Exhibit (4)(b)
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                                       CITY NATIONAL BANCSHARES CORPORATION


                                                    $1,500,000


                                     5.25% CAPITAL NOTES DUE DECEMBER 28, 2005


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

                                                  NOTE AGREEMENT
                                                   ------------

                                           Dated as of December 28, 1995




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<PAGE>
                                                 TABLE OF CONTENTS
                                                                            PAGE

1.       AUTHORIZATION OF ISSUE OF NOTES.....................................-1-
2.       PURCHASE AND SALE OF NOTES..........................................-1-
3.       CONDITIONS OF CLOSING...............................................-1-
         3A.      Opinion of Company's Counsel...............................-1-
         3B.      Representations and Warranties; No Default.................-1-
         3C.      Permitted By Applicable Laws...............................-1-
         3D.      Purchase and Assumption Agreement..........................-1-
         3E.      Proceedings................................................-2-

4.       PREPAYMENTS.........................................................-2-
         4A.      Required Prepayments.......................................-2-
         4B.      Partial Payments Pro Rata..................................-2-
         4C.      Retirement of Notes........................................-2-

5.       AFFIRMATIVE COVENANTS...............................................-2-
         5A.      Financial Statements.......................................-3-
         5B.      Inspection of Property.....................................-3-
         5C.      Covenant to Secure Note Equally............................-3-

6.       NEGATIVE COVENANTS..................................................-4-
         6A.      Unencumbered Assets........................................-4-
         6B.      Financial Maintenance Covenants............................-4-
                  6B(1).   Capital Adequacy..................................-4-
                  6B(2).   Asset Quality ....................................-4-
                  6B(3).    Liquidity........................................-4-
                  6B(4).    Earnings.........................................-4-
         6C.      Sale of Assets.............................................-4-
         6D.      Merger and Consolidation...................................-4-
         6E.      Restricted Investments ....................................-4-
         6F.      Restrictions on Subsidiaries...............................-5-
         6G.      Sale or Discount of Receivables............................-5-
         6H.      Transactions with Affiliates...............................-5-
         6I.      Restricted Payments........................................-5-

7.       EVENTS OF DEFAULT...................................................-6-
         7A.      Acceleration...............................................-7-
         7B.      Rescission of Acceleration.................................-7-
         7C.      Notice of Acceleration or Rescission.......................-7-
         7D.      Other Remedies.............................................-7-

8.       REPRESENTATIONS, COVENANTS AND WARRANTIES...........................-7-
         8A.      Organization...............................................-7-
         8B.      Financial Statements.......................................-8-
         8C.      Actions Pending............................................-8-
         8D.      Outstanding Debt...........................................-8-
         8E.      Title to Properties........................................-8-
         8F.      Taxes......................................................-8-
         8G.      Conflicting Agreements and Other Matters...................-8-
         8H.      Offering of Notes..........................................-8-
         8I.      Use of Proceeds............................................-9-
         8J.      ERISA......................................................-9-
         8K.      Governmental Consent.......................................-9-
         8L.      Environmental Compliance...................................-9-
         8M.      Disclosure.................................................-9-

9.       REPRESENTATIONS OF THE PURCHASER....................................-9-
         9A.      Nature of Purchase........................................-10-
         9B.      Registration of Notes.....................................-10-

10.      DEFINITIONS........................................................-10-
         10B.     Accounting Principles, Terms and Determinations...........-13-

11.      MISCELLANEOUS......................................................-13-
         11A.     Note Payments.............................................-13-
         11B.     Expenses..................................................-14-
         11C.     Consent to Amendments.....................................-14-
         11D.     Form, Registration, Transfer and Exchange of Notes; 
                   Lost Notes...............................................-14-
         11E.     Persons Deemed Owners; Participations.....................-14-
         11F.     Seal of Representations and Warranties; Entire Agreement..-15-
         11G.     Successors and Assigns....................................-15-
         11H.     Disclosure to Other Persons...............................-15-
         11I.     Notices...................................................-15-
         11J.     Payments Due on Non-Business Days.........................-15-
         11K.     Satisfaction Requirement..................................-16-
         11L.     Governing Law.............................................-16-
         11M.     Severability..............................................-16-
         11N.     Descriptive Headings......................................-16-
         11O.     Counterparts..............................................-16-

PURCHASER SCHEDULE

EXHIBIT A         -        FORM OF NOTE
<PAGE>
                                       1






                      CITY NATIONAL BANCSHARES CORPORATION
                                900 Broad Street
                              News New Jersey 07102



                                                         As of December 28, 1995



The Prudential Foundation
751 Broad Street, 15th Floor
Newark, New Jersey 07102


Ladies and Gentlemen:

         The undersigned,  City National  Bancshares  Corporation (herein called
the "Company"), hereby agrees with you as follows:

         1.  AUTHORIZATION  OF ISSUE OF NOTES.  The Company will  authorize  the
issue of its capital notes in the aggregate  principal amount of $1,500,000,  to
be dated  the date of issue  thereof,  to  mature  December  28,  2005,  to bear
interest on the unpaid balance thereof from the date thereof until the principal
thereof  shall have become due and payable at the rate of 5.25% per annum and on
overdue payments at the rate specified  therein,  and to be substantially in the
form of Exhibit A attached hereto. The term "Notes" as used herein shall include
each such capital note delivered pursuant to any provision of this Agreement and
each such capital note delivered in  substitution or exchange for any other Note
pursuant to any such provision.

         2. PURCHASE AND SALE OF NOTES. The Company hereby agrees to sell to you
and, subject to the terms and conditions herein set forth, you agree to purchase
Notes in the aggregate  principal amount of $1,500,000 at 100% of such aggregate
principal amount.  The Company will deliver to you, at the offices of Prudential
Capital Group, One Gateway Center, 11th Floor,  Newark, New Jersey 07102, one or
more Notes registered in your name, evidencing the aggregate principal amount of
Notes to be purchased by you and in the denomination or denominations  specified
in the Purchaser Schedule attached hereto, against payment of the purchase price
thereof  by  transfer  of  immediately  available  funds for  credit to the City
National Bank of New Jersey,  Account No#.  021201639 at Federal Reserve Bank of
New York, 33 Liberty  Street,  New York,  New York 10045 on the date of closing,
which shall be December  29,  1995 or any other date on or before  December  29,
1995 upon  which the  Company  and you may  mutually  agree  (herein  called the
"closing" or the "date of closing").

         3.  CONDITIONS OF CLOSING.  Your obligation to purchase and pay for the
Notes to be purchased by you  hereunder  is subject to the  satisfaction,  on or
before the date of closing, of the following conditions:

         3A.      Opinion of Company's Counsel.  You shall have received from 
Robinson, St. John & Wayne, special counsel for the Company, a favorable opinion
satisfactory to you and substantially in the form of Exhibit B attached hereto.

         3B. Representations and Warranties; No Default. The representations and
warranties  contained  in  paragraph  8 shall  be true on and as of the  date of
closing,  except to the  extent of  changes  caused by the  transactions  herein
contemplated;  there  shall  exist on the date of closing no Event of Default or
Default;  and the Company shall have delivered to you an Officer's  Certificate,
dated the date of closing, to both such effects.

         3C. Purchase  Permitted By Applicable Laws. The purchase of and payment
for the Notes to be  purchased  by you on the date of  closing  on the terms and
conditions herein provided  I(including the use of the proceeds of such Notes by
the Company)  shall not violate any applicable  law or  governmental  regulation
(including, without limitation, section 5 of the Securities Act or Regulation G,
T or X of the Board of  Governors of the Federal  Reserve  System) and shall not
subject you to any tax,  penalty,  liability or other onerous condition under or
pursuant to any applicable law or  governmental  regulation,  and you shall have
received  such  certificates  or other  evidence as you may request to establish
compliance with this condition.

          3D.  Purchase and  Assumption  Agreement.  The Purchase and Assumption
Agreement shall have been duly authorized and executed and delivered by the 
parties  thereto and you shall have received a fully  executed  counterpart
thereof.

<PAGE>
                                       2

         3E.  Proceedings.  All corporate and other  proceedings  taken or to be
taken in connection with the transactions  contemplated hereby and all documents
incident  thereto  shall be  satisfactory  in substance and form to you, and you
shall have received all such counterpart  originals or certified or other copies
of such documents as you may reasonably request.

         4.  PREPAYMENTS.  The Notes shall be subject to  prepayment  only with
respect to the required prepayments specified in paragraph 4A.

         4A. Required  Prepayments.  Until the Notes shall be paid in full, the
Company  shall,  on  the  date  indicated  below,  apply  to  the prepayment of 
the Notes,  without  premium,  the amount  opposite such date:



Date of Prepayment                          Amount
------------------                          ------
June 30, 2001 and
December 31, 2001                           $ 75,000

June 30, 2002 and
December 31, 2002                            112,500

June 30, 2003 and
December 31, 2003                            150,000

June 30, 2004
December 31, 2004                            187,500

June 30, 2005                                225,000

The remaining  $225,000  principal  amount of the Notes,  together with interest
accrued thereon, shall become due on the maturity date of the Notes.

         4B. Partial Payments Pro Rata. Upon any partial prepayment of the Notes
pursuant to paragraph 4A, the principal  amount so prepaid shall be allocated to
all Notes at the time outstanding (including,  for the purpose of this paragraph
4B only,  all Notes  prepaid or  otherwise  retired or  purchased  or  otherwise
acquired by the Company or any of its  Subsidiaries or Affiliates  other than by
prepayment pursuant to paragraph 4A) in proportion to the respective outstanding
principal amounts thereof.

         4C.  Retirement  of Notes.  The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity  (other than upon  acceleration  of
such final maturity pursuant to paragraph 7A), or purchase or otherwise acquire,
directly  or  indirectly,  Notes held by any holder  unless the  Company or such
Subsidiary  or Affiliate  shall have  offered to prepay or  otherwise  retire or
purchase or otherwise  acquire,  as the case may be, the same  proportion of the
aggregate  principal  amount of Notes held by each other  holder of Notes at the
time  outstanding  upon the same terms and  conditions.  Any Notes so prepaid or
otherwise  retired or purchased  or otherwise  acquired by the Company or any of
its  Subsidiaries  or Affiliates  shall not be deemed to be outstanding  for any
purpose under this Agreement, except as provided in paragraph 4B.

         5.       AFFIRMATIVE COVENANTS.

         5A.      Financial Statements.  The Company covenants that it will 
deliver to each Significant Holder in triplicate:

                  (i) as soon as practicable and in any event within 32 days the
         after  the end  each  fiscal  quarterly  period  (other  than  the last
         quarterly  period)  in  each  fiscal  year,  consolidated  reports  of
         condition and income (including  supporting  schedules),   repared  in
         accordance with applicable federal regulatory guidelines and certified
         by an authorized financial officer of the Company;

                  (ii) as soon as  practicable  and in any event  within 50 days
         after the end of each  quarterly  period (other than the last quarterly
         period) in each fiscal year,  consolidating and consolidated statements
         of income,  stockholders'  equity and cash flows of the Company and its
         Subsidiaries  for the period from the  beginning of the current  fiscal
         year to the end of  such  quarterly  period,  and a  consolidating  and
         consolidated  balance sheet of the Company and its  Subsidiaries  as at
         the  end of such  quarterly  period,  setting  forth  in  each  case in
         comparative form figures for the corresponding  period in the preceding
         fiscal year, all in reasonable  detail and  satisfactory in form to the
         Required Holder(s) and certified by an authorized  financial officer of
         the Company, subject to changes resulting from year-end adjustments;


<PAGE>
                                       3

                  (iii) as soon as  practicable  and in any event within 95 days
         after  the end of each  fiscal  year,  consolidating  and  consolidated
         statements  of income and cash flows and a  consolidating  statement of
         stockholders' equity of the Company and its Subsidiaries for such year,
         and a consolidating  and consolidated  balance sheet of the Company and
         its Subsidiaries as at the end of such year, setting forth in each case
         in  comparative  form  corresponding   consolidated  figures  from  the
         preceding annual audit, with respect to the consolidating statements in
         reasonable  detail and  satisfactory in form to the Required  Holder(s)
         and, as to the  consolidated  statements,  reported  on by  independent
         public  accountants  of recognized  national  standing  selected by the
         Company whose report shall be unqualified and without  limitation as to
         the  scope  of  the  audit  and,  as to the  consolidating  statements,
         certified by an authorized financial officer of the Company;

                  (iv) promptly upon  transmission  thereof,  copies of all such
         financial statements, notices, reports and filings with the FDIC or the
         OCC, to the extent not prohibited by law, (or any governmental  body or
         agency  succeeding  to the functions of the FDIC or OCC by operation of
         law or change in  designation  by the Company as a federally  regulated
         entity),  and, if applicable,  copies of all such financial statements,
         proxy  statements,  notices  and reports as it shall send to its public
         stockholders  and  copies  of  all  registration   statements  (without
         exhibits)  and all  reports  which it files  with  the  Securities  and
         Exchange  Commission (or any governmental  body or agency succeeding to
         the functions of the Securities and Exchange Commission);

                  (v) promptly upon receipt thereof, a copy of each other report
         submitted to the Company or any Subsidiary by  independent  accountants
         in connection with any annual, interim or special audit made by them of
         the books of the Company or any Subsidiary;

                   (vi) management letters and any material press releases;  and
                  (vii) with reasonable promptness, such other financial data as
                  such Significant Holder may reasonably request.

Together with each delivery of financial statements required by clauses (ii) and
(iii)  above,  the  Company  will  deliver  to each  Significant  Holder  (a) an
Officer's  Certificate  demonstrating  (with  computations in reasonable detail)
compliance by the Company and its Subsidiaries with the provisions of paragraphs
6A, 6B and 6C and stating that there exists no Event of Default or Default,  or,
if any Event of Default or Default  exists,  specifying the nature and period of
existence  thereof  and what action the  Company  proposes to take with  respect
thereto.  Together with each delivery of financial statements required by clause
(iii)  above,  the  Company  will  deliver  to  each  Significant  Holder  (a) a
certificate of such accountants  stating that, in making the audit necessary for
their report on such  financial  statements,  they have obtained no knowledge of
any Event of Default or  Default,  or, if they have  obtained  knowledge  of any
Event of  Default or  Default,  specifying  the  nature and period of  existence
thereof. Such accountants,  however,  shall not be liable to anyone by reason of
their failure to obtain knowledge of any Event of Default or Default which would
not be  disclosed  in the  course  of an  audit  conducted  in  accordance  with
generally accepted auditing standards, and (b) a report, in such detail and form
satisfactory to the Required  Holders,  certified by the chief financial officer
of the Company  specifying  how the proceeds of the Notes are being  utilized by
the Bank in furtherance of the Foundation's charitable purpose.

The Company  also  covenants  that  immediately  after any  Responsible  Officer
obtains  knowledge  of an Event of Default or Default,  it will  deliver to each
Significant Holder an Officer's Certificate  specifying the nature and period of
existence  thereof  and what action the  Company  proposes to take with  respect
thereto.

         5B.  Inspection of Property.  The Company covenants that it will permit
any Person designated by any Significant Holder in writing,  at such Significant
Holder's expense,  to visit and inspect any of the properties of the Company and
its  Subsidiaries,  to examine the corporate books and financial  records of the
Company and its Subsidiaries  and make copies thereof or extracts  therefrom and
to discuss the affairs,  finances and accounts of any of such  corporations with
the principal  officers of the Company and its independent  public  accountants,
all at such  reasonable  times  and as  often  as such  Significant  Holder  may
reasonably request.

         5C. Covenant to Secure Note Equally.  The Company covenants that, if it
or any  Subsidiary  shall  create or assume any Lien upon any of its property or
assets in violation of paragraph  6A,  whether now owned or hereafter  acquired,
(unless prior written  consent to the creation or assumption  thereof shall have
been  obtained  pursuant  to  paragraph  11C),  it will make or cause to be made
effective  provision  whereby the Notes will be secured by such Lien equally and
ratably  with any and all other Debt  thereby  secured so long as any such other
Debt shall be so secured:

         6.       NEGATIVE COVENANTS.
<PAGE>
                                       4

         6A.      Unencumbered Assets.  The Company covenants that it will at 
all times maintain  assets with a fair market value of $3,000,000,  and will not
create, assume or suffer to exist any Lien upon any such assets.

         6B.      Financial Maintenance Covenants.  The Company covenants that 
it will not permit, at any time

         6B(1).  Capital Adequacy -- (a) Tier I Capital to be less than 5% of
Consolidated  Total Assets or (b) the sum of Tier I Capital plus Tier II Capital
to be less than 12% of Risk Adjusted Assets;
         
         6B(2).   Asset Quality  --  (a) Consolidated Non-Performing Loans to 
exceed  1.40% of  Consolidated  Total  Assets or (b)  Consolidated  Loss Reserve
Allowance to be less than 50% of Consolidated Non-Performing Loans;

         6B(3).  Liquidity --  the Liquidity Ratio to be less than 1.25 to 1; or

         6B(4).  Earnings  --  (a) Return on Assets to be less than .50% or (b)
Return on Equity to be less than 10.5%.

         6C.      Sale of Assets.  The Company covenants that it will not, and 
will not permit any Subsidiary to, sell, lease, transfer or otherwise dispose (a
"Transfer") of any assets, except

                  (i)      any Depository Institution may sell loans in the 
         ordinary course of business;

                  (ii) the Company or any Subsidiary  may Transfer  assets that,
         in its good  faith,  reasonable  judgment,  have no  further  useful or
         productive capacity, are fully used or depreciated, are obsolete or are
         no  longer  necessary  or  productive  in the  ordinary  course  of the
         Company's business;

                  (iii)    Transfers between Subsidiaries and from any 
         Subsidiary to the Company; and

                  (iv)     Sales of Investments permitted by paragraph 6E; and

                  (v) other  Transfers if, after giving effect to such Transfer,
         (a) no Default or Event of Default exist and (b) all assets Transferred
         during the then  current  fiscal  year would not (1) have an  aggregate
         book  value,  or,  if  higher,   market  value  in  excess  of  10%  of
         Consolidated   Tangible  Net  Worth  at  the  end  of  the  immediately
         proceeding  fiscal  year  or (2)  have  contributed  more  than  10% of
         Consolidated  Operating  Profit  for  any of the  three  most  recently
         completed  fiscal years,  provided that in no event shall the aggregate
         assets Transferred pursuant to this clause (iii) have a book value, or,
         if higher,  market value in excess of 20% of Consolidated  Tangible Net
         Worth.

         6D.      Merger and Consolidation.  The Company covenants that it will 
not, and will not permit any Subsidiary to, merge or consolidate with any Person
except, if no Default or Event of Default shall exist or result therefrom

                  (i)      a Subsidiary may merge into the Company, if the 
         Company is the surviving corporation;

                  (ii)     a Subsidiary may merge into any other Subsidiary; and

                  (iii) any Person may merge into the Company or any  Subsidiary
         if the Company or such Subsidiary is the surviving corporation.

          6E. Restricted Investments. The Company covenants that is will not, 
and will not permit any Subsidiary to, make any Investment except

                  (i) that the Company or any  Subsidiary  may make  Investments
         permitted  by the  Investment  Policy  adopted in December  1994 by the
         board of directors  of City  National  Bank of New Jersey,  as it maybe
         amended from time to time,  provided that any  amendment  affecting the
         quality  standard or the limits per  Investment  category will not take
         effect  until 20 days after the holders of Notes shall have  received a
         copy of the revised  Investment  Policy and shall not have delivered to
         the  Company a written  dissent to such  amendment  within  such 20 day
         period;

                  (ii)     Investments in stocks, obligations or securities of a
          Subsidiary or a corporation which immediately after such purchase
          or acquisition will be a Subsidiary; and

                  (iii)  Investments  made in connection with the acquisition of
         all or any part of loan  portfolios,  deposit  taking  activities,  and
         other banking  functions from another  person or any branch,  agency or
         instrumentality of the Federal government.
<PAGE>
                                       5

         6F.      Restrictions on Subsidiaries.  The Company covenants that it 
will not, and will not permit any Subsidiary to,

                  (i) sell, assign,  pledge or otherwise dispose of or part with
         control  of, any Debt  owing to the  Company  or a  Subsidiary,  or any
         shares  of stock or other  equity  interest  (or  warrants,  rights  or
         options to acquire  stock of or other equity  interest)  in, any of its
         Subsidiaries,  except to the Company or a Subsidiary, provided that all
         the stock and Debt of a Subsidiary may be sold as an entirety if all of
         the assets of such Subsidiary could be sold pursuant to paragraph 6E;


                  (ii) in the  case of any  Subsidiary,  (A)  issue  or sell any
         shares of stock or equity  interest (or warrants,  rights or options to
         acquire  stock of or other equity  interest) in such  Subsidiary to any
         Person, except to the Company or another Subsidiary, or (B) enter into,
         or suffer to exist,  any contract or agreement  (including  any charter
         provision) that imposes restrictions on any Subsidiary's ability to pay
         make any Restricted Payment.

         6G.  Sale  or  Discount  of  Receivables.  Except  as  permitted  under
paragraph 6C, the Company covenants that it will not, and will not permit any of
its Subsidiaries to, discount,  pledge, sell with recourse or otherwise sell any
Receivable of the Company or any Subsidiary.

         6H.      Transactions with Affiliates.  The Company covenants that it 
shall not,  and shall not permit any  Subsidiary  to,  directly  or  indirectly,
purchase,  acquire or lease any property  from,  or sell,  transfer or lease any
property  to, or  otherwise  deal with,  in the  ordinary  course of business or
otherwise,

                  (i)      any Affiliate of the Company; or

                  (ii) any Person owning, beneficially or of record, directly or
         indirectly,   equity   securities  or  other  shares  or  evidences  of
         beneficial  interest of the Company  aggregating 5% or more of all such
         securities, shares and interest; or

                  (iii)  any  Person  of which any  Person  described  or coming
         within the  provisions of clause (i) or (ii) of this paragraph 6H shall
         own,  beneficially  or  of  record,  directly  or  indirectly,   equity
         securities  or  other  shares  or  evidences  of  beneficial   interest
         aggregating 5% or more of all such securities, shares and interests;

except that (a) any such  Person may be a  director,  officer or employee of the
Company  or  any  Subsidiary  and  may  be  paid  reasonable   compensation  and
participate in employee  benefit plans in connection  with his employment by the
Company or such  Subsidiary,  (b) any  transaction  permitted under paragraph 6E
shall be  permitted  under this  paragraph  6H, (c) the  Company may sell to, or
purchase from, any such Person shares of the Company's  stock, and (d) such acts
and transactions prohibited by the foregoing provisions of this paragraph 6H may
be performed or engaged in if made upon terms not less  favorable to the Company
than if no such  relationship  described in clauses (i),  (ii),  and (iii) above
existed.

         6I.      Restricted Payments.  The Company covenants that it will not, 
directly  or  indirectly,  declare,  order,  pay,  make or set  apart any sum or
property for any Restricted Payment, except that the Company may make Restricted
Payments,

                  (i) on,  cumulative  perpetual  preferred  stock not to exceed
         $125,000 in any fiscal  year,  provided  that such  Restricted  Payment
         shall  not  violate  any  law,  rule or  regulation  applicable  to the
         Company,

                  (ii)     on common stock not to exceed Excess Cash if, 
         immediately prior and after giving effect thereto,

                           (a)      Tier I Capital of any Depository Institution
Subsidiary is not less than 5.0% of Consolidated Total Assets of such Depository
Institution Subsidiary; and

                           (b)      the sum of Tier I Capital and Tier II 
Capital is not less than 12% of Risk-Adjusted Assets; and

                  (iii) in either  case,  immediately  prior  and  after  giving
         effect to any such Restricted  Payment,  no Default or Event of Default
         would occur.

         7.       EVENTS OF DEFAULT.
<PAGE>
                                       6

         7A.      Acceleration.  If any of the following events shall occur and
be continuing for any reason  whatsoever (and whether such  occurrence  shall be
voluntary  or  involuntary  or come about or be effected by  operation of law or
otherwise):

                  (i)      the Company defaults in the payment of any principal
         of any Note when the same shall become due, either by the terms thereof
         or otherwise as herein provided; or

                  (ii)     the Company defaults in the payment of any interest 
         on any Note for more than 5 days after the date due; or

                  (iii) the  Company  or any  Subsidiary  defaults  (whether  as
         primary  obligor or as  guarantor  or other  surety) in any  payment of
         principal of or interest on any other obligation for money borrowed (or
         any Capitalized  Lease  Obligation,  any obligation under a conditional
         sale or other  title  retention  agreement,  any  obligation  issued or
         assumed as full or partial payment for property  whether or not secured
         by a purchase money  mortgage or any obligation  under notes payable or
         drafts accepted representing extensions of credit) beyond any period of
         grace provided with respect  thereto,  or the Company or any Subsidiary
         fails to perform  or observe  any other  agreement,  term or  condition
         contained in any agreement  under which any such  obligation is created
         (or if any other event  thereunder  or under any such  agreement  shall
         occur and be continuing)  and the effect of such failure or other event
         is to cause,  or to permit the holder or holders of such obligation (or
         a  trustee  on  behalf  of such  holder  or  holders)  to  cause,  such
         obligation  to become due (or to be  repurchased  by the Company or any
         Subsidiary)  prior to any stated maturity,  provided that the aggregate
         amount of obligations as to which such payment  default shall occur and
         be  continuing  or such  failure or other event  causing or  permitting
         acceleration (or resale to the Company or any Subsidiary)  shall exceed
         $100,000; or

                  (v)      the Company fails to perform or observe any agreement
         contained in paragraph 5A or paragraph 6; or

                  (vi) the  Company  fails  to  perform  or  observe  any  other
         agreement,  term or condition  contained  herein and such failure shall
         not be remedied  within 30 days after any  Responsible  Officer obtains
         actual knowledge thereof; or

                  (vii) the Company or any  Subsidiary  makes an assignment  for
         the benefit of creditors  or is generally  not paying its debts as such
         debts become due; or

                  (viii)  any  decree or order  for  relief  in  respect  of the
         Company   or  any   Subsidiary   is  entered   under  any   bankruptcy,
         reorganization,  compromise,  arrangement,  insolvency, readjustment of
         debt,  dissolution  or  liquidation  or  similar  law,  whether  now or
         hereafter  in effect  (herein  called  the  "Bankruptcy  Law"),  of any
         jurisdiction; or

                  (ix) the Company or any Subsidiary petitions or applies to any
         tribunal for, or consents to, the appointment of, or taking  possession
         by, a trustee, receiver,  custodian,  liquidator or similar official of
         the Company or any Subsidiary, or of any substantial part of the assets
         of the Company or any  Subsidiary,  or commences a voluntary case under
         the Bankruptcy Law of the United States or any proceedings  (other than
         proceedings  for  the  voluntary   liquidation  and  dissolution  of  a
         Subsidiary)  relating  to the  Company  or  any  Subsidiary  under  the
         Bankruptcy Law of any other jurisdiction; or

                  (x) any such  petition or  application  is filed,  or any such
         proceedings  are  commenced,  against the Company or any Subsidiary and
         the  Company  or such  Subsidiary  by any act  indicates  its  approval
         thereof, consent thereto or acquiescence therein, or an order, judgment
         or decree is entered appointing any such trustee, receiver,  custodian,
         liquidator or similar  official,  or approving the petition in any such
         proceedings, and such order, judgment or decree remains unstayed and in
         effect for more than 30 days; or

                  (xi)  any  order,   judgment  or  decree  is  entered  in  any
         proceedings  against  the  Company  decreeing  the  dissolution  of the
         Company and such  order,  judgment or decree  remains  unstayed  and in
         effect for more than 60 days; or

                  (xii)  any  order,  judgment  or  decree  is  entered  in  any
         proceedings against the Company or any Subsidiary  decreeing a split-up
         of the Company or such  Subsidiary  which  requires the  divestiture of
         assets representing a substantial part, or the divestiture of the stock

<PAGE>
                                       7

         of a  Subsidiary  whose assets  represent a  substantial  part,  of the
         consolidated assets of the Company and its Subsidiaries  (determined in
         accordance  with  generally  accepted  accounting  principles) or which
         requires the  divestiture  of assets,  or stock of a Subsidiary,  which
         shall have  contributed  a  substantial  part of the  consolidated  net
         income of the Company and its  Subsidiaries  (determined  in accordance
         with generally  accepted  accounting  principles)  for any of the three
         fiscal  years then most  recently  ended,  and such order,  judgment or
         decree remains unstayed and in effect for more than 60 days; or

                  (xiii) one or more final  judgments in an aggregate  amount in
         excess of $100,000 is  rendered  against the Company or any  Subsidiary
         and,  within  60  days  after  entry  thereof,  such  judgment  is  not
         discharged or execution  thereof  stayed pending  appeal,  or within 60
         days  after the  expiration  of any such  stay,  such  judgment  is not
         discharged; or

                  (xiv) the Company or any ERISA  Affiliate,  in its capacity as
         an employer  under a  Multiemployer  Plan,  makes a complete or partial
         withdrawal from such  Multiemployer Plan resulting in the incurrence by
         such  withdrawing  employer  of a  withdrawal  liability  in an  amount
         exceeding $25,000;

then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this  paragraph 7A, the holder of any Note (other than the Company or any of its
Subsidiaries  or  Affiliates)  may at its  option,  by notice in  writing to the
Company,  declare such Note to be, and such Note shall  thereupon be and become,
immediately  due and payable at par  together  with  interest  accrued  thereon,
without presentment,  demand,  protest or other notice of any kind, all of which
are  hereby  waived by the  Company,  (b)if  such  event is an Event of  Default
specified in clause (viii), (ix) or (x) of this paragraph 7A with respect to the
Company,  all of the Notes at the time outstanding  shall  automatically  become
immediately  due and payable at par  together  with  interest  accrued  thereon,
without  presentment,  demand,  protest or notice of any kind,  all of which are
hereby  waived  by the  Company,  and (c) is such  event is any  other  Event of
Default,  the Required  Holders may,  their option,  by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall thereupon be
and become,  immediately due and payable  together with interest accrued thereon
with respect to each Note, without presentment,  demand, protest or other notice
of any kind, all of which are hereby waived by the Company.

         7B.  Rescission  of  Acceleration.  At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
7A, the Required Holder(s) may, by notice in writing to the Company, rescind and
annul such  declaration and its  consequences if (i) the Company shall have paid
all  overdue  interest  and,  the  principal  of any Notes which have become due
otherwise  than by reason of such  declaration,  and  interest  on such  overdue
interest  and overdue  principal at the rate  specified  in the Notes,  (ii) the
Company  shall not have paid any amounts  which have become due solely by reason
of such  declaration,  (iii) all  Events of  Default  and  Defaults,  other than
non-payment  of  amounts  which  have  become  due  solely  by  reason  of  such
declaration, shall have been cured or waived pursuant to paragraph 11C, and (iv)
no judgment or decree shall have been entered for the payment of any amounts due
pursuant to the Notes or this  Agreement.  No such rescission or annulment shall
extend to or affect  any  subsequent  Event of  Default or Default or impair any
right arising therefrom.

         7C. Notice of  Acceleration  or Rescission.  Whenever any Note shall be
declared  immediately  due and  payable  pursuant  to  paragraph  7A or any such
declaration  shall be  rescinded  and  annulled  pursuant to  paragraph  7B, the
Company shall  forthwith  give written notice thereof to the holder of each Note
at the time outstanding.

         7D. Other Remedies.  If any Event of Default or Default shall occur and
be  continuing,  the holder of any Note may  proceed to protect  and enforce its
rights under this  Agreement  and such Note by  exercising  such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific  performance of any
covenant  or  other  agreement  contained  in  this  Agreement  or in aid of the
exercise of any power  granted in this  Agreement.  No remedy  conferred in this
Agreement  upon the holder of any Note is intended to be  exclusive of any other
remedy,  and each and every  such  remedy  shall be  cumulative  and shall be in
addition to every other remedy conferred herein or now or hereafter  existing at
law or in equity or by statute or otherwise.

         8.       REPRESENTATIONS, COVENANTS AND WARRANTIES.  The Company
represents, covenants and warrants as follows:

         8A.      Organization.  The Company is a corporation duly organized and
existing  in good  standing  under the laws of the State of New  Jersey and each
Subsidiary is duly organized and existing in good standing under the laws of the
jurisdiction in which it is incorporated.
<PAGE>
                                       8

         8B.  Financial  Statements.  The  Company  has  furnished  you with the
following financial  statements,  identified by a principal financial officer of
the  Company:   (i)  a  consolidated  balance  sheet  of  the  Company  and  its
Subsidiaries as at December 31 in each of the years 1992 to 1994, inclusive, and
consolidated  statements of income,  stockholders'  equity and cash flows of the
Company and its Subsidiaries for each such year, all reported on by December 31;
and (ii) a consolidated  balance sheet of the Company and its Subsidiaries as at
September 30 in each of The years 1992 through 1995 and consolidated  statements
of income,  stockholders'  equity and cash flows for the nine-month period ended
on each such date, prepared by the Company. Such financial statements (including
any  related  schedules  and/or  notes)  are true and  correct  in all  material
respects (subject,  as to interim  statements,  to changes resulting from audits
and year-end  adjustments),  have been  prepared in  accordance  with  generally
accepted  accounting  principles  consistently  followed  throughout the periods
involved and show all liabilities, direct and contingent, of the Company and its
Subsidiaries  required  to be shown in  accordance  with  such  principles.  The
balance sheets fairly present the condition of the Company and its  Subsidiaries
as at the dates thereof, and the statements of income,  stockholders' equity and
cash flows fairly  present the results of the  operations of the Company and its
Subsidiaries and their cash flows for the periods  indicated.  There has been no
material adverse change in the business,  condition  (financial or otherwise) or
operations of the Company and its  Subsidiaries-taken  as a whole since December
31, 1994.

         8C.  Actions  Pending.  There  is no  action,  suit,  investigation  or
proceeding  pending or, to the knowledge of the Company,  threatened against the
Company or any of its  Subsidiaries,  or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or  governmental  body which might result in any material  adverse change in the
business,  condition  (financial  or otherwise) or operations of the Company and
its Subsidiaries taken as a whole.

         8D.      Outstanding Debt.  Neither the Company nor any of its 
Subsidiaries has outstanding any Debt listed on Exhibit C attached hereto. There
exists no default under the provisions of Any instrument evidencing such Debt or
of any agreement relating thereto.

         8E. Title to Properties.  The Company has and each of its  Subsidiaries
has good and  indefeasible  title to its respective real properties  (other than
properties  which it  leases)  and good  title  to all of its  other  respective
properties  and assets,  including the  properties  and assets  reflected in the
balance  sheet as at December  31, 1994  referred to in paragraph 8B (other than
properties  and assets  disposed of in the  ordinary  course of  business).  All
leases  necessary  in any  material  respect for the  conduct of the  respective
businesses of the Company and its  Subsidiaries are valid and subsisting and are
in full force and effect.

         8F. Taxes.  The Company has and each of its  Subsidiaries has filed all
federal,  state and other  income tax returns  which,  to the  knowledge  of the
officers of the Company,  are required to be filed,  and each has paid all taxes
as shown on such  returns  and on all  assessments  received by it to the extent
that such taxes have become due,  except  such taxes as are being  contested  in
good faith by  appropriate  proceedings  for which  adequate  reserves have been
established in accordance with generally accepted accounting principles.

         8G. Conflicting  Agreements and Other Matters.  Neither the Company nor
any of its  Subsidiaries  is a party to any  contract or agreement or subject to
any  charter or other  corporate  restriction  which  materially  and  adversely
affects its business,  property or assets, or financial  condition.  Neither the
execution  nor  delivery  of this  Agreement  or the  Notes,  nor the  offering,
issuance and sale of the Notes, nor fulfillment of nor compliance with the terms
and provisions hereof and of the Notes will conflict with, or result in a breach
of the terms,  conditions or provisions  of, or constitute a default  under,  or
result in any  violation  of, or result in the  creation of any Lien upon any of
the properties or assets of the Company or any of its Subsidiaries  pursuant to,
the charter or by-laws of the Company or any of its  Subsidiaries,  any award of
any arbitrator or any agreement  (including  any agreement  with  stockholders),
instrument,  order, judgment,  decree, statute, law, rule or regulation to which
the Company or any of its  Subsidiaries is subject.  Neither the Company nor any
of its  Subsidiaries  is a party  to,  or  otherwise  subject  to any  provision
contained  in, any  instrument  evidencing  indebtedness  of the Company or such
Subsidiary,  any agreement  relating  thereto or any other contract or agreement
(including  its  charter)  which  limits  the amount  of, or  otherwise  imposes
restrictions  on the  incurring  of,  Debt  of the  Company  of the  type  to be
evidenced by the Notes except as set forth in the agreements listed in Exhibit E
attached hereto.

         8H. Offering of Notes.  Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes or any similar security of
the Company for sale to, or solicited any offers to buy the Notes or any similar
security of the Company from, or otherwise approached or negotiated with respect

<PAGE>
                                       9

thereto with,  any Person other than  institutional  investors,  and neither the
Company  nor any agent  acting on its  behalf  has taken or will take any action
which would  subject  the  issuance  or sale of the Notes to the  provisions  of
section 5 of the  Securities  Act or to the provisions of any securities or Blue
Sky law of any applicable jurisdiction.

         8I.      Use of Proceeds.  Neither the Company nor any Subsidiary owns 
or has any present  intention  of  acquiring  any  "margin  stock" as defined in
Regulation G (12 CFR Part 207) of the Board of Governors of the Federal  Reserve
System (herein called "margin stock"). The proceeds of sale of the Notes will be
invested in the Bank in the form of Tier I capital.  None of such  proceeds will
be used, directly or indirectly, for the purpose, whether immediate,  incidental
or ultimate,  of  purchasing  or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might  constitute this  transaction a "purpose  credit" within the
meaning of such  Regulation  G.  Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or the
Notes to violate Regulation G, Regulation T or any other regulation of The Board
of Governors of the Federal  Reserve  System or to violate the Exchange  Act, in
each case as in effect now or as the same may hereafter be in effect.

         8J. ERISA. No accumulated funding deficiency (as defined in section 302
of ERISA and  section  412 of the Code),  whether  or not  waived,  exists  with
respect to any Plan (other  than a  Multiemployer  Plan).  No  liability  to the
Pension Benefit  Guaranty  Corporation has been or is expected by the Company or
any ERISA  Affiliate  to be  incurred  with  respect to any Plan  (other  than a
Multiemployer Plan) by the Company,  any Subsidiary or any ERISA Affiliate which
is or would be  materially  adverse to the  business,  condition  (financial  or
otherwise) or operations of the Company and its  Subsidiaries  taken as a whole.
Neither the Company,  any  Subsidiary  nor any ERISA  Affiliate  has incurred or
presently expects to incur any withdrawal liability under Title IV of ERISA with
respect to any Multiemployer Plan which is or would be materially adverse to the
business,  condition  (financial  or otherwise) or operations of the Company and
its Subsidiaries  taken as a whole. The execution and delivery of this Agreement
and the issuance and sale of the Notes will be exempt from,  or will not involve
any  transaction  which is subject to, the  prohibitions of section 406 of ERISA
and will not involve any transaction in connection with which a penalty could be
imposed  under  section  502(i) of ERISA or a tax could be imposed  pursuant  to
section  4975  of the  Code.  The  representation  by the  Company  in the  next
preceding  sentence is made in reliance upon and subject to the accuracy of your
representation in paragraph 9B.

         8K. Governmental  Consent.  Neither the nature of the Company or of any
Subsidiary,  nor any of  their  respective  businesses  or  properties,  nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering,  issuance, sale or delivery of the
Notes is such as to require any authorization,  consent, approval,  exemption or
other  action  by or notice to or  filing  with any court or  administrative  or
governmental body (other than routine filings after the date of closing with the
Securities  and  Exchange  Commission  and/or  state  Blue Sky  authorities)  in
connection  with the  execution  and delivery of this  Agreement,  the offering,
issuance, sale or delivery of the Notes or fulfillment of or compliance with the
terms and provisions hereof or of the Notes.

         8L. Environmental Compliance.  The Company and its Subsidiaries and all
of their respective  properties and facilities have complied at all times and in
all  respects  with all  federal,  state,  local and  regional  statutes,  laws,
ordinances  and  judicial  or  administrative  orders,  judgments,  rulings  and
regulations  relating to protection of the environment except, in any such case,
where  failure to comply  would not result in a material  adverse  effect on the
business,  condition  (financial  or otherwise) or operations of the Company and
its Subsidiaries taken as a whole.

         8M.  Disclosure.   Neither  this  Agreement  nor  any  other  document,
certificate  or  statement  furnished  to you by or on behalf of the  Company in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
and therein not  misleading.  There is no fact peculiar to the Company or any of
its Subsidiaries which materially adversely affects or in the future may (so far
as the  Company  can now  foresee)  materially  adversely  affect the  business,
property  or  assets,  or  financial  condition  of  the  Company  or any of its
Subsidiaries  and which has not been set forth in this Agreement or in the other
documents,  certificates and statements  furnished to you by or on behalf of the
Company  prior  to  the  date  hereof  in  connection   with  the   transactions
contemplated  hereby.  The  financial  projections  provided  by the Company are
reasonable  based on the  assumptions  stated  therein and the best  information
available to the officers of the Company.

         9.       REPRESENTATIONS OF THE PURCHASER.  You represent as follows:
<PAGE>
                                       10

         9A.  Nature  of  Purchase.  (a) You are not  acquiring  the Notes to be
purchased by you  hereunder  with a view to or for sale in  connection  with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition  of your  property  shall at all  times be and  remain  within  your
control. (b) You further represent that you are an "accredited investor" as such
term is defined in Rule 501(a) under the Securities  Act. You further  represent
that you are  knowledgeable,  sophisticated  and  experienced  in  business  and
financial  matters  and that you are  able to bear  the  economic  risks of your
investment in the Notes.

         9B.  Registration of Notes.  You acknowledge that if you desire to sell
or otherwise dispose of all or any of the Notes, you will deliver to the Company
an opinion of counsel, which may be in-house counsel, reasonably satisfactory in
form and substance to the Company that an exemption from registration  under the
Securities  Act and  any  applicable  state  laws is  available.  Upon  original
issuance thereof and until such time as the same is no longer required under the
applicable  requirements  of the  Securities  Act, the Notes (and all securities
issued and exchanged  thereof or substitution  thereof) shall bear the following
legend:

                  "THE SECURITIES  REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
                  APPLICABLE  STATE  BLUE  SKY  LAW.  THEY  MAY  NOT BE  SOLD OR
                  TRANSFERRED  IN THE ABSENCE OF  REGISTRATION  OR ANY EXEMPTION
                  THEREFROM UNDER SAID ACT OR ANY APPLICABLE STATE BLUE SKY LAW,
                  NOR  MAY  THEY BE SOLD OR  TRANSFERRED  UNLESS  CITY  NATIONAL
                  BANCSHARES  CORPORATION  HAS BEEN PRESENTED WITH AN OPINION OF
                  COUNSEL   (WHICH   MAY   BE   IN-HOUSE   COUNSEL)   REASONABLY
                  SATISFACTORY TO IT THAT AN EXEMPTION FROM  REGISTRATION  UNDER
                  THE SECURITIES ACT IS AVAILABLE."

         10.      DEFINITIONS.  For the purpose of this Agreement, the terms 
defined in the  introductory  sentence and in  paragraphs 1 and 2 shall have the
respective  meanings specified  therein,  and the following terms shall have the
meanings specified with respect thereto below:

                  "Affiliate"  shall  mean any  Person  directly  or  indirectly
controlling, controlled by, or under direct or indirect common control with, the
Company, except a Subsidiary.  A Person shall be deemed to control a corporation
if such Person possesses,  directly or indirectly,  the power to direct or cause
the  direction  of the  management  and  policies of such  corporation,  whether
through the ownership of voting securities, by contract or otherwise.

                  "Average Assets" shall mean, on the date of determination, the
average daily assets of the Company and its consolidated Subsidiaries determined
in accordance with GAAP.

                  "Average Equity" shall mean, on any date of determination, the
average  daily  consolidated  net  worth  of the  Company  and its  Subsidiaries
determined, in accordance with GAAP.

                  "Bank" shall mean City National Bank of New Jersey, a national
banking association and wholly-owned Subsidiary of the Company.

                  "Bankruptcy  Law" shall have the meaning  specified  in clause
(viii) of paragraph 7A.

                  "Capitalized  Lease"  shall  mean any  lease  under  which the
obligation to make rental payments  thereunder  constitutes a Capitalized  Lease
Obligation.

                  "Capitalized   Lease   Obligation"   shall   mean  any  rental
obligation  which,  under generally  accepted  accounting  principles,  would be
required to be capitalized on the books of the Company or any Subsidiary,  taken
at the amount thereof accounted for as indebtedness (net of interest expense) in
accordance with such principles.

                  "Code" shall mean the Internal Revenue Code of 1986, as 
amended.

                  "Consolidated   Loss   Reserve   Allowance"   shall  mean  the
consolidated  loss  reserve  allowance  of  the  Company  and  its  Subsidiaries
determined  in  accordance  with  the  Company's  underwriting  standards  or as
required by law or any regulatory agency.

                  "Consolidated  Operating  Profit" shall mean,  for any period,
consolidated  net income of the Company and its  Subsidiaries  for such  period,
plus all amounts deducted in calculating consolidated net income in respect of:

                  (i)      net interest expense (including amortization of debt 
discount and imputed interest on Capitalized Lease Obligations) on Debt,

                  (ii)     taxes imposed on or measured by income or excess 
profit, and
<PAGE>
                                       11

                  (iii)  all  charges  for  depreciation  of  fixed  assets  and
amortization of intangibles, all determined in accordance with GAAP.

                  "Consolidated  Non-Performing  Means" shall mean  Restructured
Assets or loans made by the Company and its Subsidiaries  which are not accruing
or in which  either a scheduled  principal  payment,  interest  payment or other
anticipated  economic  return is past due for more  than 90 days  after the date
originally scheduled for such payment.

                  "Consolidated  Tangible  Net Worth"  shall mean the  aggregate
amount of (a) capital stock (less any treasury stock,  capital stock  subscribed
and unissued and other contra-equity  accounts),  (b) surplus,  and (c) retained
earnings of the Company and its Subsidiaries, determined on a consolidated basis
in accordance with GAAP, excluding any (i) intercompany  transactions,  (ii) the
net  book  value of all  assets  which  would be  treated  as  intangible  under
generally accepted accounting principles, and (iii) the cumulative amount of any
net write-up of asset values after the date of the audit  immediately  preceding
the date of closing.

                  "Consolidated Total Assets" shall mean the aggregate amount of
assets  carried  on the books of the  Company,  on a  consolidated  basis  after
eliminating all intercompany items, in accordance with GAAP.

                  "Debt" shall mean,  without  duplication,  (a) indebtedness of
the Company and each  Subsidiary  for borrowed  money payable within one year of
the date of creation,  (b) all  indebtedness of the Company and each Subsidiary,
including  Capitalized Lease Obligations and other obligations,  in each case to
the extent required to be listed as a liability on a consolidated  balance sheet
under GAAP (other than deferred taxes,  deferred  credit and reserves,  deferred
compensation  obligations and "other noncurrent  liabilities," listed as such or
that would be required to be listed as such on the consolidated balance sheet of
the Company),  in each case,  having a final maturity of more than one year from
the date of creation  thereof (or which is renewable or extendable  for a period
or  periods  more than one year  from the date of  creation),  (c)  indebtedness
secured by a Lien on property owned by the Company or any Subsidiary, whether or
not such indebtedness has been assumed by the Company or any Subsidiary, and (d)
all Guarantees of the Company or any Subsidiary.

                  "Depository  Institution  Subsidiary"  shall mean the Bank and
any federal or state chartered  banking  institution in which all of the capital
stock is owned, directly or indirectly by the Company.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.

                  "ERISA Affiliate" shall mean any corporation which is a member
of the same  controlled  group of corporations as the Company within the meaning
of section  414(b) of the Code,  or any trade or business  which is under common
control with the Company within the meaning of section 414(c) of the Code.

                  "Event of Default"  shall mean any of the events  specified in
paragraph  7A,  provided  that  there  has been  satisfied  any  requirement  in
connection  with such event for the giving of notice,  or the lapse of time,  or
the happening of any further  condition,  event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.

                  "Excess Cash" shall mean, at any time, the sum of consolidated
net income of the Company and its  Subsidiaries,  determined in accordance  with
GAAP, for the immediately  preceding four consecutive full fiscal quarters minus
the  sum of (a)  all  regularly  scheduled  amortization  of  Debt,  and (b) all
regularly   scheduled  and  anticipated  accrued  interest  on  Debt  (including
amortization  of Debt discount and imputed  interest on Capitalized  Leases) for
the immediately succeeding four consecutive full fiscal quarters.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

                  "FDIC" shall mean the Federal Deposits  Insurance  Corporation
or any successor agency thereto.

                  "GAAP" shall mean generally accepted accounting principles.

                  "Government  Securities"  shall mean securities  issued by the
United States Treasury or any United States government agency.

                  "Guarantee" shall mean, with respect to any Person, any direct
or indirect liability,  contingent or otherwise,  of such Person with respect to
any  indebtedness,  lease,  dividend or other obligation of another,  including,
without  limitation,  any such  obligation  directly or  indirectly  guaranteed,
endorsed  (otherwise  than for  collection or deposit in the ordinary  course of
business) or discounted  or sold with recourse by such Person,  or in respect of
which such Person is otherwise directly or indirectly liable, including, without

<PAGE>
                                       12

limitation,  any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge  of such  obligation  (whether in the form of loans,  advances,  stock
purchases,  capital contributions or otherwise),  or to maintain the solvency or
any  balance  sheet  or  other  financial  condition  of  the  obligor  of  such
obligation,  or to make payment for any  products,  materials or supplies or for
any transportation or services  regardless of the non-delivery or non-furnishing
thereof,  in any such case if the  purpose  or intent  of such  agreement  is to
provide  assurance that such obligation will be paid or discharged,  or that any
agreements  relating  thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof.  The amount of any
Guarantee shall be equal to the outstanding  principal  amount of the obligation
guaranteed or such lesser amount to which the maximum  exposure of the guarantor
shall have been specifically limited.

                  "Investment" shall mean any loans or advances to, or purchases
or  acquisitions  of  the  securities  or  obligations  of,  any  Person  or the
assumption  of any  liability  of  another  Person,  other  than  loans  made or
purchased by a Depository  Institution in the ordinary  course of business,  and
the acquisition of securities arising from therefrom.

                  "Lien" shall mean any  mortgage,  pledge,  security  interest,
encumbrance,  lien (statutory or otherwise) or charge of any kind (including any
agreement  to give any of the  foregoing,  any  conditional  sale or other title
retention  agreement,  any lease in the  nature  thereof,  and the  filing of or
agreement to give any financing  statement under the Uniform  Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect,  of  protecting  a creditor  against  loss or securing the
payment or performance of an obligation.

                  "Liquid Assets" shall mean, without duplication, the Company's
and its each Subsidiaries'  consolidated cash and cash equivalents,  other short
term Investments,  securities available for sale, Government  Securities,  loans
fully guaranteed by the Small Business  Administration,  excluding Federal Funds
purchased and securities sold subject to repurchase  obligations and reserves of
the Company and each Subsidiary required by the Federal Reserve Bank.

                  "Liquidity  Ratio" shall mean the ratio of Liquid  Assets over
Volatile Liabilities.

                  "Multiemployer   Plan"   shall   mean  any  Plan  which  is  a
"multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA).

                  "OCC" shall mean the Office of the Comptroller of the Currency
 or any successor agency thereto.

                  "Officer's Certificate" shall mean a certificate signed in the
name  of the  Company  by its  President,  one of  its  Vice  Presidents  or its
Treasurer.

                  "Person" shall mean and include an individual,  a partnership,
a joint venture,  a corporation,  a trust, an unincorporated  organization and a
government or any department or agency thereof.

                  "Plan" shall mean any "employee pension benefit plan" (as such
term is  defined  in  section 3 of ERISA)  which is or has been  established  or
maintained,  or to which  contributions are or have been made, by the Company or
any ERISA Affiliate.

                  "Purchase and Assumption Agreement" shall mean the Purchase 
and Assumption Agreement, dated as of August 18, 1995, between NatWest Bank N.A.
and City National Bank of New Jersey.

                  "Receivables"  shall mean any accounts,  contracts  rights and
other form of obligation  for the payment of money arising out of the lending of
money,  the sale of goods or the  rendering  of  services  by the Company or any
Subsidiary.

                  "Required  Holder(s)"  shall  mean the holder or holders of at
least 51% of the  aggregate  principal  amount  of the  Notes  from time to time
outstanding.

                  "Responsible  Officer" shall mean the chief executive officer,
chief operating officer,  chief financial officer or chief accounting officer of
the Company or any other  officer of the  Company  involved  principally  in its
financial administration or its controllership function.

                  "Restricted  Payments"  shall mean (i) any  dividend  or other
distribution, direct or indirect, on account of any shares of any class of stock
of the Company now or hereafter outstanding, except a dividend payable solely in
shares of stock of the Company or options,  rights or warrants to acquire  stock

<PAGE>
                                       13

of  the  Company,  and  (ii)  any  redemption,  retirement,  purchase  or  other
acquisition,  direct  or  indirect,  of any  shares of any class of stock of the
Company now or hereafter outstanding,  or of any warrants,  rights or options to
acquire any such shares,  except to the extent that the  consideration  therefor
consists solely of shares of stock of the Company or warrants, rights or options
to  acquire  such  shares  or  is  funded   solely  from  the  proceeds  of  the
substantially concurrent sale of any of the foregoing.

                  "Restructured Asset" shall mean any loan in any Person made by
the Company or any  Subsidiary in which the Company or any Subsidiary has agreed
to a change in any payment term, including, (a) a change in maturity,  principal
amount, or allocation of any mandatory or scheduled prepayment or repayment with
respect to  principal  of, (b) the rate or payment date with respect to interest
on, or (c) a change in any term reducing the anticipated economic return of such
loan.

                  "Return on Assets" shall mean the  consolidated  net income of
the Company and its Subsidiaries, determined in accordance to GAAP, over Average
Assets.

                  "Return on Equity" shall mean the  consolidated  net income of
the Company and its Subsidiaries, determined in accordance to GAAP, over Average
Equity.

                  "Risk Adjusted Assets" shall mean as defined in 12 CFR ss. 2,
Part 3, App. A.

                  "Securities Act" shall mean the Securities Act of  1933, as 
amended.

                  "Significant  Holder" shall mean (i) you, so long as you shall
hold (or be committed  under this  Agreement to purchase)  any Note, or (ii) any
other holder of at least 5% of the aggregate  principal amount of the Notes from
time to time outstanding.

                  "Subsidiary" shall mean (a) any corporation,  all of the stock
of every class of which, except directors' qualifying shares, shall, at the time
as of which any  determination  is being made,  be owned by the  Company  either
directly or indirectly through  Subsidiaries and (b) any Depository  Institution
Subsidiary.

                  "Tier I Capital" shall have the meaning specified in 12 CFR 
ss. 2, Part 3, App. A.

                  "Tier II Capital" shall have the meaning specified in 12 CFR 
ss. 2, Part 3, App. A.

                  "Transferee"  shall mean any direct or indirect  transferee of
all or any part of any Note purchased by you under this Agreement.

                  "Volatile  Liabilities"  shall  mean  the  Company's  and each
Subsidiaries'  consolidated total deposits payable to federal and state agencies
and  municipalities,  tax and loan  note  option  account,  excluding  insurance
premiums payable to the FDIC.

                  "Voting  Stock" shall mean,  with respect to any  corporation,
any  shares  of stock of such  corporation  whose  holders  are  entitled  under
ordinary circumstances to vote for the election of directors of such corporation
(irrespective  of whether at the time stock of any other class or classes  shall
have or might have voting power by reason of the happening of any contingency).

         10B. Accounting Principles, Terms and Determinations. All references in
this Agreement to "generally accepted accounting  principles" shall be deemed to
refer to generally accepted accounting principles in effect in the United States
at the time of application  thereof.  Unless  otherwise  specified  herein,  all
accounting  terms used herein  shall be  interpreted,  all  determinations  with
respect  to  accounting  matters  hereunder  shall  be made,  and all  unaudited
financial  statements  and  certificates  and  reports as to  financial  matters
required  to be  furnished  hereunder  shall be  prepared,  in  accordance  with
generally accepted accounting principles, applied on a basis consistent with the
most recent  audited  consolidated  financial  statements of the Company and its
Subsidiaries  delivered  pursuant to clause (iii) of paragraph 5A or, if no such
statements have been so delivered,  the most recent audited financial statements
referred to in clause (i) of paragraph 8B.

         11.      MISCELLANEOUS.

         11A. Note Payments.  The Company agrees that, so long as you shall hold
any Note, it will make payments of principal  of,  interest on such Note,  which
comply  with the  terms  of this  Agreement,  by wire  transfer  of  immediately
available  funds for credit (not later than 12:00 noon,  New York City time,  on
the date due) to your account or accounts as specified in the Purchaser Schedule

<PAGE>
                                       14

attached  hereto,  or such other account or accounts in the United States as you
may designate in writing,  notwithstanding  any contrary  provision herein or in
any Note with respect to the place of payment.  You agree that, before disposing
of any  Note,  you will  make a  notation  thereon  (or on a  schedule  attached
thereto) of all principal  payments  previously  made thereon and of the date to
which interest  thereon has been paid. The Company agrees to afford the benefits
of this paragraph 11A to any Transferee which shall have made the same agreement
as you have made in this paragraph 11A.

         11B.  Expenses.  The Company  agrees,  whether or not the  transactions
contemplated  hereby  shall  be  consummated,  to  pay,  and  save  you  and any
Transferee  harmless  against  liability  for the payment of, all  out-of-pocket
expenses  arising  in  connection  with  such  transactions,  including  (i) all
document  production  and  duplication  charges and the fees and expenses of any
special  counsel  engaged by you or such  Transferee in connection  with and any
subsequent proposed  modification of, or proposed consent under, this Agreement,
whether or not such proposed  modification shall be effected or proposed consent
granted, and (ii) the costs and expenses, including attorneys' fees, incurred by
you or such Transferee in enforcing (or  determining  whether or how to enforce)
any rights under this Agreement or the Notes or in responding to any subpoena or
other legal process or informal  investigative  demand issued in connection with
this Agreement or the transactions  contemplated  hereby or by reason of your or
such Transferee's  having acquired any Note,  including without limitation costs
and expenses  incurred in any bankruptcy  case.  The  obligations of the Company
under this  paragraph  11B shall  survive  the  transfer  of any Note or portion
thereof or  interest  therein by you or any  Transferee  and the  payment of any
Note.

         11C.  Consent to  Amendments.  This  Agreement may be amended,  and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written  consent
to such amendment,  action or omission to act, of the Required  Holder(s) except
that,  without the written  consent of the holder or holders of all Notes at the
time  outstanding,  no amendment to this Agreement  shall change the maturity of
any Note, or change the principal of, or the rate or time of payment of interest
on any Note, or affect the time,  amount or allocation  of any  prepayments,  or
change the proportion of the principal amount of the Notes required with respect
to any consent, amendment, waiver or declaration. Each holder of any Note at the
time or thereafter  outstanding shall be bound by any consent authorized by this
paragraph 11C,  whether or not such Note shall have been marked to indicate such
consent,  but any Notes issued  thereafter may bear a notation  referring to any
such  consent.  No course of dealing  between  the Company and the holder of any
Note nor any delay in  exercising  any rights  hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note. As used herein and
in the Notes, the term "this  Agreement" and references  thereto shall mean this
Agreement as it may from time to tune be amended or supplemented.

         11D. Form,  Registration,  Transfer and Exchange of Notes;  Lost Notes.
The Notes are issuable as registered  notes without coupons in  denominations of
at least  $500,000,  except as may be necessary to reflect any principal  amount
not evenly divisible by $500,000. The Company shall keep at its principal office
a register in which the Company shall provide for the  registration of Notes and
of transfers of Notes.  Upon surrender for  registration of transfer of any Note
at the  principal  office of the  Company,  the Company  shall,  at its expense,
execute and deliver one or more new Notes of like tenor and of a like  aggregate
principal amount,  registered in the name of such transferee or transferees.  At
the option of the holder of any Note, such Note may be exchanged for other Notes
of like tenor and of any authorized denominations, of a like aggregate principal
amount,  upon  surrender of the Note to be exchanged at the principal  office of
the Company.  Whenever any Notes are so  surrendered  for exchange,  the Company
shall, at its expense, execute and deliver the Notes which the holder making the
exchange is entitled to receive.  Every Note  surrendered  for  registration  of
transfer or exchange  shall be duly  endorsed,  or be  accompanied  by a written
instrument  of  transfer  duly  executed,  by the  holder  of such  Note or such
holder's  attorney  duly  authorized  in  writing.  Any Note or Notes  issued in
exchange for any Note or upon transfer  thereof shall carry the rights to unpaid
interest  and  interest to accrue which were carried by the Note so exchanged or
transferred,  so that  neither  gain nor loss of interest  shall result from any
such transfer or exchange. Upon receipt of written notice from the holder of any
Note of the loss, theft, destruction or mutilation of such Note and, in the case
of any such loss, theft or destruction,  upon receipt of such holder's unsecured
indemnity  agreement,  or in the case of any such  mutilation upon surrender and
cancellation of such Note, the Company will make and deliver a new Note, of like
tenor, in lieu of the lost, stolen, destroyed or mutilated Note.

         11E.  Persons Deemed Owners;  Participations.  Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is  registered  as the owner and  holder  of such Note for the  purpose  of
receiving  payment  of  principal  of,  interest  on such Note and for all other
purposes whatsoever,  whether or not such Note shall be overdue, and the Company
shall not be  affected  by  notice to the  contrary.  Subject  to the  preceding

<PAGE>
                                       15

sentence,  the holder of any Note may from time to time grant  participations in
such Note to any Person on such terms and  conditions  as may be  determined  by
such  holder  in its  sole  and  absolute  discretion,  provided  that  any such
participation shall be in a principal amount of at least $100,000.

         11F. Survival of Representations and Warranties;  Entire Agreement. All
representations  and  warranties  contained  herein or made in  writing by or on
behalf of the Company in  connection  herewith  shall  survive the execution and
delivery of this  Agreement  and the Notes,  the  transfer by you of any Note or
portion  thereof or interest  therein  and the  payment of any Note,  and may be
relied upon by any Transferee,  regardless of any investigation made at any time
by or on behalf of you or any  Transferee.  Subject to the  preceding  sentence,
this  Agreement  and the Notes  embody the entire  agreement  and  understanding
between  you  and  the  Company  and   supersede   all  prior   agreements   and
understandings relating to the subject matter hereof.

         11G. Successors and Assigns. All covenants and other agreements in this
Agreement  contained by or on behalf of either of the parties  hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including,  without limitation,  any Transferee) whether so expressed or
not.

         11H.  Disclosure  to Other  Persons.  Each  holder  of Notes  agrees to
maintain the confidentiality of the Confidential  Information in accordance with
procedures adopted by such holder of Notes in good faith to protect confidential
information of third parties delivered to such holder of Notes, except that, the
Company  acknowledges  that the  holder  of any Note may  deliver  copies of any
financial  statements and other documents delivered to such holder, and disclose
any other  information  disclosed to such holder, by or on behalf of the Company
or any  Subsidiary in connection  with or pursuant to this Agreement to (i) such
holder's directors,  officers,  employees,  agents and professional consultants,
(ii) any other holder of any Note,  (iii) any Person to which such holder offers
to sell such Note or any part  thereof,  (iv) any  Person to which  such  holder
sells or offers to sell a participation in all or any part of such Note, (v) any
Person from which such holder  offers to purchase  any  security of the Company,
(vi) any federal or state  regulatory  authority having  jurisdiction  over such
holder, (vii) the National Association of Insurance Commissioners or any similar
organization  or (vii) any other Person to which such delivery or disclosure may
be necessary or appropriate (a) in compliance with any law, rule,  regulation or
order applicable to such holder,  (b) in response to any subpoena or other legal
process  or  informal  investigative  demand  or  (c)  in  connection  with  any
litigation  to  which  such  holder  is  a  party.  Prior  to  the  delivery  of
Confidential  Information  to any  Person  by any  holder of Notes  pursuant  to
clauses  (iii),  (iv) or (v) of this  paragraph  11H, such Person shall agree in
writing  (which shall be addressed and delivered to the Company and such holder)
to be bound by the  provisions  of this  paragraph  11H.  For  purposes  of this
paragraph 11H,  "Confidential  Information"  means information  delivered to any
holder of Notes by or on behalf of the  Company  or any  Subsidiary  during  any
inspection  pursuant  to  paragraph  5B or in  connection  with the  transaction
contemplated  by or otherwise  pursuant to this Agreement that is proprietary in
nature and that was clearly marked or labeled,  when received by such holder, as
being confidential information of the Company or such Subsidiary, that such term
does not include  information  that (a) was publicly known or otherwise known to
such  holder or any person  acting on such  holder's  behalf,  (b)  subsequently
becomes publicly known through no act or omission by such holder,  (c) otherwise
becomes known to such holder other than through disclosure by the Company or any
Subsidiary,  or (d) constitutes  financial  statements  delivered to such holder
under paragraph 5A that are otherwise publicly available.

         11I. Notices. All written  communications  provided for hereunder shall
be sent by first  class mail or  nationwide  overnight  delivery  service  (with
charges  prepaid) and (i) if to you,  addressed to you at the address  specified
for such  communications  in (he Purchaser  Schedule attached hereto, or at such
other address as you shall have specified to the Company in writing,  (ii) if to
any other holder of any Note,  addressed to such other holder at such address as
such other holder shall have specified to the Company in writing or, if any such
other  holder  shall not have so  specified  an  address  to the  Company,  then
addressed  to such  other  holder in care of the last  holder of such Note which
shall have so specified an address to the Company,  and (iii) if to the Company,
addressed  to it at 900 Broad  Street,  Newark,  New Jersey,  07102,  Attention:
President  and the Chief  Financial  Officer,  or at such  other  address as the
Company  shall have  specified to the holder of each Note in writing;  provided,
however,  that any such  communication to the Company may also, at the option of
the holder of any Note, be delivered by any other means either to the Company at
its address specified above or to any officer of the Company.

         11J.     Payments Due on Non-Business Days. Anything in this Agreement 
or the Notes to the  contrary  notwithstanding,  any payment of  principal of or
interest  on any Note that is due on a date other  than a Business  Day shall be
made on the  next  succeeding  Business  Day.  If the date  for any  payment  is
extended  to the  next  succeeding  Business  Day  by  reason  of the  preceding
sentence,  the period of such extension  shall be included in the computation of
the interest payable on such Business Day.
<PAGE>
                                       16

         11K. Satisfaction Requirement.  If any agreement,  certificate or other
writing,  or any action taken or to be taken,  is by the terms of this Agreement
required  to  be  satisfactory  to  you  or  to  the  Required  Holder(s),   the
determination  of  such  satisfaction  shall  be  made  by you  or the  Required
Holder(s),  as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.

         11L.     Governing Law.  This Agreement shall be construed and enforced
in accordance  with, and the rights of the parties shall be governed by, the law
of the State of New Jersey.

         11M. Severability.  Any provision of this Agreement which is prohibited
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,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

         11N.     Descriptive Headings. The descriptive headings of the several
paragraphs  of this  Agreement  are  inserted  for  convenience  only and do not
constitute a part of this Agreement.

         11O.     Counterparts. This Agreement may be executed in any number of 
counterparts, each of which shall be an original but all of which together shall
constitute one instrument.

         If you are in  agreement  with the  foregoing,  please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company,  whereupon  this letter  shall become a binding  agreement  between the
Company and you.

                                               Very truly yours,

                                               CITY NATIONAL BANCSHARES
                                               CORPORATION


                                               By:_____________________________
                                               Louis E. Prezeau
                                               President

The foregoing Agreement is hereby accepted as of the date first above written.


THE PRUDENTIAL FOUNDATION




By:____________________________
         Gabriella Coleman
         President


<PAGE>
                                       17


                               PURCHASER SCHEDULE
                           Aggregate Principal Amount

THE PRUDENTIAL FOUNDATION                                          $1,500,000

(1)      All payments on account of Notes held by such  purchaser  shall be made
         by wire transfer of immediately available funds for credit to:

         Account No. 001-57-942

         Morgan Guaranty Trust Company of New York
         23 Wall Street New York, New York 10015
         (ABA No.: 021-000-238)

         Each such  wire  transfer  shall set forth the name of the Fund,  and a
         reference to "$1,500,000  5.25% Capital  Notes,  due December 28, 2005,
         Security No. !INV 5296:" and in each case, the due date and application
         (as among principal and interest) of the payment being made.

         (2)      Address for all notices relating to payments:

                           The Prudential Foundation
                           Four Gateway Center
                           100 Mulberry Street
                           Newark, New Jersey  07102-4069

                           Attention: Private Placement Portfolio
                                         Management, Manager

(3)      Address for all other communications and notices:

                  The Prudential Foundation
                  751 Broad Street,
                  15th Floor
                  Newark, New Jersey 07102

                  Attention: Social Investment Unit

(4)      Recipient of telephonic prepayment notices:

                  Manager, Asset Management Unit
                  (201) 802-6429
                  (201) 802-8055 (facsimile)

(5)      Tax Identification No.: 22-1211670


<PAGE>
                                       18

                                                                     EXHIBIT A

                                                  [FORM OF NOTE]

                                       CITY NATIONAL BANCSHARES CORPORATION


                                      5.25% CAPITAL NOTE DUE DECEMBER _, 2005

                  THE SECURITIES  REPRESENTED BY THIS  CERTIFICATE HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
                  APPLICABLE  STATE  BLUE  SKY  LAW.  THEY  MAY  NOT BE  SOLD OR
                  TRANSFERRED  IN THE ABSENCE OF  REGISTRATION  OR ANY EXEMPTION
                  THEREFROM UNDER SAID ACT OR ANY APPLICABLE STATE BLUE SKY LAW,
                  NOR  MAY  THEY BE SOLD OR  TRANSFERRED  UNLESS  CITY  NATIONAL
                  BANCSHARES  CORPORATION  HAS BEEN PRESENTED WITH AN OPINION OF
                  COUNSEL (WHICH MAYBE IN-HOUSE COUNSEL) REASONABLY SATISFACTORY
                  TO IT THAT AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
                  ACT IS AVAILABLE.

No.__                                                                    [Date]

$1,500,000

         FOR  VALUE  RECEIVED,   the  undersigned,   CITY  NATIONAL   BANCSHARES
CORPORATION (herein called the "Company"),  a corporation organized and existing
under  the  laws of the  State  of New  Jersey,  hereby  promises  to pay to THE
PRUDENTIAL  FOUNDATION,  or registered assigns, the principal sum of ONE MILLION
FIVE HUNDRED THOUSAND  DOLLARS on December 31, 2005, with interest  (computed on
the basis of a 360-day  year--30 day month) (a) on the unpaid balance thereof at
the rate of 5.25% per annum from the date hereof,  payable  semiannually  on the
___ day of June and December in each year,  commencing with the December __ next
succeeding the date hereof, until the principal hereof shall have become due and
payable,  and (b) on any overdue payment  (including any overdue  prepayment) of
principal,  any overdue  payment of interest  payable  semiannually as aforesaid
(or, at the option of the registered  holder hereof,  on demand),  at a rate per
annum  from  time to time  equal  to 2.0%  over the  rate of  interest  publicly
announced by Morgan  Guaranty Trust Company of New York from time to time in New
York City as its Prime Rate.

         Payments of  principal  of and  interest on this Note are to be made at
the main office of Morgan Guaranty Trust Company of New York in New York City or
at such other  place as the holder  hereof  shall  designate  to the  Company in
writing, in lawful money of the United States of America.

         This Capital Note is one of a series of Capital  Notes  (herein  called
the "Notes") issued pursuant to a Note Agreement,  dated as of December 28, 1995
(herein  called  the  "Agreement"),  between  the  Company  and  The  Prudential
Foundation and is entitled to the benefits thereof.

         This Note is a registered Note and, as provided in the Agreement,  upon
surrender  of  this  Note  for  registration  of  transfer,  duly  endorsed,  or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's  attorney duly authorized in writing,  a new Note
for a like  principal  amount will be issued to, and  registered in the name of,
the  transferee.  Prior to due presentment  for  registration  of transfer,  the
Company may treat the person in whose name this Note is  registered as the owner
hereof for the purpose of receiving payment and for all other purposes,  and the
Company shall not be affected by any notice to the contrary.

         The Company  agrees to make  required  prepayments  of principal on the
dates and in the amounts specified in the Agreement.

         In case an Event of Default,  as defined in the Agreement,  shall occur
and be  continuing,  the  principal  of this Note may be declared  or  otherwise
become  due and  payable  in the  manner  and with the  effect  provided  in the
Agreement.

         This Note is  intended to be  performed  in the State of New Jersey and
shall be construed and enforced in accordance with the law of such State.

                                        CITY NATIONAL BANCSHARES
                                        CORPORATION


                                        By_____________________________
                                          President


                                        By______________________________
                                          Treasurer
                                          CONFORMED COPY