination  becomes
effective.


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<PAGE>

         4.4      Compensation Upon Early Termination.

                           (a) As a Result of Death,  Cause or  Resignation.  If
the  Employee's  employment  under this  Agreement  is  terminated  prior to the
scheduled expiration of the Term by reason of his death, termination by the Bank
for Cause or resignation  by the Employee,  the Employee shall be entitled to be
paid solely (i) the Employee's  salary then in effect through the effective date
of termination, (ii) any accrued vacation due pursuant to Section 3.4, (iii) any
amounts due  pursuant to Section 3.6,  (iv) those  benefits,  if any,  that have
vested by  operation of state or federal law or under any written term of a plan
("Vested Benefits"),  and (v) health care coverage continuation rights under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA Rights"), and the
Bank shall have no further  liability or other obligation of any kind whatsoever
to the  Employee.  In the  case of  termination  as a  result  of the  death  of
Employee,  any amounts due pursuant to this Section  4.4(a) shall be paid to the
Employee's  estate,  heirs (at law),  devisees,  legatees  or other  proper  and
legally  entitled  descendants,   or  the  personal  representative,   executor,
administrator   or  other  proper  legal   representative   on  behalf  of  such
descendants.

                           (b) By the Bank  other  than  for  Cause.  Except  as
otherwise  expressly  provided in Section  4.4(d),  if,  prior to the  scheduled
expiration of the Term, the Bank  terminates the Employee's  employment  without
Cause,  the  Employee  shall be  entitled  to receive and be paid solely (i) the
Employee's  salary then in effect until the  expiration of six months  following
the effective date of the termination of Employee's employment payable over such
period at the Bank's regular and customary intervals for the payment of salaries
as in effect from time to time ("Severance  Pay"), (ii) any accrued vacation due
pursuant to Section 3.4, (iii) any amounts due pursuant to Section 3.6, (iv) any
Vested  Benefits,  and (v) any COBRA Rights,  and the Bank shall have no further
liability  or other  obligation  of any kind  whatsoever  to the  Employee.  The
payment of Severance Pay shall constitute  liquidated damages in lieu of any and
all  claims by the  Employee  against  the Bank,  shall be in full and  complete
satisfaction of any and all rights which the Employee may enjoy  hereunder,  and
shall constitute  consideration for a full and unconditional  release of any and
all liability of the Bank or any of its shareholders,  benefit plans,  affiliate
companies,  subsidiaries,  and the directors,  officers, employees, trustees and
agents of such  entities and their  successors  or assigns,  arising out of this
Agreement  or out of the  employment  relationship  between the Employee and the
Bank (in the  form of  Exhibit  A,  hereafter  the  "Release").  Payment  of the
Severance Pay is expressly  conditioned  upon receipt by the Bank of the Release
executed by the Employee.

                           (c)  Disability.   For  the  sixty  (60)  day  period
following  onset of the  Employee's  Disability,  Employee  shall be entitled to
receive and be paid solely (i) the  Employee's  salary then in effect  until the
expiration of said sixty (60) day period payable over such period of time at the
Bank's regular and customary  intervals for the payment of salaries as in effect
from time to time, (ii) any accrued  vacation due pursuant to Section 3.4, (iii)
any amounts due pursuant to Section 3.6, (iv) any Vested  Benefits,  and (v) any
COBRA rights.  Following  expiration of the sixty (60) day period,  the Employee
shall be

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<PAGE>

entitled to receive and be paid solely a salary at a rate  commensurate with the
benefit Employee is eligible to receive under any disability  policy  maintained
by the Bank for a period of one hundred  twenty  (120) days or until  Employee's
benefits  under any  disability  policy  maintained by the Bank for the Employee
commences,  whichever period is shorter, payable over such period of time at the
Bank's regular and customary  intervals for the payment of salaries as in effect
from  time to time,  and the  Bank  shall  have no  further  liability  or other
obligation of any kind whatsoever to the Employee.

                           (d)  Change  in  Control.   Notwithstanding  anything
contained in the foregoing, if within one year of the effective date of a Change
in Control (as defined below),  of the Company (i) Employee's  employment  under
this  Agreement is  terminated by the Bank,  its assignee or successor,  without
Cause  (including,  for purposes of this Section 4.1(d), an election by the Bank
not to continue to Term of Employee's  employment)  or (ii) Employee  terminates
his  employment  under this  Agreement  on account of (y)  Employee's  position,
responsibilities or working conditions being  substantially  diminished or (z) a
material  reduction in the  Employee's  compensation  or benefits,  the Employee
shall be  entitled  to receive  and be paid  compensation  as follows in lieu of
compensation payable pursuant to Section 4.4(b):

                                    (i) Less Than Five Years of  Service.  If as
of the  effective  date of the Change in Control of the Company the Employee has
completed less than five years of service to the Bank (including  service to any
predecessor  or  subsidiary  of the Bank),  the  Employee  shall be  entitled to
receive and be paid an amount equal to (a) the Employee's  annual salary then in
effect plus (b) the average of the incentive  compensation  paid to the Employee
for the two most recently  completed fiscal years of the Bank. Said amount shall
be payable to the Employee for a period of twelve months following the effective
date  of  the   termination   of  the  Employee's   employment   (the  "Date  of
Termination").  Said  amount  shall be  payable  for such  period at the  Bank's
regular and  customary  intervals  for the payment of salaries as in effect from
time to time. In addition, the Employee shall be entitled to receive and be paid
(v) any  accrued  vacation  due  pursuant  to Section  3.4,  (w) any amounts due
pursuant to Section 3.6, (x) any Vested Benefits,  (y) any COBRA rights, and (z)
prorated incentive compensation for the current fiscal year of the Bank; or

                                    (ii) More than Five Years of Service.  If as
of the  effective  date of the Change in Control of the Company the Employee has
completed  five or more years of service to the Bank  (including  service to any
predecessor  or  subsidiary  of the Bank),  the  Employee  shall be  entitled to
receive  and be paid an  amount  equal to two times  (a) the  Employee's  annual
salary then in effect plus (b) the average of the incentive compensation paid to
the Employee for the two most recently  completed fiscal years of the Bank. Said
amount  shall be  payable to the  Employee  for a period of  twenty-four  months
following the Date of Termination.  Said amount shall be payable for such period
at the Bank's regular and customary  intervals for the payment of salaries as in
effect from time to time. In addition, the Employee shall be entitled to receive
and be paid (v) any  accrued  vacation  due  pursuant  to Section  3.4,  (w) any
amounts due  pursuant

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<PAGE>

to Section 3.6, (x) any Vested Benefits,  (y) any COBRA rights, and (z) prorated
incentive compensation for the current fiscal year of the Bank.

                           (e) Change in Control  Defined.  "Change in  Control"
means in any transaction or related series of transactions:  (a) the acquisition
(other than solely from the Company), by any individual, entity or group (within
the meaning of Section  13(d)(3) or Section 14(d)(2) of the Exchange Act), other
than the Company or any  subsidiary,  affiliate  (within the meaning of Rule 144
under the  Securities  Act of 1933, as amended) or employee  benefit plan of the
Company,   of  beneficial   ownership  (within  the  meaning  of  Rule  13(d)(3)
promulgated  under the  Exchange  Act) of more than 30% of the  combined  voting
power  of the  then  outstanding  securities  of the  Company  entitled  to vote
generally  in  the  election  of  directors  (the  "Voting  Securities");  (b) a
reorganization, merger, consolidation, share exchange or recapitalization of the
Company (a "Business  Combination"),  other than a Business Combination in which
more than 50% of the combined voting power of the outstanding  voting securities
of  the  surviving  or  resulting  entity  immediately  following  the  Business
Combination  is held by the  persons  who,  immediately  prior  to the  Business
Combination,  were the  holders  of the  Voting  Securities;  or (c) a  complete
liquidation or dissolution of the Company, or a sale of all or substantially all
of the Company's assets.

                           (f)  Tax   Gross-Up   Payment.   In  the   event  the
compensation payable to the Employee pursuant to and by reason of Section 4.4(d)
hereof and  otherwise  payable by the Bank to the Employee by reason of a Change
in Control of the Company (including without limitation,  accelerated vesting of
stock options and other compensation payable outside of this Agreement (together
the "Total Benefits"),  but determined without regard to any additional payments
required under this Section 4.4(f))  constitute excess parachute payments within
the meaning of Section  280G of the  Internal  Revenue Code (the "Code") and the
Employee  will be subject to the excise tax imposed by Section 4999 of the Code,
then the  aggregate  compensation  payable to the  Employee  pursuant  to and by
reason of  Section  4.4(d)  shall be  increased  by an  additional  amount  (the
"Gross-Up  Payment")  such that the net amount  retained by the Employee,  after
deduction of any excise tax on the Total  Benefits  and any  federal,  state and
local income tax,  excise  taxes and FICA  Medicare  withholding  taxes upon the
Gross-Up  Payment  shall be equal to the Total  Benefits.  The Gross-Up  Payment
shall be  calculated,  and all  assumptions  to be utilized in  performing  such
calculation,  shall be made by the Bank's independent  auditors (the "Accounting
Firm") which shall provide detailed supporting calculations both to the Bank and
the Employee  within  fifteen (15) business  days after the Date of  Termination
(defined in Section  4(d)(i)).  The  calculation of the Gross-Up  Payment by the
Accounting Firm shall be binding upon the Bank and Employee unless with ten (10)
business  days of receiving the  calculations  from the  Accounting  Firm either
party  objects  to the  calculation  by serving  upon the other  party a written
notice of  objection  (which  shall  contain  specific  details  supporting  the
objection). In the event of a timely objection to the calculation,  the Bank and
Employee shall meet and in good faith attempt to resolve the  objection.  If the
parties fail to resolve the objection  with ten (10) business days of receipt of
the objection,  either party may initiate arbitration,  and the dispute shall be
resolved by arbitration,  pursuant to Section 11 hereof. All reasonable fees and
expenses of the Accounting  Firm shall be borne solely by the Bank. The Gross-

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<PAGE>

Up Payment shall be added to the aggregate  compensation payable to the Employee
pursuant to and by reason of Section  4.4(d) and be payable over the  applicable
payment  period set forth in Section  4.4(d)(i) or (ii),  subject to withholding
pursuant to Section 3.5 hereof.

                  4.5  Expiration  of  the  Term.  If  not  sooner   terminated,
Employee's employment hereunder shall terminate on the expiration of the Initial
Term or the Renewal Term, as applicable in accordance with Section 2 hereof. Not
less than 45 days prior to the scheduled  expiration  of  Employee's  employment
hereunder,  the  parties  agree to  commence  discussions  with  respect  to the
possible  extension of the Term of this Agreement,  possible  execution of a new
employment agreement or other possible continuation of the Employee's employment
(it being  understood and agreed that no such discussion shall imply any current
or future obligation or commitment to enter into any such agreement or extension
or any other expressed or implied  arrangement  for the continued  employment of
the  Employee  following  the  expiration  of the  Initial  Term  or  any  other
termination of the Employee's employment hereunder).

         5. Agreement Not to Solicit Customers. The Employee agrees that, during
the Term of his  employment  with the Bank or any entity owned by or  affiliated
with the Bank (whether pursuant to this Agreement or otherwise), and for two (2)
years  following  the  termination   thereof  whether  or  not  for  any  reason
whatsoever,  he will not,  either directly or indirectly,  call on, solicit,  or
take away as a client, customer or prospective client or customer, or attempt to
call on, solicit,  or take away as a client,  customer or prospective  client or
customer, any person or entity that was a client, customer or prospective client
or customer of the Bank, or any subsidiary or affiliate thereof. For purposes of
this  agreement  "prospective  client or customer"  shall  include any person or
entity with whom the Bank has had contact for the purpose of soliciting business
within the six months prior to the  termination  of  employment or whom the Bank
intended  to contact for the purpose of  soliciting  business  within six months
after  termination  of  employment,  of which  contact or  intended  contact the
Employee had knowledge while employed by the Bank.

         6. Agreement Not to Solicit or Hire Employees. The Employee agrees that
during  the  Term of his  employment  with the  Bank or any  entity  owned by or
affiliated with the Bank (whether pursuant to this Agreement or otherwise),  and
for two (2) years  following  the  termination  thereof  whether  or not for any
reason whatsoever, he will not, either directly or indirectly, on his own behalf
or in the service or on behalf of others,  solicit,  divert or hire,  attempt to
solicit, divert or hire or induce or attempt to induce to discontinue employment
with the Bank, or any subsidiary or affiliate  thereof,  any person  employed by
the Bank, or any subsidiary or affiliate  thereof,  whether or not such employee
is a full time employee or a temporary  employee of the Bank, or any  subsidiary
or  affiliate  thereof and whether or not such  employment  is for a  determined
period or is at will.

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<PAGE>

         7.   Ownership   and   Non-Disclosure   and  Non-Use  of   Confidential
         Information.

                  7.1  Confidential  Information.  As used  in  this  Agreement,
"Confidential  Information"  shall mean all customer  deposit,  loan,  sales and
marketing  information,  customer account records,  proprietary  receipts and/or
processing techniques,  information regarding vendors and products, training and
operations  memoranda  and  similar  information,   personnel  records,  pricing
information,  financial  information and trade secrets concerning or relating to
the  business,  accounts,  customers,  employees and affairs of the Bank, or any
subsidiary  or  affiliate  thereof,  obtained  by  or  furnished,  disclosed  or
disseminated to the Employee, or obtained, assembled or compiled by the Employee
or under his  supervision  during the course of his  employment by the Bank, and
all physical embodiments of the foregoing,  all of which are hereby agreed to be
the property of and confidential to the Bank, but Confidential Information shall
not include any of the  foregoing  to the extent that the Employee can show that
the same is or becomes  publicly  known  through no action,  omission,  fault or
breach of this Agreement by the Employee.

                  7.2. Ownership.  The Employee acknowledges and agrees that all
Confidential Information, and all physical embodiments thereof, are confidential
to and shall be and  remain the sole and  exclusive  property  of the Bank.  The
Employee agrees that upon request by the Bank, and in any event upon termination
of the  Employee's  employment  with  the  Bank  whether  or not for any  reason
whatsoever, the Employee shall deliver to the Bank all property belonging to the
Bank, or any of its subsidiaries or affiliates,  including,  without limitation,
all Confidential Information (and all embodiments thereof), then in his custody,
control or possession.

                  7.3  Non-Disclosure  and Non-Use.  The Employee agrees that he
will not,  either  during the Term of his  employment  hereunder  or at any time
thereafter,  use, disclose or make available any Confidential Information to any
person or entity,  nor shall he use,  disclose,  make  available  or cause to be
used, disclosed or made available,  or permit or allow, either on his own behalf
or on behalf of others,  any use or disclosure of such Confidential  Information
other than in the proper performance of the Employee's duties hereunder.

         8.  Reasonableness  of  Restrictions.  In the event that any  provision
relating to time period set forth in Section 5, 6, or 7 shall be held by a court
of competent jurisdiction to exceed the maximum time period that the court deems
reasonable  and  enforceable,  the  time  period  which  the  court  finds to be
reasonable and enforceable  shall be deemed to become,  and thereafter shall be,
the maximum time period of such restriction as to such jurisdiction.

         9.  Enforceability.  Any provision of this Agreement which is held by a
court  of  competent   jurisdiction  to  be  invalid  or  unenforceable  in  any
jurisdiction  shall,  as to such  jurisdiction,  be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions hereof, but shall be enforced to the

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<PAGE>

maximum  extent  permitted  by law,  and  any  such  holding  of  invalidity  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

         10.  Injunction.  The  Employee  represents  that  his  experience  and
capabilities  are such  that the  provisions  of  Sections  5, 6, and 7 will not
prevent him from earning his livelihood,  and acknowledges  that a breach by the
Employee of any of the covenants  contained  therein will cause irreparable harm
and damage to the Bank, the monetary amount of which may be virtually impossible
to ascertain.  As a result, the Employee recognizes and hereby acknowledges that
the  Bank  shall be  entitled  to an  injunction  from  any  court of  competent
jurisdiction  enjoining  and  restraining  any  violation  of  any or all of the
covenants  contained in Section 5, 6, and/or 7 of this Agreement by the Employee
or any of his  affiliates,  associates,  partners or agents,  either directly or
indirectly, without any requirement to post bond or other security and that such
right to  injunction  shall be  cumulative  and in addition  to  whatever  other
remedies the Bank may possess.

         11.  Arbitration.  Subject  to the  provisions  of  Section  10  hereof
regarding  the  remedy of  injunctive  relief,  any  dispute  (whether  based on
contract,  tort,  or  statutory  duty  or  prohibition)  arising  out  of  or in
connection  with this Agreement  shall be submitted to binding  arbitration,  in
accordance  with the Commercial  Arbitration  Rules of the American  Arbitration
Association  (as modified by this  Agreement) by one  arbitrator,  designated in
accordance  with those rules.  No one who has ever had any business,  financial,
family,  or social  relationship with any party to this Agreement shall serve as
an  arbitrator  unless  the  related  party  informs  the  other  party  of  the
relationship  and  the  other  party  consents  in  writing  to the  use of that
arbitrator.

         The party  demanding  arbitration  shall submit a written  claim to the
other party, setting out the basis of the claim. A prearbitration  hearing shall
be held within twenty (20) business days after the arbitrator's  selection.  The
arbitration   shall  be  held  within   ninety  (90)  calendar  days  after  the
prearbitration   hearing.  The  arbitrator  shall  establish  any  deadlines  to
accomplish this goal. The arbitration shall take place in Napa, California, at a
time and place selected by the arbitrator.

         Each party shall be entitled to discovery of  essential  documents  and
witnesses,  as determined by the  arbitrator.  No less than thirty (30) calendar
days before the  arbitration,  a party may serve a document  request calling for
any document that would be discoverable in a state civil proceeding.  The served
with this request  shall  deliver the  requested  documents  and any  objections
within ten (10) calendar  days.  The arbitrator may resolve any dispute over the
exchange of documents.  Each party may take no more than three (3)  depositions,
unless additional  depositions are allowed by the arbitrator for good cause. All
depositions  must be  completed  as of fifteen  (15)  calendar  days  before the
arbitration  hearing  unless the parties  otherwise  agree.  The  arbitrator may
resolve any dispute  over the  depositions  as they would be resolved in a state
civil  proceeding.  Any motion may be heard by the  arbitrator on three (3) days
notice unless the parties otherwise agree. The arbitrator shall apply California
law.

                                       10
<PAGE>

         The parties agree that all  information  supplied by any party shall be
deemed to be confidential information, and the arbitrator and other participants
in the dispute shall protect such information from disclosure to the same extent
as confidential information under Section 7 of this Agreement.

         The arbitrator shall have the following powers:

                  (a)      To issue subpenas for the attendance of witnesses and
                           subpenas  duces  tecum for the  production  of books,
                           records, documents, and other evidence;

                  (b)      To order depositions to be used as evidence;

                  (c)      Consistent with the discovery  procedures  enumerated
                           above, to enforce the rights,  remedies,  procedures,
                           duties, liabilities,  and obligations of discovery as
                           if the  arbitration  were a  civil  action  before  a
                           California superior court;

                  (d)      To  conduct a hearing on the  arbitration  issues and
                           related legal and discovery issues;

                  (e)      To administer oaths to parties and witnesses;

                  (f)      To award all  damages  and  remedies  which  would be
                           available  in a  civil  action  before  a  California
                           superior court.

                  (g)      To  award  expenses  and fees of  arbitration  as the
                           arbitrator deems proper; and

                  (h)      To order such other  relief as the  arbitrator  deems
                           proper.

         Within fifteen (15) calendar days after  completion of the arbitration,
the  arbitrator  shall  submit a tentative  decision in writing  specifying  the
reasoning for the decision and any calculations  necessary to explain the award.
Each party shall have  fifteen  (15)  calendar  days in which to submit  written
comments to the  tentative  decision.  Within ten (10)  calendar  days after the
deadline for written  comments,  the arbitrator  shall announce the final award.
Any party may enter the  final  award as a  judgment  in any court of  competent
jurisdiction.

         The Bank shall pay the arbitrator's expenses and fees, all meeting room
charges,  and any other  expenses  that would not have been incurred if the case
were  litigated  in the  judicial  forum  having  jurisdiction  over it.  Unless
otherwise ordered by the arbitrator, each party shall pay its own attorney fees,
witness  fees  and  other  expenses  incurred  by the  party  for his or its own
benefit.  The arbitrator may award the prevailing  party his or its expenses and
fees of arbitration,  including  reasonable  attorney fees and costs,  including
witness fees, in such proportion as the arbitrator decides.

                                       11
<PAGE>

         12. No Prior Agreements.  The Employee  represents and warrants that he
is not a party to or otherwise subject to or bound by the terms of any contract,
agreement or  understanding  which in any manner would limit or otherwise affect
his ability to perform his obligations  hereunder,  including without limitation
any contract,  agreement or understanding containing terms and provisions in any
manner  similar  to those  contained  in  Sections  5, 6,  and/or 7 hereof.  The
Employee further  represents and warrants that his employment with the Bank will
not require him to disclose or use any  confidential  information  belonging  to
prior employers or other persons or entities.

         13.  Assignment.   The  Employee  shall  not  delegate  his  employment
obligations  pursuant to this Agreement to any other person.  This Agreement may
be  assigned  by the  Bank  without  the  Employee's  consent.  The  rights  and
protections of the Bank  hereunder  shall extend to any successors or assigns of
the Bank and to the Bank's present or future  parents,  subsidiaries,  divisions
and affiliates.

         14. Employer's  Authority.  The relationship between the parties hereto
is that of employer and employee. The Employee agrees to observe and comply with
the rules and  regulations of the Bank, as adopted by the Bank from time to time
with  respect to the  performance  of the duties of the  Employee.  The Employee
acknowledges  that he has no  authority  to enter  into any  contracts  or other
obligations  that are binding upon the Bank unless such contracts or obligations
are  authorized  by the Board of  Directors.  The Bank  shall  have the power to
direct,  control and supervise  the duties to be performed by the Employee,  the
manner of performing said duties, and the time of performing said duties.

         15.  Governing Law. 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 California, without
giving  effect to any of the  conflicts  of laws  provisions  thereof that would
compel the application of the substantive  laws of any other  jurisdiction.  The
Bank and the Employee each hereby  irrevocably submit to the jurisdiction of the
state or federal  courts  located in the State of California in connection  with
any  suit,  action  or  other  proceeding  arising  out of or  relating  to this
Agreement  and hereby agree not to assert,  by way of motion,  as a defense,  or
otherwise  in any such  suit,  action or  proceeding  that the  suit,  action or
proceeding  is brought  in an  inconvenient  forum,  that the venue of the suit,
action or  proceeding is improper or that this  Agreement or the subject  matter
hereof may not be enforced by such courts.

         16. Entire Agreement.  This Agreement  constitutes the entire agreement
between  the  parties  hereto  with  respect to the  subject  matter  hereof and
supersedes all prior agreements,  understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter.

         17. Notices.  All notices,  requests,  demands and other communications
under this  Agreement  will be in  writing  and will be deemed to have been duly
given (a) on the date of the service if served  personally  on the party to whom
notice  is to be  given,  (b) on

                                       12
<PAGE>

the date of  transmission  if  transmitted  by facsimile  with  confirmation  of
receipt,  (c) on the date of receipt if mailed to the party to whom notice is to
be given by first class mail,  registered  or certified,  postage  prepaid or by
overnight  courier  service (i.e.,  Federal  Express or  equivalent)  and unless
either party should notify the other of a change of address  properly  addressed
as follows,  or (d) otherwise on the date of receipt when the intended recipient
has acknowledged receipt:

                           (i)      If to the Employee:

                           Glen C. Terry
                           18 Lighthouse Drive
                           Napa, California  94559

                           (ii)     If to the Bank:

                           North Bay Bancorp
                           1500 Soscol Avenue
                           Napa, California  94559
                           Attention:  Terry L. Robinson,
                           President and Chief Executive Officer
                           of  North Bay Bancorp
                           Facsimile:  (707) 257-8025

         18.  Binding  Effect.  The  obligations  of  the  Employee  under  this
Agreement  shall  continue  after  the  expiration  of  this  Agreement  and the
termination  of his  employment  with the Bank for any reason,  shall be binding
upon his heirs, executors,  personal representatives,  legal representatives and
assigns and shall inure to the benefit of any successor and assigns of the Bank.

         19.  Severability.  The  invalidity  of any one or  more of the  words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the  enforceability of the remaining portions of this Agreement
or any part  thereof,  all of which are  inserted  conditionally  on their being
valid in law,  and,  in the event  that any one or more of the  words,  phrases,
sentences,  clauses,  sections or subsections contained in this Agreement or any
part thereof shall be declared invalid,  this Agreement shall be construed as if
such invalid word or words, phrase or phrases, sentence or sentences,  clause or
clauses, section or sections or subsection or subsections had not been inserted.
If such  invalidity  is caused by length of time or size of area,  or both,  the
otherwise invalid provision will be considered to be reduced to a period or area
which would cure such invalidity.

         20. Section Headings.  The section headings contained in this Agreement
are for  reference  purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

                                       13
<PAGE>

         21. No Third Party  Beneficiary.  Nothing  expressed or implied in this
Agreement is intended, or shall be construed,  to confer upon or give any person
other  than  the   parties   hereto  and  their   respective   heirs,   personal
representative,  legal  representative,  successors  and assigns,  any rights or
remedies under or by reason of this Agreement.

         22.  Amendment;  Modification;  Waiver.  No amendment,  modification or
waiver of the terms of this Agreement  shall be valid unless made in writing and
duly executed by the Bank and the  Employee.  No delay or failure at any time on
the part of the Bank in  exercising  any right,  power or  privilege  under this
Agreement,  or in enforcing  any provision of this  Agreement,  shall impair any
such right, power or privilege, or be construed as a waiver of any default or as
any  acquiescence  therein,  or shall affect the right of the Bank thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The  waiver by either  party  hereto  of a breach  or  violation  of any term or
provision of this Agreement  shall neither  operate nor be construed as a waiver
of any subsequent breach or violation.

THE  EMPLOYEE  ACKNOWLEDGES  THAT HE HAS  READ  AND  UNDERSTANDS  THE  FOREGOING
PROVISIONS AND THAT SUCH PROVISIONS ARE REASONABLE AND ENFORCEABLE.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.

                                     EMPLOYEE


                                     ______________________________
                                     Glen C. Terry

                                     BANK


                                     By:  _________________________
                                            Thomas N. Gavin,
                                            Chairman of the Board

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