<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- -----------------------
Commission File Number: 0-28938
--------------------------------------------------------
Coast Bancorp
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 77-0401327
- -------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
740 Front Street, Santa Cruz, California 95060
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(831) 458-4500
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
/X/ Yes / / No
No. of shares of Common Stock outstanding on September 30, 1999: 4,805,378
---------
<PAGE>
COAST BANCORP
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 3 Quantitative and Qualitative Disclosures about Market Risk 17
PART II
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
</TABLE>
<PAGE>
PART I
Item 1. Financial Statements
COAST BANCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
ASSETS ------------------ -----------------
(unaudited)
<S> <C> <C>
Cash and due from banks $18,746,000 $23,084,000
Federal funds sold 6,800,000 29,000,000
--------------------------------------
Total cash and equivalents 25,546,000 52,084,000
Securities:
Available for sale, at fair value 116,729,000 106,960,000
Loans:
Commercial 36,185,000 38,874,000
Real estate-term 116,936,000 95,360,000
Real estate-construction 39,542,000 22,206,000
Installment and other 4,468,000 4,536,000
--------------------------------------
Total loans 197,131,000 160,976,000
Unearned income (4,145,000) (3,272,000)
Allowance for credit losses (3,668,000) (3,871,000)
--------------------------------------
Net loans 189,318,000 153,833,000
Bank premises and equipment-net 2,124,000 2,408,000
Accrued interest receivable and other assets 16,371,000 9,463,000
--------------------------------------
TOTAL ASSETS $350,088,000 $324,748,000
======================================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand $77,058,000 $75,978,000
Interest-bearing demand 94,764,000 100,707,000
Savings 59,210,000 51,873,000
Time 51,767,000 52,252,000
--------------------------------------
Total deposits 282,799,000 280,810,000
Other borrowings 31,500,000 10,416,000
Accrued expenses and other liabilities 3,856,000 3,325,000
--------------------------------------
Total liabilities 318,155,000 294,551,000
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock-no par value; 10,000,000 shares authorized; - -
no shares issued
Common stock-no par value; 20,000,000 shares authorized; 21,049,000 20,689,000
shares outstanding: 4,805,378 in 1999 and 4,768,678 in 1998
Accumulated other comprehensive income (loss) (2,161,000) 317,000
Retained earnings 13,045,000 9,191,000
--------------------------------------
Total stockholders' equity 31,933,000 30,197,000
--------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $350,088,000 $324,748,000
======================================
</TABLE>
See notes to unaudited condensed consolidated financial statements
-1-
<PAGE>
COAST BANCORP
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $5,042,000 $4,126,000 $13,603,000 $12,496,000
Securities:
Taxable 1,632,000 1,306,000 4,509,000 3,757,000
Nontaxable 193,000 191,000 577,000 523,000
Federal funds sold 118,000 596,000 691,000 949,000
---------------------------------------------------------------------
Total interest income 6,985,000 6,219,000 19,380,000 17,725,000
Interest expense:
Deposits 1,497,000 1,556,000 4,476,000 3,975,000
Other borrowings 327,000 273,000 668,000 1,033,000
---------------------------------------------------------------------
Total interest expense 1,824,000 1,829,000 5,144,000 5,008,000
---------------------------------------------------------------------
Net interest income 5,161,000 4,390,000 14,236,000 12,717,000
Provision for credit losses - 75,000 - 225,000
---------------------------------------------------------------------
Net interest income after provision for
credit losses 5,161,000 4,315,000 14,236,000 12,492,000
Noninterest income:
Customer service fees 729,000 590,000 2,006,000 1,767,000
Gain from sale of loans 403,000 599,000 1,033,000 1,894,000
Loan servicing fees 199,000 255,000 638,000 750,000
Gains on sales of securities - 1,000 52,000 13,000
Other 40,000 42,000 124,000 130,000
---------------------------------------------------------------------
Total noninterest income 1,371,000 1,487,000 3,853,000 4,554,000
Noninterest expenses:
Salaries and benefits 1,929,000 1,672,000 5,470,000 4,773,000
Occupancy 328,000 297,000 936,000 859,000
Equipment 287,000 276,000 856,000 828,000
Customer services 177,000 180,000 519,000 514,000
Advertising and promotion 131,000 201,000 376,000 504,000
Stationery and postage 121,000 106,000 324,000 299,000
Professional services 94,000 94,000 272,000 296,000
Data processing 93,000 63,000 275,000 208,000
Insurance 56,000 48,000 164,000 165,000
Other 246,000 177,000 692,000 592,000
---------------------------------------------------------------------
Total noninterest expenses 3,462,000 3,114,000 9,884,000 9,038,000
---------------------------------------------------------------------
Income before income taxes 3,070,000 2,688,000 8,205,000 8,008,000
Income taxes 1,212,000 1,120,000 3,202,000 3,327,000
---------------------------------------------------------------------
Net income $1,858,000 $1,568,000 $5,003,000 $4,681,000
=====================================================================
Earnings per share:
Basic $.39 $.33 $1.05 $.97
=====================================================================
Diluted $.38 $.32 $1.02 $.94
=====================================================================
</TABLE>
See notes to unaudited condensed consolidated financial statements
-2-
<PAGE>
COAST BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,003,000 $4,681,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses - 225,000
Depreciation and amortization (364,000) 88,000
(Gains) on securities transactions (52,000) (13,000)
Deferred income taxes (497,000) 100,000
Proceeds from loan sales 64,859,000 60,028,000
Origination of loans held for sale (59,660,000) (63,509,000)
Accrued interest receivable and other assets (4,681,000) (1,228,000)
Accrued expenses and other liabilities 531,000 749,000
Increase in unearned income 1,945,000 1,582,000
Other operating activities - (252,000)
--------------------------------------
Net cash provided by operating activities 7,084,000 2,451,000
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities 25,708,000 15,787,000
Proceeds from sales of securities available for sale 4,600,000 25,418,000
Purchases of securities available for sale (44,382,000) (59,498,000)
Net decrease in loans (41,557,000) (2,111,000)
Purchases of bank premises and equipment (275,000) (925,000)
--------------------------------------
Net cash used in investing activities (55,906,000) (21,329,000)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 1,989,000 64,181,000
Net proceeds from (repayment of) other borrowings 21,084,000 (19,414,000)
Exercise of stock options 360,000 186,000
Payment of cash dividends (1,149,000) (983,000)
Repurchase of common stock - (2,651,000)
Payment of fractional shares resulting from stock dividend - (7,000)
--------------------------------------
Net cash provided by financing activities 22,284,000 41,312,000
--------------------------------------
Net (decrease) increase in cash and equivalents (26,538,000) 22,434,000
Cash and equivalents, beginning of period 52,084,000 30,853,000
--------------------------------------
Cash and equivalents, end of period $25,546,000 $53,287,000
======================================
SUPPLEMENTAL CASH FLOW INFORMATION CASH PAID DURING
THE PERIOD FOR:
Interest $5,180,000 $4,907,000
Income taxes 2,554,000 3,146,000
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Additions to other real estate owned $- $85,000
</TABLE>
See notes to unaudited condensed consolidated financial statements
-3-
<PAGE>
COAST BANCORP
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION - These financial statements reflect, in
management's opinion, all adjustments, consisting of adjustments of a
normal recurring nature, which are necessary for a fair presentation of
Coast Bancorp's financial position and results of operations and cash
flows for the periods presented. The results of interim periods are not
necessarily indicative of results of operations expected for the full
year. These financial statements should be read in conjunction with the
audited consolidated financial statements for 1998 included in the Company's
Annual Report on Form 10-K.
2. EARNINGS PER SHARE - Basic earnings per share is computed by dividing net
income by the number of weighted average common shares outstanding. Diluted
earnings per share reflects potential dilution from outstanding stock
options, using the treasury stock method. The number of weighted average
shares used in computing basic and diluted earnings per share are as
follows:
<TABLE>
<CAPTION>
Three months ended September 30,
------------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic shares 4,796,339 4,796,158
Dilutive effect of stock options 122,871 151,556
-----------------------------------------------
Diluted shares 4,919,210 4,947,714
===============================================
===============================================
<CAPTION>
Nine months ended September 30,
-----------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Basic shares 4,783,829 4,815,534
Dilutive effect of stock options 116,167 141,004
-----------------------------------------------
Diluted shares 4,899,996 4,956,538
===============================================
</TABLE>
3. COMPREHENSIVE INCOME - The Company's source of other comprehensive income is
unrealized gains and losses on securities available for sale. Total
comprehensive income was computed as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------------------
1999 1998
----------------------------------------
<S> <C> <C>
Net income $1,858,000 $1,568,000
Other comprehensive income (loss) (1,128,000) 341,000
----------------------------------------
Total comprehensive income $730,000 $1,909,000
========================================
<CAPTION>
Nine Months Ended
September 30,
----------------------------------------
1999 1998
----------------------------------------
<S> <C> <C>
Net income $5,003,000 $4,681,000
Other comprehensive income (loss) (2,478,000) 251,000
----------------------------------------
Total comprehensive income $2,525,000 $4,932,000
========================================
</TABLE>
4. RECLASSIFICATIONS - Certain amounts in the 1998 financial statements have
been reclassified to conform to the 1999 presentation. These reclassifications
had no impact on stockholders' equity or net income.
-4-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis should be read in conjunction with the
Company's unaudited Condensed Consolidated Financial Statements, including the
Notes, appearing elsewhere in this report.
This document may contain forward-looking statements that are subject to risks
and uncertainties that could cause actual results to differ materially from
those projected. For a discussion of factors that could cause actual results to
differ, please see the Company's publicly available Securities and Exchange
Commission filings, including its Annual Report on Form 10-K for the year ended
December 31, 1998, and particularly the discussion of risk factors within the
document.
OVERVIEW
Net income for the three months ended September 30, 1999 was $1,858,000 compared
to $1,568,000 for the three months ended September 30, 1998. Net income for the
nine months ended September 30, 1999 was $5,003,000 compared to $4,681,000 for
the nine months ended September 30, 1998. During 1999 an increase in net
interest income combined with decreases in the provision for credit losses was
offset by a decrease in noninterest income and an increase in noninterest
expenses.
All yields and rates paid discussed in this report are presented on an
annualized basis.
EARNINGS SUMMARY
NET INTEREST INCOME
Net interest income refers to the difference between interest and fees earned on
loans and investments and the interest paid on deposits and other borrowed
funds. It is the largest component of the net earnings of a financial
institution. The primary factors to consider in analyzing net interest income
are the composition and volume of earning assets and interest-bearing
liabilities, the amount of noninterest bearing liabilities and nonaccrual loans,
and changes in market interest rates.
Table I sets forth average balance sheet information, interest income and
expense, average yields and rates, and net interest income and net interest
margin for the three and nine months ended September 30, 1999 and 1998.
-5-
<PAGE>
Table I Components of Net Interest Income
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------
1999 1998
---- ----
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
BALANCE -------- RATE (4) BALANCE -------- RATE (4)
------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans (1)(2) $193,021 $5,042 10.4% $148,596 $4,126 11.1%
Securities:
Taxable 97,023 1,632 6.7% 78,128 1,306 6.7%
Nontaxable (3) 15,299 292 7.6% 14,921 290 7.8%
Federal funds sold 9,370 118 5.0% 42,666 596 5.6%
---------------------------- -------------------------------
Total earning assets 314,713 7,084 9.0% 284,311 6,318 8.9%
Cash and due from banks 16,983 18,178
Allowance for credit
losses (3,757) (3,723)
Unearned income (3,747) (2,900)
Bank premises and
equipment, net 2,196 2,377
Other assets 12,229 9,047
------------- ----------------
Total assets $338,617 $307,290
============== ================
Interest-bearing
liabilities:
Deposits:
Demand $93,542 380 1.6% $91,833 461 2.0%
Savings 57,430 510 3.6% 42,144 390 3.7%
Time 52,053 607 4.7% 53,961 705 5.2%
---------------------------- -------------------------------
Total deposits 203,025 1,497 2.9% 187,938 1,556 3.3%
Borrowed funds 25,562 327 5.1% 20,051 273 5.4%
---------------------------- -------------------------------
Total interest-bearing
liabilities 228,587 1,824 3.2% 207,989 1,829 3.5%
Demand deposits 73,513 68,346
Other liabilities 4,063 3,176
Stockholders' equity 32,454 27,779
------------- ----------------
Total liabilities and
stockholders' equity $338,617 $307,290
============== ================
Net interest income and
margin $5,260 6.7% $4,489 6.3%
============== ===============
</TABLE>
(1) Loan fees totaling $377,000 and $281,000 are included in loan interest
income for the three months ended September 30, 1999 and 1998.
(2) Average nonaccrual loans totaling $1,994,000 and $58,000 are included in
average loans for the three months ended September 30, 1999 and 1998.
(3) Tax exempt income includes $99,000 in 1999 and 1998, to adjust to a fully
taxable equivalent basis using the federal statutory rate of 34%.
(4) Annualized
-6-
<PAGE>
Table I Components of Net Interest Income
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------
1999 1998
---- ----
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
BALANCE -------- RATE (4) BALANCE -------- RATE (4)
------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets:
Loans (1)(2) $176,314 $13,603 10.3% $149,662 $12,496 11.1%
Securities:
Taxable 92,180 4,509 6.5% 75,573 3,757 6.6%
Nontaxable (3) 15,261 874 7.6% 13,423 792 7.9%
Federal funds sold 19,275 691 4.8% 23,376 949 5.4%
--------------------------- ------------------------------
Total earning assets 303,030 19,677 8.7% 262,034 17,994 9.2%
Cash and due from banks 16,192 17,901
Allowance for credit
losses (3,831) (3,682)
Unearned income (3,574) (2,666)
Bank premises and
equipment, net 2,286 2,202
Other assets 10,807 8,983
------------- ---------------
Total assets $324,910 $284,772
============= ===============
Interest-bearing liabilities:
Deposits:
Demand $93,565 1,182 1.7% $83,348 1,222 2.0%
Savings 56,583 1,511 3.6% 32,318 821 3.4%
Time 51,676 1,783 4.6% 49,796 1,932 5.2%
--------------------------- ------------------------------
Total deposits 201,824 4,476 3.0% 165,462 3,975 3.2%
Borrowed funds 17,194 668 5.2% 25,201 1,033 5.5%
--------------------------- ------------------------------
Total interest-bearing
liabilities 219,018 5,144 3.1% 190,663 5,008 3.5%
Demand deposits 69,590 63,064
Other liabilities 3,700 2,865
Stockholders' equity 32,602 28,180
------------ ---------------
Total liabilities and
stockholders' equity $324,910 $284,772
============= ===============
Net interest income and
margin $14,533 6.4% $12,986 6.6%
============= =============
</TABLE>
(1) Loan fees totaling $1,123,000 and $950,000 are included in loan interest
income for the nine months ended September 30, 1999 and 1998.
(2) Average nonaccrual loans totaling $1,676,000 and $243,000 are included in
average loans for the nine months ended September 30, 1999 and 1998.
(3) Tax exempt income includes $297,000 and $269,000 in 1999 and 1998, to adjust
to a fully taxable equivalent basis using the federal statutory rate of 34%.
(4) Annualized
-7-
<PAGE>
For the three months ended September 30, 1999, net interest income, on a
fully taxable-equivalent basis, was $5,260,000 or 6.7% of average earning
assets, an increase of 17% over $4,489,000 or 6.3% of average earning assets
in the comparable period in 1998. For the nine months ended September 30,
1999, net interest income, on a fully taxable-equivalent basis, was
$14,533,000 or 6.4% of average earning assets, an increase of 12% over
$12,986,000 or 6.6% of average earning assets in the comparable period in
1998. The increase in 1999 reflects higher levels of earning assets
partially offset by an increase in interest-bearing liabilities.
Interest income, on a fully taxable-equivalent basis, was $7,084,000 and
$6,318,000 for the three months and $19,677,000 and $17,994,000 for the nine
months ended September 30, 1999 and 1998. The increase in 1999 resulted from
the growth in average earning assets partially offset by decreases in
yields. Loan yields averaged 10.4% and 11.1% for the three months and 10.3%
and 11.1% for the nine months ended September 30, 1999 and 1998.
Approximately 84% of the Bank's loans have interest rates indexed to the
prime rate which are variable or reset within 3 months. The Bank's average
prime rate was 8.10% and 8.50% for the three month and 7.87% and 8.50% for
the nine month periods ended September 30, 1999 and 1998. Average earning
assets were $314,713,000 and $303,030,000 for the three and nine months
ended September 30, 1999 compared to $284,311,000 and $262,034,000 for the
same periods in the growth in average earning assets resulted from increased
levels of deposits which were invested primarily in loans and securities.
The increase in interest income during 1999, on a fully taxable-equivalent
basis, was partially offset by an increase in interest expense resulting
from the growth in interest bearing deposits partially offset by the
decrease in rates paid. The average rate paid on interest bearing deposits
was 2.9% and 3.3% for the three months ended September 30, 1999 and 1998 and
3.0% and 3.2% for the nine months ended September 30, 1999 and 1998.
NONINTEREST INCOME
Table 2 summarizes the sources of noninterest income for the periods indicated:
Table 2 - Noninterest Income
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
Customer service fees $729 $590
Gain on sale of loans 403 599
Loan servicing fees 199 255
Gains on sales of securities - 1
Other 40 2
----------------------
Total noninterest income $1,371 $1,487
======================
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1999 1998
---- ----
<S> <C> <C>
Customer service fees $2,006 $1,767
Gain on sale of loans 1,033 1,894
Loan servicing fees 638 750
Gains on sales of securities 52 13
Other 124 130
----------------------
Total noninterest income $3,853 $4,554
======================
</TABLE>
The Company sells SBA loans and FHLMC conforming mortgage loans with SBA loan
sales providing the primary source of gains on sale. Gains on sale of loans
decreased as a result of a lower volume of Small Business Administration (SBA)
loans sold and a significant decline in market prices for SBA loans in 1999
compared to 1998.
-8-
<PAGE>
NONINTEREST EXPENSES
The major components of noninterest expenses stated in dollars and as a
percentage of average earning assets are set forth in Table 3 for the periods
indicated.
Table 3 - Noninterest Expenses
(Dollars in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1999 1998
---- ----
<S> <C> <C> <C> <C>
Salaries and benefits $1929 2.45% $1,672 2.35%
Occupancy 328 .42% 297 .42%
Equipment 287 .36% 276 .39%
Customer services 177 .22% 180 .25%
Advertising and promotion 131 .17% 201 .28%
Stationery and postage 121 .15% 106 .15%
Data processing 93 .12% 63 .09%
Professional services 94 .12% 94 .13%
Insurance 56 .07% 48 .07%
Other 246 .31% 177 .25%
------------------------------------------------------
Total noninterest expenses $3,462 4.40% $3,114 4.38%
======================================================
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1999 1998
---- ----
<S> <C> <C> <C> <C>
Salaries and benefits $5,470 2.41% $4,773 2.43%
Occupancy 936 .41% 859 .44%
Equipment 856 .38% 828 .42%
Customer services 519 .23% 514 .26%
Advertising and promotion 376 .17% 504 .26%
Stationery and postage 324 .14% 299 .15%
Data processing 275 .12% 296 .15%
Professional services 272 .12% 208 .11%
Insurance 164 .07% 165 .08%
Other 692 .30% 592 .30%
------------------------------------------------------
Total noninterest expenses $9,884 4.35% $9,038 4.60%
======================================================
</TABLE>
The increases in 1999 were primarily related to higher staff and occupancy costs
and increases in other noninterest expenses partially offset by decreases in
advertising and promotion. The increase in noninterest expenses reflects the
opening of a new branch in August 1998 and the growth in total loans, deposits
and assets. The decrease in noninterest expense as a percentage of average
earning assets for the nine month period in 1999 compared to 1998 is the result
of the rate of growth in average earning assets in 1999 exceeding the rate of
increase in noninterest expenses.
INCOME TAXES
The Company's effective tax rate was 39.4% and 39.0% for the three and nine
months ended September 30, 1999 compared to 41.7% and 41.5% for the same periods
in 1998. Changes in the effective tax rate for the Company are primarily due to
fluctuations in the proportion of tax exempt income generated from investment
securities to pre-tax income.
BALANCE SHEET ANALYSIS
Total assets were $350.1 million at September 30, 1999, compared to $324.7
million at the end of 1998. Based on average balances, third quarter 1999
average total assets of $338.6 million represent an increase of 10%
over the third quarter of 1998 while the nine month 1999 average total assets of
$324.9 million represent an increase of 14% over the nine months 1998.
EARNING ASSETS
LOANS
Total gross loans at September 30, 1999 were $197.1 million, a 22% increase
from $161.0 million at December 31, 1998. Average loans in the three and nine
months of 1999 were $193,021,000 and $176,314,000 representing increases of 30%
and 18% over the same period in 1998. The 1999 increases primarily reflected
growth in average real estate loans, particularly commercial real estate, SBA
guaranteed commercial real estate, construction and residential mortgage loans,
which in the opinion of the Company is due to favorable local economic
conditions and the level of interest rates. The origination of all types of real
estate loans is significantly affected by the level of interest rates and
general economic conditions. There can be no assurance the Company will maintain
current origination levels in its construction, SBA, commercial real estate and
residential mortgage lending operations as interest rates or economic conditions
change.
-9-
<PAGE>
Risk Elements
Lending money involves an inherent risk of nonpayment. Through the
administration of loan policies and monitoring of the portfolio, management
seeks to reduce such risks. The allowance for credit losses is an estimate to
provide a financial buffer for losses, both identified and unidentified, in the
loan portfolio.
Nonaccrual Loans, Loans Past Due and OREO
The accrual of interest is discontinued and any accrued and unpaid interest is
reversed when the payment of principal or interest is 90 days past due unless
the amount is well secured and in the process of collection. Income on such
loans is then recognized only to the extent that cash is received and where the
future collection of principal is probable. At September 30, 1999 nonaccrual
loans totaled $1,836,000 or .93% of total loans compared to $1,108,000 or .69%
of total loans at December 31, 1998. Nonaccrual loans at September 30, 1999
consist of one commercial real estate loan, partially guaranteed by the SBA, and
an extension of credit to one commercial borrower. The commercial borrower's
loan is collaterlized by residential property.
Table 4 presents the composition of nonperforming assets at September 30, 1999.
Table 4 Nonperforming Assets
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------
<S> <C>
Nonperforming Assets:
Loans Past Due 90 Days or More $353
Nonaccrual Loans 1,836
-------------------
Total Nonperforming Loans 2,189
OREO -
-------------------
Total Nonperforming Assets $2,189
===================
Nonperforming Loans as a Percent of Total Loans 1.11%
OREO as a Percent of Total Assets -
Nonperforming Assets as a Percent of Total Assets 0.63%
Allowance for Credit Losses $3,668
As a Percent of Total Loans 1.86%
As a Percent of Nonaccrual Loans 200%
As a Percent of Nonperforming Loans 168%
</TABLE>
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
Management has established an evaluation process designed to determine the
adequacy of the allowance for credit losses. This process attempts to assess the
risk of loss inherent in the portfolio by segregating the allowance for credit
losses into three components: "historical losses;" "specific;" and
"margin for imprecision." The "historical losses" component is calculated as a
function of the prior four years loss experience for commercial, real estate and
consumer loan types. The four years are assigned weightings of 35%, 30%, 20% and
15% beginning with the most recent year. The "specific" component is established
by allocating a portion of the allowance to individual classified credits on the
basis of specific circumstances and assessments. The "margin for imprecision"
component is an unallocated portion that supplements the first two components as
a conservative margin to guard against unforeseen factors. The "historical
losses" and "specific" components include management's judgment of the effect of
current and forecasted economic conditions on the ability of the Company's
borrowers to repay; an evaluation of the allowance for credit losses in relation
to the size of the overall loan portfolio; an evaluation of the composition of,
and growth trends within, the loan portfolio; consideration of the relationship
of the allowance for credit losses to nonperforming loans; net charge-off
trends; and other factors. While this evaluation process utilizes historical and
other objective information, the classification of loans and the establishment
of the allowance for credit losses, relies, to a great extent, on the judgment
and experience of management. We evaluate the adequacy of our allowance for
credit losses quarterly.
-10-
<PAGE>
It is the policy of management to maintain the allowance for credit losses at a
level adequate for known and inherent risks in the loan portfolio. Based on
information currently available to analyze loan loss potential, including
economic factors, overall credit quality, historical delinquency and a history
of actual charge-offs, management believes that the loan loss provision and
allowance are adequate; however, no assurance of the ultimate level of credit
losses can be given with any certainty. Loans are charged against the allowance
when management believes that the collectibility of the principal is unlikely.
An analysis of activity in the allowance for credit losses is presented in Table
5.
TABLE 5 Allowance for Credit Losses
(Dollars in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
---------------------------
<S> <C>
Total Loans Outstanding $197,131
Average Total Loans 176,314
Allowance for credit losses:
Balance, January 1 $3,871
Charge-offs by Loan Category:
Commercial 253
Installment and other 3
Real Estate construction -
Real Estate-term -
-------------
Total Charge-Offs 256
Recoveries by Loan Category:
Commercial 48
Installment and other 1
Real Estate construction -
Real Estate-term 4
-------------
Total Recoveries 53
Net Charge-Offs 203
Provision Charged to Expense -
-------------
Balance, September 30 $3,668
=============
Ratios:
Net Charge-offs to Average Loans 0.12%
Reserve to Total Loans 1.86%
</TABLE>
OTHER INTEREST-EARNING ASSETS
For the three and nine months ended September 30, 1999, the average balance
of investment securities and federal funds sold totaled $121,692,000, and
$126,716,000, from $135,715,000 and $112,372,000 for the same periods in 1998.
The decrease in the three month periods from 1998 to 1999 reflects redeploying
federal funds sold into loans. The increase in the 1999 nine month period
resulted from investing additional liquidity in investment securities.
Additional liquidity was generated by the excess of the increase in average
deposits over the increase in average loans. Management also uses borrowed funds
to increase earning assets and enhance the Company's interest rate risk profile.
-11-
<PAGE>
FUNDING
Deposits represent the Company's principal source of funds for investment.
Deposits are primarily core deposits in that they are demand, savings, and time
deposits under $100,000 generated from local businesses and individuals. These
sources represent relatively stable, long term deposit relationships
which minimize fluctuations in overall deposit balances. We have accepted a $20
million time deposit from the State of California in part to replace borrowed
funds and to increase earning assets. The State of California time deposit is
renewable approximately every three months at a rate similar to the three month
U.S. Treasury bill. The Bank has never used brokered deposits.
Deposits increased $1,989,000 from year-end or 1% to $282,799,000 as of
September 30, 1999. Average total deposits in the three and nine months of 1999
of $276,537,000 and $271,414,000 increased from $256,284,000 and $228,526,000 in
the same periods in 1998.
Another source of funding for the Company is borrowed funds. Management uses
borrowed funds to increase earning assets, prudently leverage capital and
minimize interest rate risk. Typically, these funds result from the use of
advances from the FHLB and agreements to sell investment securities with a
repurchase at a designated future date, also known as repurchase agreements.
Repurchase agreements are conducted with major banks and investment brokerage
firms. The maturity of these arrangements for the Bank has generally been 30 to
270 days. Repurchase agreements totaled $15,000,000 at September 30, 1999.
Advances from the FHLB may vary in maturity from 1 to 10 years. Advances from
the FHLB at September 30, 1999 totaled $15,000,000, payable at maturity in 2003
and 2004. The advances are callable by the FHLB beginning in February 1999
($10,000,000) and March 2000 ($5,000,000) and bear interest at a weighted
average rate of 4.9%. The average balance of borrowed funds was $25,562,000 and
$17,194,000 during the three and nine months ended September 30, 1999 compared
to $20,051,000 and $25,201,000 for the same periods in 1998. The decrease in
average borrowed funds for the nine months ended September 30, 1999 reflects the
substitution of time deposits from the State of California for borrowed funds
during the first quarter of 1998.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Liquidity management refers to the Company's ability to provide funds on an
ongoing basis to meet fluctuations in deposit levels as well as the credit needs
and requirements of its clients. Both assets and liabilities contribute to the
Bank's liquidity position. Federal funds lines, short-term investments and
securities, and loan repayments contribute to liquidity, along with deposit
increases, while loan funding and deposit withdrawals decrease liquidity. The
Company assesses the likelihood of projected funding requirements by reviewing
historical funding patterns, current and forecasted economic conditions and
individual client funding needs. The Bank maintains informal lines of credit
with its correspondent banks for short-term liquidity needs. These informal
lines of credit are not committed facilities by the correspondent banks and no
fees are paid by the Company to maintain them.
The Bank manages its liquidity by maintaining a majority of its investment
portfolio in liquid investments in addition to its federal funds sold. Liquidity
is measured by various ratios, including the liquidity ratio of net liquid
assets compared to total assets. As of September 30, 1999, this ratio was 13.2%.
Other key liquidity ratios are the ratios of loans to deposits and federal funds
sold to deposits, which were 69.7% and 2.4%, respectively,
as of September 30, 1999. The measures of liquidity have decreased since
December 31, 1998 as federal funds sold have been shifted to loans and
investment securities.
INTEREST RATE SENSITIVITY
Interest rate sensitivity is a measure of the exposure of the Company's future
earnings due to changes in interest rates. If assets and liabilities do not
reprice simultaneously and in equal volumes, the potential for such exposure
exists. It is management's objective to achieve a near-matched to modestly
asset-sensitive cumulative position at one year, such that the net interest
margin of the Company increases as market interest rates rise and decreases when
short-term interest rates decline.
-12-
<PAGE>
One quantitative measure of the "mismatch" between asset and liability repricing
is the interest rate sensitivity "gap" analysis. All interest-earning assets and
funding sources are classified as to their expected repricing or maturity date,
whichever is sooner. Within each time period, the difference between asset and
liability balances, or "gap," is calculated. Positive cumulative gaps in early
time periods suggest that earnings will increase if interest rates rise.
Negative gaps suggest that earnings will decline when interest rates rise. Table
6 presents the gap analysis for the Company at September 30, 1999. Mortgage
backed securities are reported in the period of their expected repricing based
upon estimated prepayments developed from recent experience.
Table 6 Interest Rate Sensitivity
(Dollars in thousands)
<TABLE>
<CAPTION>
OVER THREE
NEXT DAY AND MONTHS AND OVER ONE AND
WITHIN THREE WITHIN ONE WITHIN FIVE OVER FIVE
IMMEDIATELY MONTHS YEAR YEARS YEARS TOTAL
----------- ------ ---- ----- ----- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1999
Rate Sensitive Assets:
Federal Funds Sold $6,800 $- $- $- $- $6,800
Investment Securities:
Treasury and Agency
Obligations - - - 7,307 - 7,307
Mortgage-Backed
Securities..... - 2,388 10,395 33,626 32,196 78,605
Municipal Securities - 225 333 3,244 10,746 14,548
Corporate Securities - 9,433 - - 4,085 13,518
Other - - - - 2,751 2,751
=============================================================================================
Total Investment Securities - 12,046 10,728 44,177 49,778 116,729
Loans Excluding
Nonaccrual Loans 102,746 61,245 1,671 15,989 13,644 195,295
=============================================================================================
Total Rate Sensitive
Assets $109,546 $73,291 $12,399 $60,167 $63,422 $318,823
---------------------------------------------------------------------------------------------
Rate Sensitive Liabilities:
Deposits:
Demand and Savings $153,974 $- $- $- $- $153,974
Time - 38,428 12,211 1,128 - 51,767
=============================================================================================
Total Interest-bearing
Deposits 153,974 38,428 12,211 1,128 - 205,741
Other Borrowings - 6,500 - 15,000 - 31,500
=============================================================================================
Total Rate Sensitive
Liabilities $153,974 $44,928 $12,211 $16,128 $- $237,241
=============================================================================================
Gap $(44,428) $28,363 $(9,812) $44,038 $63,422 $81,582
Cumulative Gap $(44,428) $(16,065) $(25,877) $18,162 $81,582
</TABLE>
-13-
<PAGE>
The Company's positive cumulative total gap results from the exclusion from the
above table of noninterest-bearing demand deposits, which represent a
significant portion of the Company's funding sources. The Company maintains a
negative cumulative gap in the immediate, next day and within three months and
the over three months and within one year time periods and a positive cumulative
gap in all other time periods. The Company's experience indicates money market
deposit rates tend to lag changes in the prime rate which immediately impact the
prime-based loan portfolio. Even in the Company's negative gap time periods,
rising rates result in an increase in net interest income. Should interest rates
stabilize or decline in future periods, it is reasonable to assume that the
Company's net interest margin, as well as net interest income, may decline
correspondingly.
CAPITAL RESOURCES
Management seeks to maintain adequate capital to support
anticipated asset growth and credit risks, and to ensure that the Company and
the Bank are in compliance with all regulatory capital guidelines. The primary
source of new capital for the Company has been the retention of earnings. The
Company does not have any material commitments for capital expenditures as of
September 30, 1999.
The Company pays a quarterly cash dividend on its common stock as part of
efforts to enhance shareholder value. The Company's goal is to maintain a strong
capital position that will permit payment of a consistent cash dividend which
may grow commensurately with earnings growth.
During 1997, the Board of Directors approved a stock repurchase program
authorizing open market purchases of up to 3% of the shares outstanding, or
approximately 145,837 shares, in order to enhance long term shareholder value.
As of September 30, 1999, 145,500 shares had been purchased under the program.
The Company and the Bank are subject to capital adequacy guidelines issued by
the federal bank regulatory authorities. Under these guidelines, the minimum
total risk-based capital requirement is 10.0% of risk-weighted assets and
certain off-balance sheet items for a "well capitalized" depository institution.
At least 6.0% of the 10.0% total risk-based capital ratio must consist of Tier 1
capital, defined as tangible common equity, and the remainder may consist of
subordinated debt, cumulative preferred stock and a limited amount of the
allowance for credit losses.
The federal regulatory authorities have established minimum capital leverage
ratio guidelines. The ratio is determined using Tier 1 capital divided by
quarterly average total assets. The guidelines require a minimum of 3.0% to 5.0%
of quarterly average total assets.
The Bank's risk-based capital ratios were in excess of regulatory guidelines for
a "well capitalized" depository institution as of September 30, 1999, and
December 31, 1998. Capital ratios for the Company and the Bank are set forth in
Table 7:
Table 7 Capital Ratios
The Company:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31,1998
------------------ ----------------
<S> <C> <C>
Total risk-based capital ratio 14.6% 15.4%
Tier 1 risk-based capital ratio 13.4% 14.2%
Tier 1 leverage ratio 10.0% 9.5%
</TABLE>
Coast Commercial Bank:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31,1998
------------------ ----------------
<S> <C> <C>
Total risk-based capital ratio 14.0% 14.8%
Tier 1 risk-based capital ratio 12.7% 13.6%
Tier 1 leverage ratio 9.5% 9.1%
</TABLE>
-14-
<PAGE>
YEAR 2000 READINESS DISCLOSURE
The year 2000 problem exists because many computer systems use only the last two
digits to refer to a year. This convention could affect date-sensitive
calculations that treat "00" as the year 1900 rather than 2000. Another issue is
that the year 2000 is a leap year and some programs may not properly provide for
February 29, 2000.
This discussion of the implications of the year 2000 problem for us contains
numerous forward-looking statements on inherently uncertain information. The
cost of the project and the date on which we plan to complete the internal year
2000 modifications are based on management's best estimates, which were derived
utilizing a number of assumptions of future events including the continued
availability of internal and external resources, third party modifications and
other factors. We cannot guarantee, however, these estimates, and actual results
could differ. Moreover, although management believes it will be able to make the
necessary modifications in advance, there can be no guarantee that the failure
to modify the systems would not have a material adverse impact on us.
Readiness Preparation
Our plan to address the year 2000 issues includes a process of inventory,
analysis, modification, testing and certification, and implementation. In 1997
we alerted our business customers of the year 2000 problem and are now assessing
the readiness preparations of our major customers and suppliers. Reviews of our
information systems and information provided by our primary vendors, large
customers and suppliers have not identified any year 2000 readiness issues which
appear to be unresolvable by December 31, 1999.
Our major critical information system is our core transaction processing
software which provides transaction processing for loans, deposits and general
ledger. The vendor supplying our core transaction processing software has
provided evidence of year 2000 readiness. We have obtained satisfaction
regarding the the year 2000 readiness of various systems that integrate
information into the core processing software. Testing of the core processing
software and other systems which integrate into the core processing software has
been completed. Other purchased software and systems supported by external
parties has been tested as part of the year 2000 program. No significant
information systems have been found not ready for year 2000. Additional testing
may be conducted as on-going product updates by software vendors are installed.
A freeze on installation of software upgrades is planned for the fourth quarter
of 1999. In addition, contingency plans have been developed to reduce the impact
of potential events that may occur. We cannot guarantee, however, that the
systems of vendors or customers with which we conduct business will be completed
on a timely basis, or that contingency plans will shield operations from
failures that may occur.
We do not significantly rely on embedded technology in our critical processes.
Embedded technology typically controls operations such as power management and
related facilities functions. Year 2000 risks associated with embedded
technology in our facilities appear low.
We rely on suppliers and customers, and we are addressing year 2000 issues with
both groups. We have identified vendors upon whom there is significant reliance
and made inquiries regarding year 2000 readiness plans and status. Appropriate
measures to minimize risk will be undertaken with those that appear to pose a
significant risk. Replacements may be effected where necessary. We have,
however, no viable alternative for some suppliers, such as power distribution
and local telephone companies. While all our significant suppliers, including
power distribution and local telephone companies, have stated they are Year 2000
ready, we continue to monitor the information provided by these companies, and
we will use the information for contingency planning. As with all financial
institutions, we place a high degree of reliance on the systems of other
institutions, including government agencies, to settle transactions. Principal
settlement methods associated with major payment systems have been tested as
part of their integration with the core processing system.
We also rely on our customers to make necessary preparations for year 2000 so
that their business operations will not be interrupted, thus threatening their
ability to honor their financial commitments. Borrowers, funding sources and
large depositors have been reviewed to determine those with financial volumes
sufficiently large to warrant inquiry and assessment of their year 2000
readiness preparation. Financial volumes include loans and unused commitments,
collected deposit balances, ACH, and foreign exchange, etc.
-15-
<PAGE>
The population of customers with loans and unused commitments outstanding
("borrowers") pose the highest risk level of concern for any lender. Business
purpose borrowings exceeding $50,000 were assigned one of three year 2000 risk
levels: low, medium or high. Borrowers representing 3% and 28% of outstanding
loans were assigned high and medium year 2000 risk levels, respectively.
Ongoing reassessments with risk mitigation plans have been made for all levels
of risk. Customers with low and medium risk were reassessed on an annual basis,
while customers with high risk have been reassessed quarterly. The risk
mitigation plan evaluates whether year 2000 issues will materially affect the
customer's cash flows, asset account values related to its balance sheet, and/or
collateral pledged to us. The risk mitigation plan is incorporated into the
normal credit review process.
Cost
Amounts expensed in the first nine months of 1999 were not significant to our
financial position or results of operations. Although the remaining costs
associated with achieving year 2000 compliance have not yet been determined,
management believes the amounts expensed during 1999 will not have a material
effect on our financial position, results of operations or cash flows. In
addition, we have replaced certain equipment and software to ensure year 2000
readiness. The cost of the replacement items will be expensed over the useful
lives of those assets. During 1998, six existing automated teller machines were
replaced with new machines at a cost of approximately $300,000 due in part to
year 2000 issues with the existing equipment. The cost of other identified
replacement items and contingency equipment is estimated at less than $100,000.
Estimated total costs could change as our analysis continues.
Risks
The principal risks associated with the year 2000 problem can be grouped into
three categories:
- we do not successfully ready our operations for the next century,
- disruption of our operations due to operational failures of third
parties, and
- business interruption among fund providers and obligors such that
expected funding and repayment does not take place.
The only risk largely under our control is preparing our internal operations for
the year 2000. We, like other financial institutions, are heavily dependent on
our computer systems. The complexity of these systems and their interdependence
make it impracticable to switch to alternative systems without interruptions if
necessary modifications are not completed on schedule. Management believes it
has made the necessary modifications on schedule.
Failure of third parties may jeopardize our operations, but the seriousness of
this risk depends on the nature and duration of the failures. The most serious
impact on our operations from suppliers would result if basic services such as
telecommunications, electric power suppliers and services provided by other
financial institutions and governmental agencies were disrupted. Some public
disclosure about readiness preparation among basic infrastructure and other
suppliers is now available. We are unable, however, to estimate the likelihood
of significant disruptions among our basic infrastructure suppliers. In view of
the unknown probability of occurrence and impact on operations, we consider the
loss of basic infrastructure services to be the most reasonably likely worst
case year 2000 scenario.
Operational failures among our customers could affect their ability to continue
to provide funding or meet obligations when due. The information we develop in
the customer assessments described earlier allows us to identify those customers
that exhibit a risk of not making the adequate preparations for the century
change. We are taking appropriate actions to manage these risks.
Program Assessment
Senior management and banking regulators regularly assess our year 2000
preparations. Additionally, a consulting and services firm has been retained to
review and advise senior management on internally developed testing plans for
critical systems and on contingency planning.
-16-
<PAGE>
Contingency Plans
We have developed remediation contingency plans and business resumption
contingency plans specific to the year 2000. Remediation contingency plans
address the actions to be taken if the current approach to remediating a system
is falling behind schedule or otherwise appears in jeopardy of failing to
deliver a year 2000 ready system when needed. Business resumption contingency
plans address the actions that would be taken if critical business functions can
not be carried out in the normal manner upon entering the next century due to
system or supplier failure. The testing of business resumption contingency plans
has been completed for all mission critical areas. Most contingent action plans
prepared at this time involve manual processing of transactions. Given the size,
scope and complexity of our operations, and the results of contingency plan
tests, manual processing appears a viable alternative for our information
systems.
The Company's disclosure and announcement herein concerning its Year 2000
planning and programs are intended to constitute "year 2000 readiness
disclosures" as defined in the recently-enacted Year 2000 Information and
Readiness Disclosure Act (the "Act"). The Act provided certain protection from
liability for certain public and private statements concerning an entity's Year
2000 readiness and the Year 2000 readiness of its products and services.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
In management's opinion there has not been a material change in the
Compnany's market risk profile at September 30, 1999 compared to
December 31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 5. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
On October 20, 1999, the Coast Bancorp Board of Directors declared a
cash dividend of eight cents ($0.08) per share, payable November 24, 1999, to
shareholders of record on November 4, 1999.
Item 5. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit Number
<S> <C>
10.20 Consulting Agreement by and between Coast Bancorp, Coast Commercial Bank and Harvey J. Nickelson
dated July 22, 1999
10.21 Amended and Restated Salary Continuation Agreement by and between Coast Bancorp, Coast Commercial
Bank and Harvey J. Nickelson dated July 23, 1999
10.22 Amended and Restated Salary Continuation Agreement by and between Coast Bancorp, Coast Commercial
Bank and David V. Heald dated July 23, 1999
10.23 Executive Salary Continuation Agreement by and between Coast Bancorp, Coast Commercial Bank and
Sandra Anderson dated July 23, 1999
10.24 Executive Salary Continuation Agreement by and between Coast Bancorp, Coast Commercial Bank and
Terry A. Chandler dated July 23, 1999
10.25 Executive Salary Continuation Agreement by and between Coast Bancorp, Coast Commercial Bank and
Richard Hofstetter dated July 23, 1999
10.26 Executive Salary Continuation Agreement by and between Coast Bancorp, Coast Commercial Bank and
Bruce H. Kendall dated July 23, 1999
10.27 Life Insurance Endorsement Method Split Dollar Plan Agreement between Coast Bancorp, Coast
Commercial Bank and Harvey J. Nickelson dated October 1, 1999
10.28 Life Insurance Endorsement Method Split Dollar Plan Agreement between Coast Bancorp, Coast
Commercial Bank and David V. Heald dated October 1, 1999
10.29 Life Insurance Endorsement Method Split Dollar Plan Agreement between Coast Bancorp, Coast
Commercial Bank and Sandra Anderson dated October 1, 1999
10.30 Life Insurance Endorsement Method Split Dollar Plan Agreement between Coast Bancorp, Coast
Commercial Bank and Terry A. Chandler dated October 1, 1999
10.31 Life Insurance Endorsement Method Split Dollar Plan Agreement between Coast Bancorp, Coast
Commercial Bank and Richard Hofstetter dated October 1, 1999
10.32 Life Insurance Endorsement Method Split Dollar Plan Agreement between Coast Bancorp, Coast
Commercial Bank and Bruce H. Kendall dated October 1, 1999
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K
Not applicable
-17-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COAST BANCORP
---------------------------------------
(REGISTRANT)
Date: November 11, 1999
/s/ HARVEY J. NICKELSON
---------------------------------------
Harvey J. Nickelson
President and Chief Executive Officer
/s/ BRUCE H. KENDALL
---------------------------------------
Bruce H. Kendall
Senior Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
-18-
<PAGE>
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into this 22nd
day of July, 1999, by and between Coast Bancorp, a California corporation and
Coast Commercial Bank, a California banking corporation on the one hand
(collectively the "Company"), their successors or assigns and HARVEY J.
NICKELSON ("Consultant") on the other hand.
RECITALS
A. Consultant represents that he possesses expertise and
knowledge in the area of commercial banking and contact in banking in Santa Cruz
County, California.
B. The Company desires to retain Consultant in a consulting
capacity to avail themselves of his skills and knowledge of banking in Santa
Cruz County.
C. Consultant desires to be affiliated with the Company in
such a consulting capacity, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the above recitals and of the
mutual provision and conditions contained in this Agreement, it is agreed as
follows:
1. SCOPE OF SERVICES. During the term of this Agreement as
provided in Section 2, Consultant shall make himself available upon receipt of
seventy-two (72) hours written notice, to market the services of the Company;
for general consultation concerning the business activities of the Company' and
to cooperate fully with and assist the Company in connection with any litigation
or alternative dispute resolution involving the Company ("Consulting Services").
2. TERM. The term of this Agreement shall commence upon the
later of consultant's sixtieth birthday or the termination of his position as
president and Chief Executive
1
<PAGE>
Officer of the Company and shall terminate upon his attaining age sixty-three
(63).
3. INDEPENDENT CONTRACTOR RELATIONSHIP. In all Consulting
Services rendered to the Company during the term of this Agreement, Consultant
understands and agrees that Consultant is acting as an independent contractor,
not as an employee. Consultant is not authorized to incur any obligation of any
description on behalf of the Company. Consultant will not be entitled to any
benefits afforded by the Company. Consultant is not required to adhere to any
formal schedule or work hours or duties. Consultant will maintain his own office
or home office, and will pay for his own equipment, materials, supplies and
other overhead expenses. The Company will not supervise the services Consultant
renders to it, will not give detailed instructions to him in connection with his
services as an independent contractor, and will not otherwise exercise control
nor retain the right to control the means and manner by which Consultant
accomplishes the Consulting Services which Consultant undertakes for the
Company. Consultant alone will be responsible for the timely and satisfactory
completion of his duties.
4. WARRANTIES, REPRESENTATIONS AND CONVENANTS. Consultant
acknowledges and warrants that Consultant is engaged in an independent business
and has complied, and in the future will comply, with any and all federal, state
and local laws regarding the Consulting Services to be performed for the
Company. The Company further acknowledges that Consultant is engaged, or can
engage, in other activities for other clients and that the Company is not, and
need not be, his sole client.
5. COMPENSATION. In consideration of the Consulting Services
provided by consultant to the Company, Consultant will be paid at the rate of
$125,000 per year, payable in equal monthly installments. Consultant will
invoice the Company on the effective date of this Agreement, and thereafter on
the 1st (first) of each month, for the duration of this Agreement.
2
<PAGE>
Payments by the Company to Consultant will be made within five (5) business days
of receipt of the invoice.
6. EXPENSES. Consultant will be reimbursed for expenses
incurred directly on behalf of the Company upon presentation of appropriate
documentation.
7. CONFIDENTIALITY. By virtue of Consultant's engagement with
the Company as an independent contractor, Consultant will be entrusted with
confidential and proprietary information pertaining to the Company's business.
Except as required and expressly authorized by the Company or as required by
law, during his engagement, Consultant agrees that Consultant will not, at any
time during his engagement or thereafter, use for his own benefit, or disclose
to others, any confidential business or financial affairs or proprietary
information of the Company.
8. TERMINATION. The Agreement may be terminated for "cause" by
the Company or upon the Consultant's death. For this purpose, "cause" shall mean
any act of personal dishonesty or willful misconduct in connection with the
Company, embezzlement, fraud, intentional failure to comply with the Company's
policies, willful violation of any banking law, rule or regulation, or material
breach of any provision of this Agreement.
9. RELATIONSHIP OF PARTIES. Consultant understands and
acknowledges that no workers' compensation insurance or disability insurance has
been or will be obtained on his behalf, by the Company. Consultant also
understands and acknowledges that no deductions or withholding will be made from
the payments the Company makes to him for his Consulting Services for any
employment-related taxes or contributions of any kind, including payroll and
employment taxes and contributions (e.g., FICA, FUTA, SSI, SUI/SDI, of federal
or state income taxes). Consultant understands that Consultant will be
responsible to report all amounts Consultant receives from the Company as
ordinary self-employment income on his applicable
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tax return(s). Consultant understands that Consultant remains solely responsible
for any workers' compensation and disability insurance and taxes, and Consultant
agrees to indemnify, defend and holds the Company harmless from any liability
for workers' compensation or disability claims, taxes, contributions, penalties
or interest that may arise from his failure to comply with his self-employment
obligations.
10. INDEMNIFICATION. Consultant expressly agrees to indemnify,
defend and hold harmless the Company from and against any and all loss,
liability, expense, claims, costs, suit and damages, including attorneys' fees,
arising out of the performance of Consulting Services under this Agreement.
11. APPLICABLE LAW. This Agreement shall be governed by the
laws of the State of California.
12. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the Company and the undersigned Consultant and supersedes, cancels
and annuls any and all previous contracts, agreements, arrangements or
understandings, whether oral, written or implied, between the parties hereto
with respect to the matters covered by this Agreement. This Agreement may be
modified only in writing signed by the Company and the undersigned Consultant.
13.(a) Attorneys' Fees. If any legal action or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees and other costs incurred
in that action or proceeding, in addition to any other relief to which it or
they may be entitled.
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13.(b) WAIVER OF JURY TRIAL. THE COMPANY AND EXECUTIVE EACH
HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH
MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING
OUT OF OR UNDER IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED
TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
14. ENFORCEMENT. If any provision of this Agreement is held
invalid or unenforceable, the remainder of this Agreement shall nevertheless
remain in full force and effect. If any provision is held invalid or
unenforceable with respect to particular circumstances, it shall nevertheless
remain in full force and effect in all of these circumstances. Consultant
acknowledges that he has read and understands this Agreement and signs it
voluntarily.
COAST BANCORP CONSULTANT
By:_/S/ JAMES C. THOMPSON
-----------------
Its: CHAIRMAN /S/ HARVEY J. NICKELSON
-------- -------------------
COAST COMMERCIAL BANK
By:
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Its:
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AMENDED AND RESTATED
EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE SALARY CONTINUATION AGREEMENT
("Agreement") is made and entered into this 23rd day of July, 1999, by and
between Coast Bancorp, a California corporation and Coast Commercial Bank, a
California banking corporation on the one hand (collectively the "Bank"), their
successors or assigns, and Harvey J. Nickelson on the other hand (the
"Executive"), and supersedes the prior agreement among the parties dated
September 19, 1992.
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President and Chief Executive Officer; and
WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contact in the banking industry are so
valuable that assurance of his continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the Bank
to arrange terms of continued employment for the Executive so as to reasonably
assure his remaining in the Bank's employment during his lifetime or until the
age of retirement; and
WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or his beneficiaries certain
benefits in accordance with the
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terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and convenants herein contained, it is
hereby agreed as follows:
ARTICLE 1.
1.1 BENEFICIARY. The term Beneficiary shall mean the person or persons
whom the Executive shall designate in writing to receive the benefits provided
hereunder.
1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined in
such policy without regard to any waiting period. If Executive is not covered by
a Bank-sponsored disability policy, the term disability shall mean the inability
of the Executive to perform the duties and responsibilities of his position with
the Bank in a normal and regular manner, due to mental or physical illness or
injury, for a period of ninety (90) consecutive days, or for fifty percent (50%)
or more of the normal working days during a period of one hundred eighty (180)
consecutive days. Determination of the Executive's disability shall be made by
the Bank's Board of Directors, which determination shall not be unreasonable or
arbitrary and shall be supported by medical opinion. In the event Executive is
also a director of the Bank, the Executive shall be ineligible to participate in
such disability determination. Executive shall, if requested by the Bank's Board
of Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The psychiatrist
or physician performing such examination shall be selected by the Bank and
Executive, or the Executive's representative if Executive is not able to
participate in such selection.
1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan
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Administrator of this plan shall be the Bank.
1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i) a tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of the Bank; (ii) the Bank
shall be merged or consolidated with another bank or corporation and as a result
of such merger or consolidation less then 75% of the outstanding voting
securities of the surviving or resulting bank or corporation shall be owned in
the aggregate by the former shareholders of the Bank, other than affiliates
(within the meaning of the Securities Exchange Act of 1934) of the party to such
merger or consolidation, as the same shall have existed immediately prior to
such merger or consolidation; (iii) the Bank shall sell substantially all of its
assets to another bank or corporation which is not a wholly owned subsidiary; or
(iv) a person, within the meaning of Section 3 (a)(9) or of Section 13(d)(3) (as
in effect on the date hereof) of the Securities Exchange Act of 1934, shall
acquire 25% or more of the outstanding voting securities of the Bank (whether
directly, indirectly, beneficially or of record). For purposes hereof, ownership
of voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13d-3(d)(1)(I) (as in effect on
the date hereof) pursuant to the Securities Exchange Act of 1934.
1.5 CAUSE. The term "Cause" shall mean any act of personal dishonesty,
willful misconduct, embezzlement, fraud, intentional failure to comply with the
Bank's policies, willful violation of any banking law, rule or regulation, or
material breach of any provision of this Agreement.
ARTICLE 2.
2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank
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in such capacity and with such duties and responsibilities as may be assigned to
him, and with such compensation as may be determined from time to time by the
Board of Directors of the Bank.
2.2 FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank by
which Executive is then employed pursuant to this Agreement; provided, however,
this provision shall not preclude Executive from serving as a director or member
of a committee of any other organization involving no conflict of interest with
the interests of the Bank, from engaging in charitable and community activities,
and from managing his personal investments, provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.
2.3 FRINGE BENEFIT. The salary continuation benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Executive and are
not part of any salary reduction plan or any arrangement deferring a bonus or
salary increase. The Executive has no option to take any current payment or
bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1 RETIREMENT. Executive shall be entitled to receive the benefit set
forth in Section 3.2 of this Agreement beginning on the first day of the month
next following his attainment of age sixty-three (63) or upon such later date as
may be mutually agreed upon by the Executive and the Bank ("Retirement Date").
3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will pay
to the Executive the annual sum of One Hundred Twenty Thousand Dollars
($120,000), payable in
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equal monthly installments on the first day of each month following such
Retirement Date until the Executive dies, subject to the conditions and
limitations set forth in this Agreement. This amount shall be adjusted upward
annually on the anniversary of the first payment at the rate of two percent (2%)
per year based upon the previous year's amount.
3.3 VESTING. Executive shall be vested immediately as to fifty percent
(50%) of the benefit and shall vest at the rate of an additional twelve and
one-half percent (12 1/2%) each year on December 31st while in the Bank's employ
beginning on December 31, 2000, until vested in full.
3.4 EARLY RETIREMENT. Executive shall be entitled to early retirement
anytime after he attains age sixty (60), if fully vested. In the event of
Executive's early retirement, he shall be entitled to receive the benefit set
for the in Section 3.2, reduced by five percent (5%) for each year that
Executive elects to receive the benefit prior to the Retirement Date.
ARTICLE 4.
4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to his Retirement
Date, or upon the Executive's death after his Retirement Date, the Bank shall
pay to the Executive's designated Beneficiary an amount equal to the accumulated
salary continuation obligation on the books of the Bank for the benefit of the
Executive. Said amount shall be paid to the Executive's designated Beneficiary
in a lump sum within three (3) months of the Executive's date of death. If a
valid Beneficiary Designation is not in effect, the payments shall be made to
the Executive's surviving spouse or, if none, said payments shall be made to the
duly qualified personal representative, executor or administrator of Executive's
estate. Provided, however, that anything hereinabove to the
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contrary notwithstanding, no death benefit shall be payable hereunder if it is
determined that the Executive has made any material misstatement of fact on any
application for life insurance purchased by the Bank.
4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive should
become disabled while actively employed by the Bank at any time after the date
of this Agreement but prior to her Retirement Date, the Executive shall become
fully vested. In the event of disability, Executive then may elect to receive
payments either pursuant to the provisions of Section 3.2 regarding retirement
or Section 3.4 regarding early retirement.
ARTICLE 5.
5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to terminate
the employment of the Executive at any time prior to his Retirement Date. In the
event that Executive's employment is terminated for cause, as defined above,
then Executive shall not be entitled to any benefits pursuant to this Agreement.
In the event that the employment of the Executive's shall terminate prior to the
Executive's Retirement Date, other than by reasons of Executive's disability,
death or cause, then Executive shall be entitled to the vested portion of the
benefit pursuant to Article 3 of this Agreement.
5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (i) the Executive's employment with the Bank is terminated;
(ii) Executive's annual compensation and benefits are reduced from their levels
on the date of a Change of Control of the Bank; (iii) Executive's duties,
responsibilities and authority are reduced from those of his then position on
the date of a Change of Control of the Bank; or (iv) the situs of Executive's
employment is
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changed more than 50 miles, then in such event, Executive shall become fully
vested.
ARTICLE 6.
6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise
encumber in advance any of the benefits hereunder, nor shall any of said
benefits be subject to seizure for the payment of any debts, judgments, alimony
or separate maintenance, owed by the Executive or his beneficiary or any of
them, or be transferable by operation of law in the event of a bankruptcy,
insolvency or otherwise.
ARTICLE 7.
7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits under
the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based; (3) a
description of any additional information or material necessary for the claimant
to perfect his claim, and a description of why it is needed; and (4) an
explanation of the Agreement's claim review procedure and other appropriate
information as to the steps to be taken if the Executive or Executive's
beneficiary wishes to have the claim reviewed. If the Bank determines that there
are special circumstances requiring additional time to make a decision, the Bank
shall notify the Executive or Executive's beneficiary of the special
circumstances and the date by which a decision is expected to be made,
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and may extend the time for up to one additional period of up to sixty (60)
days.
7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive or
Executive's beneficiary believes that he is entitled to greater or different
benefits, the Executive or Executive's beneficiary shall have the opportunity to
have such claim reviewed by the Bank by filing a petition for review with the
Bank within sixty (60) days after receipt of the notice issued by the Bank. Said
petition shall state the specific reasons which the Executive or Executive's
beneficiary believes, entitle him to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Bank of the petition, the
Bank shall afford the Executive or Executive's beneficiary (and counsel, if any)
an opportunity to present his position to the Bank orally or in writing, and the
Executive or Executive's beneficiary (or counsel) shall have the right to review
the pertinent documents. The Bank shall notify the Executive or Executive's
beneficiary of its decision in writing within the sixty (60) day period, stating
specifically the basis of its decision, written within the sixty (60) day
period, stating specifically the basis of its decision, written in a manner
calculated to be understood by the Executive or Executive's beneficiary and the
specific provisions of the Agreement on which the decision is based. If, because
of the need for a hearing, the sixty (60) day period is not sufficient, the
decision may be deferred for one additional period of up to sixty (60) days at
the election of the Bank, but notice of this deferral shall be given to the
Executive or Executive's beneficiary.
ARTICLE 8.
8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited to
the right to receive payments as provided in this Agreement and the Executive's
position with respect thereto
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is that of a general unsecured creditor of the Bank.
ARTICLE 9.
9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of the Bank unless and until such succeeding or continuing
corporation, bank, firm, or person agrees to assume and discharge the
obligations of the Bank under this Agreement. Upon the occurrence of such event,
the term "Bank" as used in this Agreement shall be deemed to refer to such
successor or survivor corporation, bank, firm or person.
ARTICLE 10.
10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive, or
restrict the right of the Executive to terminate his employment.
ARTICLE 11.
11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into this
Agreement, have been concerned with the fact that substantial damages will be
suffered by the Executive in the event that the Bank shall fail to perform
according to this Agreement. In the event of nonperformance by the Bank for a
period of thirty (30) days or more from the time any such payment was scheduled
to be made pursuant to this Agreement, executive shall immediately be entitled
to liquidated damages of Five Thousand Dollars ($5,000.) for each payment not
made on a timely basis. This provision shall not be applicable in the event that
such nonpayment is the result of prohibition of such payment by law, regulation
or order of a banking regulatory agency.
ARTICLE 12.
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12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations of
this Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representative of the parties hereto. Executive may
not assign this Agreement or any of the Executive's rights hereunder except with
the prior written consent of the Bank.
12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstance, is judged by a court to be void or
unenforceable, in whole or in part, the same shall in no way affect any other
provision of this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the State
of California applicable to contracts performed entirely therein. Executive and
Bank each consent to the jurisdiction of, and any action concerning this
Agreement shall be brought and tried in, the United States District Court for
the Northern District of California or the Superior or Municipal Court for the
County of Santa Cruz.
12.4 WAIVER. A waiver by either party of any of the terms or conditions
of this Agreement in any one instance shall not be deemed or construed to be a
waiver of such terms or conditions for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations, and agreements
contained in this Agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.
12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or
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misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees an other costs incurred in that action or proceeding,
in addition to any other relief to which it or they may be entitled.
12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH HEREBY
MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE
TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF
OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
12.6 HEADINGS. The headings in this Agreement are for convenience only
and shall not in any manner affect the interpretation or construction of the
Agreement or any of its provisions.
12.7. NOTICE. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served, or if mailed, upon deposit in the United
States mail, first class postage prepaid, express or certified, return receipt
requested, and properly addressed to the parties as follows: if to Executive at
his last address shown in the Bank's records, if to Bank:
Coast Commercial Bank
740 Front Street, Suite 240
Santa Cruz, CA 95060
Attn: Chairman
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Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.
(Signature page follows)
IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Santa Cruz, California, the day and year first above written.
COAST COMMERCIAL BANK EXECUTIVE
By: /S/ JAMES. C. THOMPSON
- --------------------------
Its: CHAIRMAN /S/ HARVEY J. NICKELSON
- ------------- -----------------------
Harvey J. Nickelson
COAST BANCORP
By: /S/ JAMES C. THOMPSON
- -------------------------
Its: CHAIRMAN
- -------------
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AMENDED AND RESTATED
EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS AMENDED AND RESTATED EXECUTIVE SALARY CONTINUATION AGREEMENT
("Agreement") is made and entered into this 23rd day of July, 1999, by and
between Coast Bancorp, a California corporation and Coast Commercial Bank, a
California banking corporation on the one hand (collectively the "Bank"), their
successors or assigns, and David V. Heald on the other hand (the "Executive"),
and supersedes the prior agreement among the parties dated September 19, 1992.
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President and Chief Banking Officer; and
WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contact in the banking industry are so
valuable that assurance of his continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the Bank
to arrange terms of continued employment for the Executive so as to reasonably
assure his remaining in the Bank's employment during his lifetime or until the
age of retirement; and
WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or his beneficiaries certain
benefits in accordance with the
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terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and convenants herein contained, it is
hereby agreed as follows:
ARTICLE 1.
1.1 BENEFICIARY. The term Beneficiary shall mean the person or persons
whom the Executive shall designate in writing to receive the benefits provided
hereunder.
1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined in
such policy without regard to any waiting period. If Executive is not covered by
a Bank-sponsored disability policy, the term disability shall mean the inability
of the Executive to perform the duties and responsibilities of his position with
the Bank in a normal and regular manner, due to mental or physical illness or
injury, for a period of ninety (90) consecutive days, or for fifty percent (50%)
or more of the normal working days during a period of one hundred eighty (180)
consecutive days. Determination of the Executive's disability shall be made by
the Bank's Board of Directors, which determination shall not be unreasonable or
arbitrary and shall be supported by medical opinion. In the event Executive is
also a director of the Bank, the Executive shall be ineligible to participate in
such disability determination. Executive shall, if requested by the Bank's Board
of Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The psychiatrist
or physician performing such examination shall be selected by the Bank and
Executive, or the Executive's representative if Executive is not able to
participate in such selection.
1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan
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Administrator of this plan shall be the Bank.
1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i) a tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of the Bank; (ii) the Bank
shall be merged or consolidated with another bank or corporation and as a result
of such merger or consolidation less then 75% of the outstanding voting
securities of the surviving or resulting bank or corporation shall be owned in
the aggregate by the former shareholders of the Bank, other than affiliates
(within the meaning of the Securities Exchange Act of 1934) of the party to such
merger or consolidation, as the same shall have existed immediately prior to
such merger or consolidation; (iii) the Bank shall sell substantially all of its
assets to another bank or corporation which is not a wholly owned subsidiary; or
(iv) a person, within the meaning of Section 3 (a)(9) or of Section 13(d)(3) (as
in effect on the date hereof) of the Securities Exchange Act of 1934, shall
acquire 25% or more of the outstanding voting securities of the Bank (whether
directly, indirectly, beneficially or of record). For purposes hereof, ownership
of voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13d-3(d)(1)(I) (as in effect on
the date hereof) pursuant to the Securities Exchange Act of 1934.
1.5 CAUSE. The term "Cause" shall mean any act of personal dishonesty,
willful misconduct, embezzlement, fraud, intentional failure to comply with the
Bank's policies, willful violation of any banking law, rule or regulation, or
material breach of any provision of this Agreement.
ARTICLE 2.
2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank
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in such capacity and with such duties and responsibilities as may be assigned
to him, and with such compensation as may be determined from time to time by
the Board of Directors of the Bank.
2.2 FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank by
which Executive is then employed pursuant to this Agreement; provided, however,
this provision shall not preclude Executive from serving as a director or member
of a committee of any other organization involving no conflict of interest with
the interests of the Bank, from engaging in charitable and community activities,
and from managing his personal investments, provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.
2.3 FRINGE BENEFIT. The salary continuation benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Executive and are
not part of any salary reduction plan or any arrangement deferring a bonus or
salary increase. The Executive has no option to take any current payment or
bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1 RETIREMENT. Executive shall be entitled to receive the benefit set
forth in Section 3.2 of this Agreement beginning on the first day of the month
next following his attainment of age sixty-two (62) or upon such later date as
may be mutually agreed upon by the Executive and the Bank ("Retirement Date").
3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will pay
to the Executive the annual sum of Seventy-Five Thousand Dollars ($75,000),
payable in equal
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monthly installments on the first day of each month following such Retirement
Date until the Executive dies, subject to the conditions and limitations set
forth in this Agreement. This amount shall be adjusted upward annually on the
anniversary of the first payment at the rate of two percent (2%) per year
based upon the previous year's amount.
3.3 VESTING. Executive shall be vested immediately as to fifty percent
(50%) of the benefit and shall vest at the rate of an additional twelve and
one-half percent (12 1/2%) each year on December 31st while in the Bank's employ
beginning on December 31, 2000, until vested in full.
3.4 EARLY RETIREMENT. Executive shall be entitled to early retirement
anytime after he attains age fifty-five (55), if fully vested. In the event of
Executive's early retirement, he shall be entitled to receive the benefit set
for the in Section 3.2, reduced by five percent (5%) for each year that
Executive elects to receive the benefit prior to the Retirement Date.
ARTICLE 4.
4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to his Retirement
Date, or upon the Executive's death after his Retirement Date, the Bank shall
pay to the Executive's designated Beneficiary an amount equal to the accumulated
salary continuation obligation on the books of the Bank for the benefit of the
Executive. Said amount shall be paid to the Executive's designated Beneficiary
in a lump sum within three (3) months of the Executive's date of death. If a
valid Beneficiary Designation is not in effect, the payments shall be made to
the Executive's surviving spouse or, if none, said payments shall be made to the
duly qualified personal representative, executor or administrator of Executive's
estate. Provided, however, that anything hereinabove to the
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contrary notwithstanding, no death benefit shall be payable hereunder if it
is determined that the Executive has made any material misstatement of fact
on any application for life insurance purchased by the Bank.
4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive should
become disabled while actively employed by the Bank at any time after the date
of this Agreement but prior to her Retirement Date, the Executive shall become
fully vested. In the event of disability, Executive then may elect to receive
payments either pursuant to the provisions of Section 3.2 regarding retirement
or Section 3.4 regarding early retirement.
ARTICLE 5.
5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to terminate
the employment of the Executive at any time prior to his Retirement Date. In the
event that Executive's employment is terminated for cause, as defined above,
then Executive shall not be entitled to any benefits pursuant to this Agreement.
In the event that the employment of the Executive's shall terminate prior to the
Executive's Retirement Date, other than by reasons of Executive's disability,
death or cause, then Executive shall be entitled to the vested portion of the
benefit pursuant to Article 3 of this Agreement.
5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (i) the Executive's employment with the Bank is terminated;
(ii) Executive's annual compensation and benefits are reduced from their levels
on the date of a Change of Control of the Bank; (iii) Executive's duties,
responsibilities and authority are reduced from those of his then position on
the date of a Change of Control of the Bank; or (iv) the situs of Executive's
employment is
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changed more than 50 miles, then in such event, Executive shall become fully
vested.
ARTICLE 6.
6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise
encumber in advance any of the benefits hereunder, nor shall any of said
benefits be subject to seizure for the payment of any debts, judgments, alimony
or separate maintenance, owed by the Executive or his beneficiary or any of
them, or be transferable by operation of law in the event of a bankruptcy,
insolvency or otherwise.
ARTICLE 7.
7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits under
the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based; (3) a
description of any additional information or material necessary for the claimant
to perfect his claim, and a description of why it is needed; and (4) an
explanation of the Agreement's claim review procedure and other appropriate
information as to the steps to be taken if the Executive or Executive's
beneficiary wishes to have the claim reviewed. If the Bank determines that there
are special circumstances requiring additional time to make a decision, the Bank
shall notify the Executive or Executive's beneficiary of the special
circumstances and the date by which a decision is expected to be made,
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and may extend the time for up to one additional period of up to sixty (60)
days.
7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive or
Executive's beneficiary believes that he is entitled to greater or different
benefits, the Executive or Executive's beneficiary shall have the opportunity to
have such claim reviewed by the Bank by filing a petition for review with the
Bank within sixty (60) days after receipt of the notice issued by the Bank. Said
petition shall state the specific reasons which the Executive or Executive's
beneficiary believes, entitle him to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Bank of the petition, the
Bank shall afford the Executive or Executive's beneficiary (and counsel, if any)
an opportunity to present his position to the Bank orally or in writing, and the
Executive or Executive's beneficiary (or counsel) shall have the right to review
the pertinent documents. The Bank shall notify the Executive or Executive's
beneficiary of its decision in writing within the sixty (60) day period, stating
specifically the basis of its decision, written within the sixty (60) day
period, stating specifically the basis of its decision, written in a manner
calculated to be understood by the Executive or Executive's beneficiary and the
specific provisions of the Agreement on which the decision is based. If, because
of the need for a hearing, the sixty (60) day period is not sufficient, the
decision may be deferred for one additional period of up to sixty (60) days at
the election of the Bank, but notice of this deferral shall be given to the
Executive or Executive's beneficiary.
ARTICLE 8.
8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited to
the right to receive payments as provided in this Agreement and the Executive's
position with respect thereto
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is that of a general unsecured creditor of the Bank.
ARTICLE 9.
9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of the Bank unless and until such succeeding or continuing
corporation, bank, firm, or person agrees to assume and discharge the
obligations of the Bank under this Agreement. Upon the occurrence of such event,
the term "Bank" as used in this Agreement shall be deemed to refer to such
successor or survivor corporation, bank, firm or person.
ARTICLE 10.
10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive, or
restrict the right of the Executive to terminate his employment.
ARTICLE 11.
11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into this
Agreement, have been concerned with the fact that substantial damages will be
suffered by the Executive in the event that the Bank shall fail to perform
according to this Agreement. In the event of nonperformance by the Bank for a
period of thirty (30) days or more from the time any such payment was scheduled
to be made pursuant to this Agreement, executive shall immediately be entitled
to liquidated damages of Five Thousand Dollars ($5,000.) for each payment not
made on a timely basis. This provision shall not be applicable in the event that
such nonpayment is the result of prohibition of such payment by law, regulation
or order of a banking regulatory agency.
ARTICLE 12.
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12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations of
this Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representative of the parties hereto. Executive may
not assign this Agreement or any of the Executive's rights hereunder except with
the prior written consent of the Bank.
12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstance, is judged by a court to be void or
unenforceable, in whole or in part, the same shall in no way affect any other
provision of this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the State
of California applicable to contracts performed entirely therein. Executive and
Bank each consent to the jurisdiction of, and any action concerning this
Agreement shall be brought and tried in, the United States District Court for
the Northern District of California or the Superior or Municipal Court for the
County of Santa Cruz.
12.4 WAIVER. A waiver by either party of any of the terms or conditions
of this Agreement in any one instance shall not be deemed or construed to be a
waiver of such terms or conditions for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations, and agreements
contained in this Agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.
12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or
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misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees an other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH HEREBY
MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE
TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF
OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
12.6 HEADINGS. The headings in this Agreement are for convenience only
and shall not in any manner affect the interpretation or construction of the
Agreement or any of its provisions.
12.7. NOTICE. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served, or if mailed, upon deposit in the United
States mail, first class postage prepaid, express or certified, return receipt
requested, and properly addressed to the parties as follows: if to Executive at
his last address shown in the Bank's records, if to Bank:
Coast Commercial Bank
740 Front Street, Suite 240
Santa Cruz, CA 95060
Attn: Chairman
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Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.
(Signature page follows)
IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Santa Cruz, California, the day and year first above written.
COAST COMMERCIAL BANK EXECUTIVE
BY: /s/ BRUCE H. KENDALL
- ------------------------
ITS: SENIOR VICE PRESIDENT & CFO /s/ DAVID V. HEALD
- -------------------------------- ------------------
David V. Heald
COAST BANCORP
BY: /s/ BRUCE H. KENDALL
- ------------------------
ITS: SENIOR VICE PRESIDENT & CFO
- ---------------------------------
12
<PAGE>
EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS EXECUTIVE SALARY CONTINUATION AGREEMENT ("Agreement") is made and
entered into this 23rd day of July, 1999, by and between Coast Bancorp, a
California corporation and Coast Commercial Bank, a California banking
corporation on the one hand (collectively the "Bank"), their successors or
assigns, and Sandra Anderson on the other hand (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President; and
WHEREAS, the experience of the Executive, her knowledge of the affairs
of the Bank, and her reputation and contact in the banking industry are so
valuable that assurance of her continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the Bank
to arrange terms of continued employment for the Executive so as to reasonably
assure her remaining in the Bank's employment during her lifetime or until the
age of retirement; and
WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or her beneficiaries certain
benefits in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and convenants herein contained, it is
hereby agreed as follows:
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ARTICLE 1.
1.1 BENEFICIARY. The term Beneficiary shall mean the person or persons
whom the Executive shall designate in writing to receive the benefits provided
hereunder.
1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined in
such policy without regard to any waiting period. If Executive is not covered by
a Bank-sponsored disability policy, the term disability shall mean the inability
of the Executive to perform the duties and responsibilities of her position with
the Bank in a normal and regular manner, due to mental or physical illness or
injury, for a period of ninety (90) consecutive days, or for fifty percent (50%)
or more of the normal working days during a period of one hundred eighty (180)
consecutive days. Determination of the Executive's disability shall be made by
the Bank's Board of Directors, which determination shall not be unreasonable or
arbitrary and shall be supported by medical opinion. In the event Executive is
also a director of the Bank, the Executive shall be ineligible to participate in
such disability determination. Executive shall, if requested by the Bank's Board
of Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The psychiatrist
or physician performing such examination shall be selected by the Bank and
Executive, or the Executive's representative if Executive is not able to
participate in such selection.
1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan Administrator of this plan shall be the Bank.
1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i)
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a tender offer shall be made and consummated for the ownership of 25% or more of
the outstanding voting securities of the Bank; (ii) the Bank shall be merged or
consolidated with another bank or corporation and as a result of such merger or
consolidation less then 75% of the outstanding voting securities of the
surviving or resulting bank or corporation shall be owned in the aggregate by
the former shareholders of the Bank, other than affiliates (within the meaning
of the Securities Exchange Act of 1934) of the party to such merger or
consolidation, as the same shall have existed immediately prior to such merger
or consolidation; (iii) the Bank shall sell substantially all of its assets to
another bank or corporation which is not a wholly owned subsidiary; or (iv) a
person, within the meaning of Section 3 (a)(9) or of Section 13(d)(3) (as in
effect on the date hereof) of the Securities Exchange Act of 1934, shall acquire
25% or more of the outstanding voting securities of the Bank (whether directly,
indirectly, beneficially or of record). For purposes hereof, ownership of voting
securities shall take into account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(1)(I) (as in effect on the date hereof)
pursuant to the Securities Exchange Act of 1934.
1.5 CAUSE. The term "Cause" shall mean any act of personal dishonesty,
willful misconduct, embezzlement, fraud, intentional failure to comply with the
Bank's policies, willful violation of any banking law, rule or regulation, or
material breach of any provision of this Agreement.
ARTICLE 2.
2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to her, and with such compensation as may be
determined from time to time by the Board of Directors of the
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Bank.
2.2 FULL EFFORTS. Executive shall devote her full business time and
efforts to the business and affairs of the Bank or the successor to the Bank by
which Executive is then employed pursuant to this Agreement; provided, however,
this provision shall not preclude Executive from serving as a director or member
of a committee of any other organization involving no conflict of interest with
the interests of the Bank, from engaging in charitable and community activities,
and from managing her personal investments, provided that such activities do not
materially interfere with the regular performance of her duties and
responsibilities under this Agreement.
2.3 FRINGE BENEFIT. The salary continuation benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Executive and are
not part of any salary reduction plan or any arrangement deferring a bonus or
salary increase. The Executive has no option to take any current payment or
bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1 RETIREMENT. Executive shall be entitled to receive the benefit set
forth in Section 3.2 of this Agreement beginning on the first day of the month
next following her attainment of age sixty-two (62) or upon such later date as
may be mutually agreed upon by the Executive and the Bank ("Retirement Date").
3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will pay
to the Executive the annual sum of Forty Thousand Dollars ($40,000), payable in
equal monthly installments on the first day of each month following such
Retirement Date until the Executive dies, subject to the conditions and
limitations set forth in this Agreement. This amount shall be
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<PAGE>
adjusted upward annually on the anniversary of the first payment at the rate of
two percent (2%) per year based upon the previous year's amount.
3.3 VESTING. Executive shall become vested immediately as to thirty
percent (30%) of the benefit and shall vest at the rate of an additional ten
percent (10%) each year on December 31st while in the Bank's employ beginning on
December 31, 2000. In the event that the Executive is employed by the Bank on
December 7, 2004, the Executive shall become fully vested.
3.4 EARLY RETIREMENT. Executive shall be entitled to early retirement
anytime after she attains age fifty-five (55), if fully vested. In the event of
Executive's early retirement, she shall be entitled to receive the benefit set
for the in Section 3.2, reduced by five percent (5%) for each year that
Executive elects to receive the benefit prior to the Retirement Date.
ARTICLE 4.
4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to her Retirement
Date, or upon the Executive's death after her Retirement Date, the Bank shall
pay to the Executive's designated Beneficiary an amount equal to the accumulated
salary continuation obligation on the books of the Bank for the benefit of the
Executive. Said amount shall be paid to the Executive's designated Beneficiary
in a lump sum within three (3) months of the Executive's date of death. If a
valid Beneficiary Designation is not in effect, the payments shall be made to
the Executive's surviving spouse or if none, said payments shall be made to the
duly qualified personal representative, executor or administrator of Executive's
estate. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if it is determined
that the
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Executive has made any material misstatement of fact on any application for life
insurance purchased by the Bank.
4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive should
become disabled while actively employed by the Bank at any time after the date
of this Agreement but prior to her Retirement Date, the Executive shall become
fully vested. In the event of disability, Executive then may elect to receive
payments either pursuant to the provisions of Section 3.2 regarding retirement
or Section 3.4 regarding early retirement.
ARTICLE 5.
5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to terminate
the employment of the Executive at any time prior to her Retirement Date. In the
event that Executive's employment is terminated for cause, as defined above,
then Executive shall not be entitled to any benefits pursuant to this Agreement.
In the event that the employment of the Executive's disability, death or cause,
then Executive shall be entitled to the vested portion of the benefit pursuant
to Article 3 of this Agreement.
5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (I) the Executive's employment with the Bank is terminated;
(ii) Executive's annual compensation and benefits are reduced from their levels
on the date of a Change of Control of the Bank; (iii) Executive's duties,
responsibilities and authority are reduced from those of her then position on
the date of a Change of Control of the Bank; or (iv) the situs of Executive's
employment is changed more than 50 miles, then in such event, Executive shall
become fully vested.
ARTICLE 6.
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6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate, mortgage, commute, modify, or otherwise
encumber in advance any of the benefits hereunder, nor shall any of said
benefits be subject to seizure for the payment of any debts, judgments, alimony
or separate maintenance, owed by the Executive or her beneficiary or any of
them, or be transferable by operation of law in the event of a bankruptcy,
insolvency or otherwise.
ARTICLE 7.
7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits under
the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based; (3) a
description of any additional information or material necessary for the claimant
to perfect her claim, and a description of why it is needed; and (4) an
explanation of the Agreement's claim review procedure and other appropriate
information as to the steps to be taken if the Executive or Executive's
beneficiary wishes to have the claim reviewed. If the Bank determines that there
are special circumstances requiring additional time to make a decision, the Bank
shall notify the Executive or Executive's beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to one additional period of up to sixty (60) days.
7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive or
Executive's beneficiary believes that
7
<PAGE>
she is entitled to greater or different benefits, the Executive or Executive's
beneficiary shall have the opportunity to have such claim reviewed by the Bank
by filing a petition for review with the Bank within sixty (60) days after
receipt of the notice issued by the Bank. Said petition shall state the specific
reasons which the Executive or Executive's beneficiary believes, entitle her to
benefits or to greater or different benefits. Within sixty (60) days after
receipt by the Bank of the petition, the Bank shall afford the Executive or
Executive's beneficiary (and counsel, if any) an opportunity to present her
position to the Bank orally or in writing, and the Executive or Executive's
beneficiary (or counsel) shall have the right to review the pertinent documents.
The Bank shall notify the Executive or Executive's beneficiary of its decision
in writing within the sixty (60) day period, stating specifically the basis of
its decision, written within the sixty (60) day period, stating specifically the
basis of its decision, written in a manner calculated to be understood by the
Executive or Executive's beneficiary and the specific provisions of the
Agreement on which the decision is based. If, because of the need for a hearing,
the sixty (60) day period is not sufficient, the decision may be deferred for
one additional period of up to sixty (60) days at the election of the Bank, but
notice of this deferral shall be given to the Executive or Executive's
beneficiary.
ARTICLE 8.
8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited to
the right to receive payments as provided in this Agreement and the Executive's
position with respect thereto is that of a general unsecured creditor of the
Bank.
ARTICLE 9.
9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of
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the Bank unless and until such succeeding or continuing corporation, bank, firm,
or person agrees to assume and discharge the obligations of the Bank under this
Agreement. Upon the occurrence of such event, the term "Bank" as used in this
Agreement shall be deemed to refer to such successor or survivor corporation,
bank, firm or person.
ARTICLE 10.
10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive, or
restrict the right of the Executive to terminate her employment.
ARTICLE 11.
11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into this
Agreement, have been concerned with the fact that substantial damages will be
suffered by the Executive in the event that the Bank shall fail to perform
according to this Agreement. In the event of nonperformance by the Bank for a
period of thirty (30) days or more from the time any such payment was scheduled
to be made pursuant to this Agreement, executive shall immediately be entitled
to liquidated damages of Five Thousand Dollars ($5,000.) for each payment not
made on a timely basis. This provision shall not be applicable in the event that
such nonpayment is the result of prohibition of such payment by law, regulation
or order of a banking regulatory agency.
ARTICLE 12.
12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations of
this Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representative of the parties hereto. Executive may
not assign this Agreement or any of
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the Executive's rights hereunder except with the prior written consent of the
Bank.
12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstance, is judged by a court to be void or
unenforceable, in whole or in part, the same shall in no way affect any other
provision of this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the State
of California applicable to contracts performed entirely therein. Executive and
Bank each consent to the jurisdiction of, and any action concerning this
Agreement shall be brought and tried in, the United States District Court for
the Northern District of California or the Superior or Municipal Court for the
County of Santa Cruz.
12.4 WAIVER. A waiver by either party of any of the terms or conditions
of this Agreement in any one instance shall not be deemed or construed to be a
waiver of such terms or conditions for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations, and agreements
contained in this Agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.
12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees an other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
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entitled.
12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH HEREBY
MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY HAVE
TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF
OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT CONTEMPLATED TO
BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THIS AGREEMENT.
12.6 HEADINGS. The headings in this Agreement are for convenience only
and shall not in any manner affect the interpretation or construction of the
Agreement or any of its provisions.
12.7. NOTICE. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served, or if mailed, upon deposit in the United
States mail, first class postage prepaid, express or certified, return receipt
requested, and properly addressed to the parties as follows: if to Executive at
her last address shown in the Bank's records, if to Bank:
Coast Commercial Bank
740 Front Street, Suite 240
Santa Cruz, CA 95060
Attn: Chairman
Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.
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Signature page follows.
IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set her hand at
Santa Cruz, California, the day and year first above written.
COAST COMMERCIAL BANK EXECUTIVE
BY: /s/ BRUCE H. KENDALL
- ------------------------
ITS: SENIOR VICE PRESIDENT & CFO /s/ SANDRA ANDERSON
- -------------------------------- -------------------
Sandra Anderson
COAST BANCORP
BY: /s/ BRUCE H. KENDALL
- ------------------------
ITS: SENIOR VICE PRESIDENT & CFO
- --------------------------------
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EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS EXECUTIVE SALARY CONTINUATION AGREEMENT ("Agreement") is made and
entered into this 23rd day of July, 1999, by and between Coast Bancorp, a
California corporation and Coast Commercial Bank, a California banking
corporation on the one hand (collectively the "Bank"), their successors or
assigns, and Terry A. Chandler on the other hand (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President; and
WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contact in the banking industry are so
valuable that assurance of his continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the Bank
to arrange terms of continued employment for the Executive so as to reasonably
assure his remaining in the Bank's employment during his lifetime or until the
age of retirement; and
WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the
Bank provided the Bank agrees to pay the Executive or his beneficiaries
certain benefits in accordance with the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the services to be performed in
the future as well as the mutual promises and convenants herein contained, it
is hereby agreed as follows:
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ARTICLE 1.
1.1 BENEFICIARY. The term Beneficiary shall mean the person or persons
whom the Executive shall designate in writing to receive the benefits provided
hereunder.
1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined
in such policy without regard to any waiting period. If Executive is not
covered by a Bank-sponsored disability policy, the term disability shall mean
the inability of the Executive to perform the duties and responsibilities of
his position with the Bank in a normal and regular manner, due to mental or
physical illness or injury, for a period of ninety (90) consecutive days, or
for fifty percent (50%) or more of the normal working days during a period of
one hundred eighty (180) consecutive days. Determination of the Executive's
disability shall be made by the Bank's Board of Directors, which
determination shall not be unreasonable or arbitrary and shall be supported
by medical opinion. In the event Executive is also a director of the Bank,
the Executive shall be ineligible to participate in such disability
determination. Executive shall, if requested by the Bank's Board of
Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The
psychiatrist or physician performing such examination shall be selected by
the Bank and Executive, or the Executive's representative if Executive is not
able to participate in such selection.
1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan Administrator of this plan shall be the Bank.
1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i)
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a tender offer shall be made and consummated for the ownership of 25% or more
of the outstanding voting securities of the Bank; (ii) the Bank shall be
merged or consolidated with another bank or corporation and as a result of
such merger or consolidation less then 75% of the outstanding voting
securities of the surviving or resulting bank or corporation shall be owned
in the aggregate by the former shareholders of the Bank, other than
affiliates (within the meaning of the Securities Exchange Act of 1934) of the
party to such merger or consolidation, as the same shall have existed
immediately prior to such merger or consolidation; (iii) the Bank shall sell
substantially all of its assets to another bank or corporation which is not a
wholly owned subsidiary; or (iv) a person, within the meaning of Section 3
(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, shall acquire 25% or more of the outstanding
voting securities of the Bank (whether directly, indirectly, beneficially or
of record). For purposes hereof, ownership of voting securities shall take
into account and shall include ownership as determined by applying the
provisions of Rule 13d-3(d)(1)(I) (as in effect on the date hereof) pursuant
to the Securities Exchange Act of 1934.
1.5 CAUSE. The term "Cause" shall mean any act of personal
dishonesty, willful misconduct, embezzlement, fraud, intentional failure to
comply with the Bank's policies, willful violation of any banking law, rule
or regulation, or material breach of any provision of this Agreement.
ARTICLE 2.
2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to him, and with such compensation as may be
determined from time to time by the Board of Directors of the
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Bank.
2.2 FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank
by which Executive is then employed pursuant to this Agreement; provided,
however, this provision shall not preclude Executive from serving as a
director or member of a committee of any other organization involving no
conflict of interest with the interests of the Bank, from engaging in
charitable and community activities, and from managing his personal
investments, provided that such activities do not materially interfere with
the regular performance of his duties and responsibilities under this
Agreement.
2.3 FRINGE BENEFIT. The salary continuation benefits provided by
this Agreement are granted by the Bank as a fringe benefit to the Executive
and are not part of any salary reduction plan or any arrangement deferring a
bonus or salary increase. The Executive has no option to take any current
payment or bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1 RETIREMENT. Executive shall be entitled to receive the benefit
set forth in Section 3.2 of this Agreement beginning on the first day of the
month next following his attainment of age sixty-two (62) or upon such later
date as may be mutually agreed upon by the Executive and the Bank
("Retirement Date").
3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will
pay to the Executive the annual sum of Forty Thousand Dollars ($40,000),
payable in equal monthly installments on the first day of each month
following such Retirement Date until the Executive dies, subject to the
conditions and limitations set forth in this Agreement. This amount shall be
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adjusted upward annually on the anniversary of the first payment at the rate
of two percent (2%) per year based upon the previous year's amount.
3.3 VESTING. Executive shall become vested immediately as to thirty
percent (30%) of the benefit and shall vest at the rate of an additional ten
percent (10%) each year on December 31st while in the Bank's employ beginning
on December 31, 2000, until vested in full.
3.4 EARLY RETIREMENT. Executive shall be entitled to early
retirement anytime after he attains age fifty-five (55), if fully vested. In
the event of Executive's early retirement, he shall be entitled to receive
the benefit set for the in Section 3.2, reduced by five percent (5%) for each
year that Executive elects to receive the benefit prior to the Retirement
Date.
ARTICLE 4.
4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to his
Retirement Date, or upon the Executive's death after his Retirement Date, the
Bank shall pay to the Executive's designated Beneficiary an amount equal to
the accumulated salary continuation obligation on the books of the Bank for
the benefit of the Executive. Said amount shall be paid to the Executive's
designated Beneficiary a lump sum within three (3) months of the Executive's
date of death. If a valid Beneficiary Designation is not in effect, the
payments shall be made to the Executive's surviving spouse or, if none, said
payments shall be made to the duly qualified personal representative,
executor or administrator of Executive's estate. Provided, however, that
anything hereinabove to the contrary notwithstanding, no death benefit shall
be payable hereunder if it is determined that the Executive has made any
material misstatement of fact on any application for life insurance purchased
by the Bank.
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4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive
should become disabled while actively employed by the Bank at any time after
the date of this Agreement but prior to his Retirement Date, the Executive
shall become fully vested. In the event of disability, Executive then may
elect to receive payments either pursuant to the provisions of Section 3.2
regarding retirement or Section 3.4 regarding early retirement.
ARTICLE 5.
5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to
terminate the employment of the Executive at any time prior to his Retirement
Date. In the event that Executive's employment is terminated for cause, as
defined above, then Executive shall not be entitled to any benefits pursuant
to this Agreement. In the event that the employment of the Executive's
disability, death or cause, then Executive shall be entitled to the vested
portion of the benefit pursuant to Article 3 of this Agreement.
5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (I) the Executive's employment with the Bank is
terminated; (ii) Executive's annual compensation and benefits are reduced
from their levels on the date of a Change of Control of the Bank; (iii)
Executive's duties, responsibilities and authority are reduced from those of
his then position on the date of a Change of Control of the Bank; or (iv) the
situs of Executive's employment is changed more than 50 miles, then in such
event, Executive shall become fully vested.
ARTICLE 6.
6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate,
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mortgage, commute, modify, or otherwise encumber in advance any of the
benefits hereunder, nor shall any of said benefits be subject to seizure for
the payment of any debts, judgments, alimony or separate maintenance, owed by
the Executive or his beneficiary or any of them, or be transferable by
operation of law in the event of a bankruptcy, insolvency or otherwise.
ARTICLE 7.
7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits
under the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based;
(3) a description of any additional information or material necessary for the
claimant to perfect his claim, and a description of why it is needed; and (4)
an explanation of the Agreement's claim review procedure and other
appropriate information as to the steps to be taken if the Executive or
Executive's beneficiary wishes to have the claim reviewed. If the Bank
determines that there are special circumstances requiring additional time to
make a decision, the Bank shall notify the Executive or Executive's
beneficiary of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to one additional period
of up to sixty (60) days.
7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive or
Executive's beneficiary believes that he is entitled to greater or different
benefits, the Executive or Executive's beneficiary shall have the opportunity to
have such claim reviewed by the Bank by filing a petition for review with the
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Bank within sixty (60) days after receipt of the notice issued by the Bank.
Said petition shall state the specific reasons which the Executive or
Executive's beneficiary believes, entitle him to benefits or to greater or
different benefits. Within sixty (60) days after receipt by the Bank of the
petition, the Bank shall afford the Executive or Executive's beneficiary (and
counsel, if any) an opportunity to present his position to the Bank orally or
in writing, and the Executive or Executive's beneficiary (or counsel) shall
have the right to review the pertinent documents. The Bank shall notify the
Executive or Executive's beneficiary of its decision in writing within the
sixty (60) day period, stating specifically the basis of its decision,
written within the sixty (60) day period, stating specifically the basis of
its decision, written in a manner calculated to be understood by the
Executive or Executive's beneficiary and the specific provisions of the
Agreement on which the decision is based. If, because of the need for a
hearing, the sixty (60) day period is not sufficient, the decision may be
deferred for one additional period of up to sixty (60) days at the election
of the Bank, but notice of this deferral shall be given to the Executive or
Executive's beneficiary.
ARTICLE 8.
8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited
to the right to receive payments as provided in this Agreement and the
Executive's position with respect thereto is that of a general unsecured
creditor of the Bank.
ARTICLE 9.
9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of the Bank unless and until such succeeding or continuing
corporation, bank, firm, or person agrees to assume and discharge the
obligations of the Bank under this Agreement. Upon the
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occurrence of such event, the term "Bank" as used in this Agreement shall be
deemed to refer to such successor or survivor corporation, bank, firm or
person.
ARTICLE 10.
10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be
deemed to constitute a contract of employment between the parties hereto, nor
shall any provision hereof restrict the right of the Bank to discharge the
Executive, or restrict the right of the Executive to terminate his employment.
ARTICLE 11.
11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into
this Agreement, have been concerned with the fact that substantial damages
will be suffered by the Executive in the event that the Bank shall fail to
perform according to this Agreement. In the event of nonperformance by the
Bank for a period of thirty (30) days or more from the time any such payment
was scheduled to be made pursuant to this Agreement, executive shall
immediately be entitled to liquidated damages of Five Thousand Dollars
($5,000.) for each payment not made on a timely basis. This provision shall
not be applicable in the event that such nonpayment is the result of
prohibition of such payment by law, regulation or order of a banking
regulatory agency.
ARTICLE 12.
12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations
of this Agreement shall be binding upon and inure to the benefit of the
successors, assigns, heirs and personal representative of the parties hereto.
Executive may not assign this Agreement or any of the Executive's rights
hereunder except with the prior written consent of the Bank.
12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to
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any circumstance, is judged by a court to be void or unenforceable, in whole
or in part, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or
the validity or enforceability of this Agreement.
12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the
State of California applicable to contracts performed entirely therein.
Executive and Bank each consent to the jurisdiction of, and any action
concerning this Agreement shall be brought and tried in, the United States
District Court for the Northern District of California or the Superior or
Municipal Court for the County of Santa Cruz.
12.4 WAIVER. A waiver by either party of any of the terms or
conditions of this Agreement in any one instance shall not be deemed or
construed to be a waiver of such terms or conditions for the future, or of
any subsequent breach thereof. All remedies, rights, undertakings,
obligations, and agreements contained in this Agreement shall be cumulative,
and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either party.
12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees an other costs
incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.
12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH
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HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR
ARISING OUT OF OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT.
12.6 HEADINGS. The headings in this Agreement are for convenience
only and shall not in any manner affect the interpretation or construction of
the Agreement or any of its provisions.
12.7. NOTICE. Any notice or other communication to be given under
this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if personally served, or if mailed, upon deposit
in the United States mail, first class postage prepaid, express or certified,
return receipt requested, and properly addressed to the parties as follows:
if to Executive at his last address shown in the Bank's records, if to Bank:
Coast Commercial Bank
740 Front Street, Suite 240
Santa Cruz, CA 95060
Attn: Chairman
Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.
Signature page follows.
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IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Santa Cruz, California, the day and year first above written.
COAST COMMERCIAL BANK EXECUTIVE
BY: /s/ BRUCE H. KENDALL
----------------------------
ITS: SENIOR VICE PRESIDENT & CFO /s/ TERRY A. CHANDLER
------------------------
COAST BANCORP
BY: /s/ BRUCE H. KENDALL
----------------------------
ITS: SENIOR VICE PRESIDENT & CFO
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EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS EXECUTIVE SALARY CONTINUATION AGREEMENT ("Agreement") is made and
entered into this 23rd day of July, 1999, by and between Coast Bancorp, a
California corporation and Coast Commercial Bank, a California banking
corporation on the one hand (collectively the "Bank"), their successors or
assigns, and Richard Hofstetter on the other hand (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President; and
WHEREAS, the experience of the Executive, his knowledge of the affairs
of the Bank, and his reputation and contact in the banking industry are so
valuable that assurance of his continued service is essential for the future
growth and profitability of the Bank and it is in the best interests of the Bank
to arrange terms of continued employment for the Executive so as to reasonably
assure his remaining in the Bank's employment during his lifetime or until the
age of retirement; and
WHEREAS, it is the desire of the Bank that the Executive's services be
retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the Bank
provided the Bank agrees to pay the Executive or his beneficiaries certain
benefits in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the services to be performed in the
future as well as the mutual promises and convenants herein contained, it is
hereby agreed as follows:
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ARTICLE 1.
1.1 BENEFICIARY. The term Beneficiary shall mean the person or persons
whom the Executive shall designate in writing to receive the benefits provided
hereunder.
1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined in
such policy without regard to any waiting period. If Executive is not covered by
a Bank-sponsored disability policy, the term disability shall mean the inability
of the Executive to perform the duties and responsibilities of his position with
the Bank in a normal and regular manner, due to mental or physical illness or
injury, for a period of ninety (90) consecutive days, or for fifty percent (50%)
or more of the normal working days during a period of one hundred eighty (180)
consecutive days. Determination of the Executive's disability shall be made by
the Bank's Board of Directors, which determination shall not be unreasonable or
arbitrary and shall be supported by medical opinion. In the event Executive is
also a director of the Bank, the Executive shall be ineligible to participate in
such disability determination. Executive shall, if requested by the Bank's Board
of Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The psychiatrist
or physician performing such examination shall be selected by the Bank and
Executive, or the Executive's representative if Executive is not able to
participate in such selection.
1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan Administrator of this plan shall be the Bank.
1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i)
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a tender offer shall be made and consummated for the ownership of 25% or more
of the outstanding voting securities of the Bank; (ii) the Bank shall be
merged or consolidated with another bank or corporation and as a result of
such merger or consolidation less then 75% of the outstanding voting
securities of the surviving or resulting bank or corporation shall be owned
in the aggregate by the former shareholders of the Bank, other than
affiliates (within the meaning of the Securities Exchange Act of 1934) of the
party to such merger or consolidation, as the same shall have existed
immediately prior to such merger or consolidation; (iii) the Bank shall sell
substantially all of its assets to another bank or corporation which is not a
wholly owned subsidiary; or (iv) a person, within the meaning of Section 3
(a)(9) or of Section 13(d)(3) (as in effect on the date hereof) of the
Securities Exchange Act of 1934, shall acquire 25% or more of the outstanding
voting securities of the Bank (whether directly, indirectly, beneficially or
of record). For purposes hereof, ownership of voting securities shall take
into account and shall include ownership as determined by applying the
provisions of Rule 13d-3(d)(1)(I) (as in effect on the date hereof) pursuant
to the Securities Exchange Act of 1934.
1.5 CAUSE. The term "Cause" shall mean any act of personal dishonesty,
willful misconduct, embezzlement, fraud, intentional failure to comply with the
Bank's policies, willful violation of any banking law, rule or regulation, or
material breach of any provision of this Agreement.
ARTICLE 2.
2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to him, and with such compensation as may be
determined from time to time by the Board of Directors of the
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Bank.
2.2 FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank by
which Executive is then employed pursuant to this Agreement; provided, however,
this provision shall not preclude Executive from serving as a director or member
of a committee of any other organization involving no conflict of interest with
the interests of the Bank, from engaging in charitable and community activities,
and from managing his personal investments, provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.
2.3 FRINGE BENEFIT. The salary continuation benefits provided by this
Agreement are granted by the Bank as a fringe benefit to the Executive and are
not part of any salary reduction plan or any arrangement deferring a bonus or
salary increase. The Executive has no option to take any current payment or
bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1 RETIREMENT. Executive shall be entitled to receive the benefit set
forth in Section 3.2 of this Agreement beginning on the first day of the month
next following his attainment of age sixty-two (62) or upon such later date as
may be mutually agreed upon by the Executive and the Bank ("Retirement Date").
3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will pay
to the Executive the annual sum of Fifty Thousand Dollars ($50,000), payable in
equal monthly installments on the first day of each month following such
Retirement Date until the Executive dies, subject to the conditions and
limitations set forth in this Agreement. This amount shall be
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adjusted upward annually on the anniversary of the first payment at the rate
of two percent (2%) per year based upon the previous year's amount.
3.3 VESTING. Executive shall become vested immediately as to thirty
percent (30%) of the benefit and shall vest at the rate of an additional ten
percent (10%) each year on December 31st while in the Bank's employ beginning on
December 31, 2000, until vested in full.
3.4 EARLY RETIREMENT. Executive shall be entitled to early retirement
anytime after he attains age fifty-five (55), if fully vested. In the event of
Executive's early retirement, he shall be entitled to receive the benefit set
for the in Section 3.2, reduced by five percent (5%) for each year that
Executive elects to receive the benefit prior to the Retirement Date.
ARTICLE 4.
4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to his Retirement
Date, or upon the Executive's death after his Retirement Date, the Bank shall
pay to the Executive's designated Beneficiary an amount equal to the accumulated
salary continuation obligation on the books of the Bank for the benefit of the
Executive. Said amount shall be paid to the Executive's designated Beneficiary
in a lump sum within three (3) months of the Executive's date of death. If a
valid Beneficiary Designation is not in effect, the payments shall be made to
the Executive's surviving spouse or, if none, said payments shall be made to the
duly qualified personal representative, executor or administrator of Executive's
estate. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if it is determined
that the Executive has made any material misstatement of fact on any application
for life insurance purchased by the Bank.
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4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive should
become disabled while actively employed by the Bank at any time after the date
of this Agreement but prior to her Retirement Date, the Executive shall become
fully vested. In the event of disability, Executive then may elect to receive
payments either pursuant to the provisions of Section 3.2 regarding retirement
or Section 3.4 regarding early retirement.
ARTICLE 5.
5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to terminate
the employment of the Executive at any time prior to his Retirement Date. In the
event that Executive's employment is terminated for cause, as defined above,
then Executive shall not be entitled to any benefits pursuant to this Agreement.
In the event that the employment of the Executive's disability, death or cause,
then Executive shall be entitled to the vested portion of the benefit pursuant
to Article 3 of this Agreement.
5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (i) the Executive's employment with the Bank is terminated;
(ii) Executive's annual compensation and benefits are reduced from their levels
on the date of a Change of Control of the Bank; (iii) Executive's duties,
responsibilities and authority are reduced from those of his then position on
the date of a Change of Control of the Bank; or (iv) the situs of Executive's
employment is changed more than 50 miles, then in such event, Executive shall
become fully vested.
ARTICLE 6.
6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary under this Agreement shall have any power or right to transfer,
assign, anticipate, hypothecate,
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mortgage, commute, modify, or otherwise encumber in advance any of the
benefits hereunder, nor shall any of said benefits be subject to seizure for
the payment of any debts, judgments, alimony or separate maintenance, owed by
the Executive or his beneficiary or any of them, or be transferable by
operation of law in the event of a bankruptcy, insolvency or otherwise.
ARTICLE 7.
7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits under
the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based; (3) a
description of any additional information or material necessary for the claimant
to perfect his claim, and a description of why it is needed; and (4) an
explanation of the Agreement's claim review procedure and other appropriate
information as to the steps to be taken if the Executive or Executive's
beneficiary wishes to have the claim reviewed. If the Bank determines that there
are special circumstances requiring additional time to make a decision, the Bank
shall notify the Executive or Executive's beneficiary of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to one additional period of up to sixty (60) days.
7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive or
Executive's beneficiary believes that he is entitled to greater or different
benefits, the Executive or Executive's beneficiary shall have the opportunity to
have such claim reviewed by the Bank by filing a petition for review with the
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Bank within sixty (60) days after receipt of the notice issued by the Bank. Said
petition shall state the specific reasons which the Executive or Executive's
beneficiary believes, entitle him to benefits or to greater or different
benefits. Within sixty (60) days after receipt by the Bank of the petition, the
Bank shall afford the Executive or Executive's beneficiary (and counsel, if any)
an opportunity to present his position to the Bank orally or in writing, and the
Executive or Executive's beneficiary (or counsel) shall have the right to review
the pertinent documents. The Bank shall notify the Executive or Executive's
beneficiary of its decision in writing within the sixty (60) day period, stating
specifically the basis of its decision, written within the sixty (60) day
period, stating specifically the basis of its decision, written in a manner
calculated to be understood by the Executive or Executive's beneficiary and the
specific provisions of the Agreement on which the decision is based. If, because
of the need for a hearing, the sixty (60) day period is not sufficient, the
decision may be deferred for one additional period of up to sixty (60) days at
the election of the Bank, but notice of this deferral shall be given to the
Executive or Executive's beneficiary.
ARTICLE 8.
8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited to
the right to receive payments as provided in this Agreement and the Executive's
position with respect thereto is that of a general unsecured creditor of the
Bank.
ARTICLE 9.
9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of the Bank unless and until such succeeding or continuing
corporation, bank, firm, or person agrees to assume and discharge the
obligations of the Bank under this Agreement. Upon the
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occurrence of such event, the term "Bank" as used in this Agreement shall be
deemed to refer to such successor or survivor corporation, bank, firm or
person.
ARTICLE 10.
10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be deemed
to constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Bank to discharge the Executive, or
restrict the right of the Executive to terminate his employment.
ARTICLE 11.
11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into this
Agreement, have been concerned with the fact that substantial damages will be
suffered by the Executive in the event that the Bank shall fail to perform
according to this Agreement. In the event of nonperformance by the Bank for a
period of thirty (30) days or more from the time any such payment was scheduled
to be made pursuant to this Agreement, executive shall immediately be entitled
to liquidated damages of Five Thousand Dollars ($5,000.) for each payment not
made on a timely basis. This provision shall not be applicable in the event that
such nonpayment is the result of prohibition of such payment by law, regulation
or order of a banking regulatory agency.
ARTICLE 12.
12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations of
this Agreement shall be binding upon and inure to the benefit of the successors,
assigns, heirs and personal representative of the parties hereto. Executive may
not assign this Agreement or any of the Executive's rights hereunder except with
the prior written consent of the Bank.
12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to
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any circumstance, is judged by a court to be void or unenforceable, in whole
or in part, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances, or
the validity or enforceability of this Agreement.
12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the State
of California applicable to contracts performed entirely therein. Executive and
Bank each consent to the jurisdiction of, and any action concerning this
Agreement shall be brought and tried in, the United States District Court for
the Northern District of California or the Superior or Municipal Court for the
County of Santa Cruz.
12.4 WAIVER. A waiver by either party of any of the terms or conditions
of this Agreement in any one instance shall not be deemed or construed to be a
waiver of such terms or conditions for the future, or of any subsequent breach
thereof. All remedies, rights, undertakings, obligations, and agreements
contained in this Agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.
12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding is
brought for the enforcement of this Agreement, or because of an alleged dispute,
breach, default, or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party or parties shall be
entitled to recover reasonable attorneys' fees an other costs incurred in that
action or proceeding, in addition to any other relief to which it or they may be
entitled.
12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH
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HEREBY MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR
ARISING OUT OF OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT.
12.6 HEADINGS. The headings in this Agreement are for convenience only
and shall not in any manner affect the interpretation or construction of the
Agreement or any of its provisions.
12.7. NOTICE. Any notice or other communication to be given under this
Agreement shall be in writing and shall be deemed to have been duly given on the
date of service if personally served, or if mailed, upon deposit in the United
States mail, first class postage prepaid, express or certified, return receipt
requested, and properly addressed to the parties as follows: if to Executive at
his last address shown in the Bank's records, if to Bank:
Coast Commercial Bank
740 Front Street, Suite 240
Santa Cruz, CA 95060
Attn: Chairman
Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.
Signature page follows.
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IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Santa Cruz, California, the day and year first above written.
COAST COMMERCIAL BANK EXECUTIVE
BY: /s/ BRUCE H. KENDALL
-------------------------------
ITS: SENIOR VICE PRESIDENT & CFO /s/ RICHARD HOFSTETTER
------------------------------ ------------------------------
Richard Hofstetter
COAST BANCORP
BY: /s/ BRUCE H. KENDALL
-------------------------------
ITS: SENIOR VICE PRESIDENT & CFO
------------------------------
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EXECUTIVE SALARY CONTINUATION AGREEMENT
THIS EXECUTIVE SALARY CONTINUATION AGREEMENT ("Agreement") is made
and entered into this 23rd day of July, 1999, by and between Coast Bancorp, a
California corporation and Coast Commercial Bank, a California banking
corporation on the one hand (collectively the "Bank"), their successors or
assigns, and Bruce H. Kendall on the other hand (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive is employed by the Bank as its Senior Vice
President and Chief Financial Officer; and
WHEREAS, the experience of the Executive, his knowledge of the
affairs of the Bank, and his reputation and contact in the banking industry
are so valuable that assurance of his continued service is essential for the
future growth and profitability of the Bank and it is in the best interests
of the Bank to arrange terms of continued employment for the Executive so as
to reasonably assure his remaining in the Bank's employment during his
lifetime or until the age of retirement; and
WHEREAS, it is the desire of the Bank that the Executive's services
be retained as herein provided; and
WHEREAS, the Executive is willing to continue in the employ of the
Bank provided the Bank agrees to pay the Executive or his beneficiaries
certain benefits in accordance with the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the services to be performed in the
future as
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well as the mutual promises and convenants herein contained, it is hereby
agreed as follows:
ARTICLE 1.
1.1 BENEFICIARY. The term Beneficiary shall mean the person or
persons whom the Executive shall designate in writing to receive the benefits
provided hereunder.
1.2. DISABILITY. If the Executive is covered by a Bank-sponsored
disability insurance policy, the definition of disability shall be as defined
in such policy without regard to any waiting period. If Executive is not
covered by a Bank-sponsored disability policy, the term disability shall mean
the inability of the Executive to perform the duties and responsibilities of
his position with the Bank in a normal and regular manner, due to mental or
physical illness or injury, for a period of ninety (90) consecutive days, or
for fifty percent (50%) or more of the normal working days during a period of
one hundred eighty (180) consecutive days. Determination of the Executive's
disability shall be made by the Bank's Board of Directors, which
determination shall not be unreasonable or arbitrary and shall be supported
by medical opinion. In the event Executive is also a director of the Bank,
the Executive shall be ineligible to participate in such disability
determination. Executive shall, if requested by the Bank's Board of
Directors, submit to a mental or physical examination to assist the Board of
Directors in making its determination of disability hereunder. The
psychiatrist or physician performing such examination shall be selected by
the Bank and Executive, or the Executive's representative if Executive is not
able to participate in such selection.
1.3 NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The Named Fiduciary and
Plan Administrator of this plan shall be the Bank.
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1.4 CHANGE OF CONTROL. A "Change of Control" shall be deemed to have
occurred if (i) a tender offer shall be made and consummated for the
ownership of 25% or more of the outstanding voting securities of the Bank;
(ii) the Bank shall be merged or consolidated with another bank or
corporation and as a result of such merger or consolidation less then 75% of
the outstanding voting securities of the surviving or resulting bank or
corporation shall be owned in the aggregate by the former shareholders of the
Bank, other than affiliates (within the meaning of the Securities Exchange
Act of 1934) of the party to such merger or consolidation, as the same shall
have existed immediately prior to such merger or consolidation; (iii) the
Bank shall sell substantially all of its assets to another bank or
corporation which is not a wholly owned subsidiary; or (iv) a person, within
the meaning of Section 3 (a)(9) or of Section 13(d)(3) (as in effect on the
date hereof) of the Securities Exchange Act of 1934, shall acquire 25% or
more of the outstanding voting securities of the Bank (whether directly,
indirectly, beneficially or of record). For purposes hereof, ownership of
voting securities shall take into account and shall include ownership as
determined by applying the provisions of Rule 13d-3(d)(1)(I) (as in effect on
the date hereof) pursuant to the Securities Exchange Act of 1934.
1.5 CAUSE. The term "Cause" shall mean any act of personal
dishonesty, willful misconduct, embezzlement, fraud, intentional failure to
comply with the Bank's policies, willful violation of any banking law, rule
or regulation, or material breach of any provision of this Agreement.
ARTICLE 2.
2.1 EMPLOYMENT. The Bank agrees to employ the Executive in such
capacity as the Bank may determine from time to time. The Executive will
continue in the employ of the Bank in such capacity and with such duties and
responsibilities as may be assigned to him, and with
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such compensation as may be determined from time to time by the Board of
Directors of the Bank.
2.2 FULL EFFORTS. Executive shall devote his full business time and
efforts to the business and affairs of the Bank or the successor to the Bank
by which Executive is then employed pursuant to this Agreement; provided,
however, this provision shall not preclude Executive from serving as a
director or member of a committee of any other organization involving no
conflict of interest with the interests of the Bank, from engaging in
charitable and community activities, and from managing his personal
investments, provided that such activities do not materially interfere with
the regular performance of his duties and responsibilities under this
Agreement.
2.3 FRINGE BENEFIT. The salary continuation benefits provided by
this Agreement are granted by the Bank as a fringe benefit to the Executive
and are not part of any salary reduction plan or any arrangement deferring a
bonus or salary increase. The Executive has no option to take any current
payment or bonus in lieu of these salary continuation benefits.
ARTICLE 3.
3.1 RETIREMENT. Executive shall be entitled to receive the benefit
set forth in Section 3.2 of this Agreement beginning on the first day of the
month next following his attainment of age sixty-two (62) or upon such later
date as may be mutually agreed upon by the Executive and the Bank
("Retirement Date").
3.2 PAYMENT. The Bank agrees that upon such Retirement Date it will
pay to the Executive the annual sum of Fifty Thousand Dollars ($50,000),
payable in equal monthly installments on the first day of each month
following such Retirement Date until the Executive
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dies, subject to the conditions and limitations set forth in this Agreement.
This amount shall be adjusted upward annually on the anniversary of the first
payment at the rate of two percent (2%) per year based upon the previous
year's amount.
3.3 VESTING. Executive shall become vested immediately as to thirty
percent (30%) of the benefit and shall vest at the rate of an additional ten
percent (10%) each year on December 31st while in the Bank's employ beginning
on December 31, 2000 until vested in full.
3.4 EARLY RETIREMENT. Executive shall be entitled to early
retirement anytime after he attains age fifty-five (55), if fully vested. In
the event of Executive's early retirement, he shall be entitled to receive
the benefit set for the in Section 3.2, reduced by five percent (5%) for each
year that Executive elects to receive the benefit prior to the Retirement
Date.
ARTICLE 4.
4.1 DEATH PRIOR TO OR AFTER RETIREMENT. In the event the Executive
should at any time after the date of this Agreement but prior to his
Retirement Date, or upon the Executive's death after her Retirement Date, the
Bank shall pay to the Executive's designated Beneficiary an amount equal to
the accumulated salary continuation obligation on the books of the Bank for
the benefit of the Executive. Said amount shall be paid to the Executive's
designated Beneficiary an a lump sum within three (3) months of the
Executive's date of death. If a valid Beneficiary Designation is not in
effect, the payments shall be made to the Executive's surviving spouse or, if
none, said payments shall be made to the duly qualified personal
representative, executor or administrator of Executive's estate. Provided,
however, that anything hereinabove to the contrary notwithstanding, no death
benefit shall be payable hereunder if it is determined that the Executive has
made any material misstatement of fact on any application for life insurance
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purchased by the Bank.
4.2 DISABILITY PRIOR TO RETIREMENT. In the event the Executive
should become disabled while actively employed by the Bank at any time after
the date of this Agreement but prior to his Retirement Date, the Executive
shall become fully vested. In the event of disability, Executive then may
elect to receive payments either pursuant to the provisions of Section 3.2
regarding retirement or Section 3.4 regarding early retirement.
ARTICLE 5.
5.1 TERMINATION OF EMPLOYMENT. The Bank reserves the right to
terminate the employment of the Executive at any time prior to his Retirement
Date. In the event that Executive's employment is terminated for cause, as
defined above, then Executive shall not be entitled to any benefits pursuant
to this Agreement. In the event that the employment of the Executive's
disability, death or cause, then Executive shall be entitled to the vested
portion of the benefit pursuant to Article 3 of this Agreement.
5.2 TERMINATION OF EMPLOYMENT DUE TO A CHANGE OF CONTROL. Anything
hereinabove the contrary notwithstanding, if, within two (2) years after a
change of control: (i) the Executive's employment with the Bank is
terminated; (ii) Executive's annual compensation and benefits are reduced
from their levels on the date of a Change of Control of the Bank; (iii)
Executive's duties, responsibilities and authority are reduced from those of
his then position on the date of a Change of Control of the Bank; or (iv) the
situs of Executive's employment is changed more than 50 miles, then in such
event, Executive shall become fully vested.
ARTICLE 6.
6.2 NONASSIGNABLE. Neither the Executive, her spouse, nor any other
beneficiary
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under this Agreement shall have any power or right to transfer, assign,
anticipate, hypothecate, mortgage, commute, modify, or otherwise encumber in
advance any of the benefits hereunder, nor shall any of said benefits be
subject to seizure for the payment of any debts, judgments, alimony or
separate maintenance, owed by the Executive or his beneficiary or any of
them, or be transferable by operation of law in the event of a bankruptcy,
insolvency or otherwise.
ARTICLE 7.
7.1 CLAIMS PROCEDURE. The Bank shall notify the Executive or
Executive's beneficiary in writing, within sixty (60) days of written
application for benefits, of eligibility or non-eligibility for benefits
under the Agreement. If the Bank determines that the Executive or Executive's
beneficiary is not eligible for benefits or full benefits, a notice shall be
sent setting forth: (1) the specific reasons for denial; (2) a specific
reference to the provisions of the Agreement on which the denial is based;
(3) a description of any additional information or material necessary for the
claimant to perfect his claim, and a description of why it is needed; and (4)
an explanation of the Agreement's claim review procedure and other
appropriate information as to the steps to be taken if the Executive or
Executive's beneficiary wishes to have the claim reviewed. If the Bank
determines that there are special circumstances requiring additional time to
make a decision, the Bank shall notify the Executive or Executive's
beneficiary of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to one additional period
of up to sixty (60) days.
7.2 REVIEW PROCEDURE. If Executive or Executive's beneficiary is
determined by the Bank not to be eligible for benefits, or if the Executive
or Executive's beneficiary believes that he is entitled to greater or
different benefits, the Executive or Executive's beneficiary shall have
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the opportunity to have such claim reviewed by the Bank by filing a petition
for review with the Bank within sixty (60) days after receipt of the notice
issued by the Bank. Said petition shall state the specific reasons which the
Executive or Executive's beneficiary believes, entitle her to benefits or to
greater or different benefits. Within sixty (60) days after receipt by the
Bank of the petition, the Bank shall afford the Executive or Executive's
beneficiary (and counsel, if any) an opportunity to present his position to
the Bank orally or in writing, and the Executive or Executive's beneficiary
(or counsel) shall have the right to review the pertinent documents. The Bank
shall notify the Executive or Executive's beneficiary of its decision in
writing within the sixty (60) day period, stating specifically the basis of
its decision, written within the sixty (60) day period, stating specifically
the basis of its decision, written in a manner calculated to be understood by
the Executive or Executive's beneficiary and the specific provisions of the
Agreement on which the decision is based. If, because of the need for a
hearing, the sixty (60) day period is not sufficient, the decision may be
deferred for one additional period of up to sixty (60) days at the election
of the Bank, but notice of this deferral shall be given to the Executive or
Executive's beneficiary.
ARTICLE 8.
8.1 UNSECURED GENERAL CREDITOR. The Executive's rights are limited
to the right to receive payments as provided in this Agreement and the
Executive's position with respect thereto is that of a general unsecured
creditor of the Bank.
ARTICLE 9.
9.1 REORGANIZATION. The Bank shall not voluntarily engage in a Change
of Control of the Bank unless and until such succeeding or continuing
corporation, bank, firm, or person
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agrees to assume and discharge the obligations of the Bank under this
Agreement. Upon the occurrence of such event, the term "Bank" as used in this
Agreement shall be deemed to refer to such successor or survivor corporation,
bank, firm or person.
ARTICLE 10.
10.1 NOT A CONTRACT OF EMPLOYMENT. This Agreement shall not be
deemed to constitute a contract of employment between the parties hereto, nor
shall any provision hereof restrict the right of the Bank to discharge the
Executive, or restrict the right of the Executive to terminate his employment.
ARTICLE 11.
11.1 LIQUIDATED DAMAGES. The parties hereto, before entering into
this Agreement, have been concerned with the fact that substantial damages
will be suffered by the Executive in the event that the Bank shall fail to
perform according to this Agreement. In the event of nonperformance by the
Bank for a period of thirty (30) days or more from the time any such payment
was scheduled to be made pursuant to this Agreement, executive shall
immediately be entitled to liquidated damages of Five Thousand Dollars
($5,000.) for each payment not made on a timely basis. This provision shall
not be applicable in the event that such nonpayment is the result of
prohibition of such payment by law, regulation or order of a banking
regulatory agency.
ARTICLE 12.
12.1 SUCCESSORS AND ASSIGNS; ASSIGNMENT. The rights and obligations
of this Agreement shall be binding upon and inure to the benefit of the
successors, assigns, heirs and personal representative of the parties hereto.
Executive may not assign this Agreement or any of the Executive's rights
hereunder except with the prior written consent of the Bank.
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12.2 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstance, is judged by a court to be void or
unenforceable, in whole or in part, the same shall in no way affect any other
provision of this Agreement, the application of such provision in any other
circumstances, or the validity or enforceability of this Agreement.
12.3 APPLICABLE LAW; JURISDICTION AND VENUE. This Agreement and all
matters or issues collateral hereto shall be governed by the laws of the
State of California applicable to contracts performed entirely therein.
Executive and Bank each consent to the jurisdiction of, and any action
concerning this Agreement shall be brought and tried in, the United States
District Court for the Northern District of California or the Superior or
Municipal Court for the County of Santa Cruz.
12.4 WAIVER. A waiver by either party of any of the terms or
conditions of this Agreement in any one instance shall not be deemed or
construed to be a waiver of such terms or conditions for the future, or of
any subsequent breach thereof. All remedies, rights, undertakings,
obligations, and agreements contained in this Agreement shall be cumulative,
and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either party.
12.5. (a) ATTORNEY'S FEES. If any legal action or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties
shall be entitled to recover reasonable attorneys' fees an other costs
incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.
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12.5 (b) WAIVER OF JURY TRIAL. THE BANK AND EXECUTIVE EACH HEREBY
MUTUALLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EACH MAY
HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING
OUT OF OR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTION
OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES
ENTERING INTO THIS AGREEMENT.
12.6 HEADINGS. The headings in this Agreement are for convenience
only and shall not in any manner affect the interpretation or construction of
the Agreement or any of its provisions.
12.7. NOTICE. Any notice or other communication to be given under
this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if personally served, or if mailed, upon deposit
in the United States mail, first class postage prepaid, express or certified,
return receipt requested, and properly addressed to the parties as follows:
if to Executive at his last address shown in the Bank's records, if to Bank:
Coast Commercial Bank
740 Front Street, Suite 240
Santa Cruz, CA 95060
Attn: Chairman
Either party may designate a new address for purposes of this Section 12.7 by
giving the other notice of the new address as provided herein.
Signature page follows.
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IN WITNESS WHEREOF, the Bank has caused this Agreement to be duly
executed by its proper officer and the Executive has hereunto set his hand at
Santa Cruz, California, the day and year first above written.
COAST COMMERCIAL BANK EXECUTIVE
BY: /s/ DAVID HEALD
--------------------------------
ITS: EXECUTIVE VICE PRESIDENT & CBO /s/ BRUCE H. KENDALL
------------------------------
Bruce H. Kendall
COAST BANCORP
BY: /s/ DAVID HEALD
--------------------------------
ITS: EXECUTIVE VICE PRESIDENT & CBO
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LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: U200000563 Union Central Life Insurance Company:
Bank: Coast Bancorp and Coast Commercial Bank
Insured: Harvey Nickelson
Relationship of Insured to Bank: Executive Officer
Date: October 1, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The insured (or beneficiary[ies] or assignee[s] shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
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V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Executive the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to $1,500,000 if the Insured
dies before attaining age seventy (70) and $1,000,000 if the
Insured dies at age seventy (70) or after.
B. The Bank and the Insured (or beneficiary[ies] or assignee[s]
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
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This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Salary Continuation Agreement effective as of July
23, 1999 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined
in any written employment agreement entered into by
and between the Bank and the Insured or
b. Any act of personal dishonesty, willful misconduct,
embezzlement, fraud, intentional failure to comply
with the Bank's policies or the willful violation of
any banking law, rule or regulation.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operational
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
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The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. ((770)
952-1529). When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
COAST BANCORP INSURED
By: /s/ BRUCE H. KENDALL /s/ HARVEY J. NICKELSON
------------------------------- ------------------------------
Harvey J. Nickelson
Its: SENIOR VICE PRESIDENT & CFO
------------------------------
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COAST COMMERCIAL BANK
By: /s/ BRUCE H. KENDALL
-------------------------------
Its: SENIOR VICE PRESIDENT & CFO
-------------------------------
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LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: U200000564 Union Central Life Insurance Company:
0600089821 Southland Life Insurance Company
Bank: Coast Bancorp and Coast Commercial Bank
Insured: David Heald
Relationship of Insured to Bank: Executive Officer
Date: October 1, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The insured (or beneficiary[ies] or assignee[s] shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
1
<PAGE>
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Executive the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to $1,000,000 if the Insured
dies before attaining age seventy (70) and $750,000 if the
Insured dies at age seventy (70) or after.
B. The Bank and the Insured (or beneficiary[ies] or assignee[s]
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
2
<PAGE>
X. TERMINATION OF AGREEMENT
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Salary Continuation Agreement effective as of July
23, 1999 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined
in any written employment agreement entered into by
and between the Bank and the Insured or
b. Any act of personal dishonesty, willful misconduct,
embezzlement, fraud, intentional failure to comply
with the Bank's policies or the willful violation of
any banking law, rule or regulation.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operational
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
3
<PAGE>
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. ((770)
952-1529). When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
COAST BANCORP INSURED
By: /s/ BRUCE H. KENDALL /s/ DAVID V. HEALD
-------------------------------- ------------------------------
David V. Heald
Its: Senior Vice President & CFO
-------------------------------
4
<PAGE>
COAST COMMERCIAL BANK
By: /s/ BRUCE H. KENDALL
--------------------------------
Its: Senior Vice President & CFO
------------------------------
5
<PAGE>
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: U200000553 Union Central Life Insurance Company:
0600089485 Southland Life Insurance Company
Bank: Coast Bancorp and Coast Commercial Bank
Insured: Sandra Anderson
Relationship of Insured to Bank: Senior Officer
Date: October 1, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The insured (or beneficiary[ies] or assignee[s] shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
1
<PAGE>
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Executive the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to $600,000.
B. The Bank and the Insured (or beneficiary[ies] or assignee[s]
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
2
<PAGE>
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Salary Continuation Agreement effective as of July
23, 1999 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined
in any written employment agreement entered into by
and between the Bank and the Insured or
b. Any act of personal dishonesty, willful misconduct,
embezzlement, fraud, intentional failure to comply
with the Bank's policies or the willful violation of
any banking law, rule or regulation.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operational
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
3
<PAGE>
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. ((770)
952-1529). When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
COAST BANCORP INSURED
By: /s/ BRUCE H. KENDALL /s/ SANDRA ANDERSON
-------------------------------- ------------------------------
Sandra Anderson
Its: Senior Vice President & CFO
-------------------------------
4
<PAGE>
COAST COMMERCIAL BANK
By: /s/ BRUCE H. KENDALL
--------------------------------
Its: Senior Vice President & CFO
-------------------------------
5
<PAGE>
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: U200000565 Union Central Life Insurance Company:
0600089819 Southland Life Insurance Company
Bank: Coast Bancorp and Coast Commercial Bank
Insured: Terry Chandler
Relationship of Insured to Bank: Senior Vice President
Date: October 1, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The insured (or beneficiary[ies] or assignee[s] shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
1
<PAGE>
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Executive the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to $600,000.
B. The Bank and the Insured (or beneficiary[ies] or assignee[s]
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
2
<PAGE>
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Salary Continuation Agreement effective as of July
23, 1999 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined
in any written employment agreement entered into by
and between the Bank and the Insured or
b. Any act of personal dishonesty, willful misconduct,
embezzlement, fraud, intentional failure to comply
with the Bank's policies or the willful violation of
any banking law, rule or regulation.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operational
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
3
<PAGE>
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. ((770)
952-1529). When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
COAST BANCORP INSURED
By: /s/ BRUCE H. KENDALL /s/ TERRY A. CHANDLER
-------------------------- ---------------------------
Terry A. Chandler
Its: Senior Vice President & CFO
----------------------------
4
<PAGE>
COAST COMMERCIAL BANK
By: /s/ BRUCE H. KENDALL
---------------------
Its: Senior Vice President & CFO
----------------------------
5
<PAGE>
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: 0001079254 Security Life of Denver Insurance Company:
0600089481 Southland Life Insurance Company
Bank: Coast Bancorp and Coast Commercial Bank
Insured: Rick Hofstetter
Relationship of Insured to Bank: Executive Officer
Date: October 1, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The insured (or beneficiary[ies] or assignee[s] shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
1
<PAGE>
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Executive the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to $750,000.
B. The Bank and the Insured (or beneficiary[ies] or assignee[s]
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
2
<PAGE>
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Salary Continuation Agreement effective as of July
23, 1999 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined
in any written employment agreement entered into by
and between the Bank and the Insured or
b. Any act of personal dishonesty, willful misconduct,
embezzlement, fraud, intentional failure to comply
with the Bank's policies or the willful violation of
any banking law, rule or regulation.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operational
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
3
<PAGE>
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. ((770)
952-1529). When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
COAST BANCORP INSURED
By: /s/ BRUCE H. KENDALL /s/ RICHARD HOFSTETTER
------------------------------- -------------------------
Richard Hofstetter
Its: Senior Vice President & CFO
------------------------------
4
<PAGE>
COAST COMMERCIAL BANK
By: /s/ BRUCE H. KENDALL
-------------------------------
Its: Senior Vice President & CFO
------------------------------
5
<PAGE>
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer/Policy Number: 001079253 Security Life of Denver Insurance Company:
0600089483 Southland Life Insurance Company
Bank: Coast Bancorp and Coast Commercial Bank
Insured: Bruce Kendall
Relationship of Insured to Bank: Executive Officer
Date: October 1, 1999
The respective rights and duties of the Bank and the Insured in the above
policy(ies) (the "Policy") shall be as follows:
I. DEFINITIONS
Refer to the Policy provisions for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the
use of the Insured all in accordance with this Agreement. The Bank
alone may, to the extent of its interest, exercise the right to borrow
or withdraw the Policy cash values. Where the Bank and the Insured (or
beneficiary[ies] or assignee[s], with the consent of the Insured)
mutually agree to exercise the right to increase the coverage under the
subject split dollar Policy, then in such event, the rights, duties and
benefits of the parties to such increased coverage shall continue to be
subject to the terms of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
The insured (or beneficiary[ies] or assignee[s] shall have the right
and power to designate a beneficiary or beneficiaries to receive his
share of the proceeds payable upon the death of the Insured, and to
elect and change a payment option for such beneficiary, subject to any
right or interest the Bank may have in such proceeds, as provided in
this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any
other premium payments that might become necessary to maintain the
Policy in force.
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<PAGE>
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the
assumed cost of insurance as required by the Internal Revenue Service.
The Bank (or its administrator) will report to the Executive the amount
of imputed income received each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraph VII herein, the division of the death proceeds of
the Policy is as follows:
A. The Insured's beneficiary(ies), designated in accordance with
Paragraph III, shall be entitled to $750,000.
B. The Bank and the Insured (or beneficiary[ies] or assignee[s]
shall share in any interest due on the death proceeds on a pro
rata basis in the ratio that the proceeds due the Bank and the
Insured, respectively, bears to the total proceeds, excluding
any such interest.
VII. DIVISION OF CASH SURRENDER VALUE
The Bank shall at all times be entitled to an amount equal to the
Policy's cash value, as that term is defined in the Policy, less any
Policy loans and unpaid interest or cash withdrawals previously
incurred by the Bank and any applicable Policy surrender charges. Such
cash value shall be determined as of the date of surrender of the
Policy or death of the Insured as the case may be.
VIII. PREMIUM WAIVER
If the Policy contains a premium waiver provision, any such waived
amounts shall be considered for all purposes of this Agreement as
having been paid by the Bank.
IX. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the Policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits
shall be determined under the provisions of this Agreement by regarding
such endowment proceeds or the commuted value of such annuity benefits
as the Policy's cash value. Such endowment proceeds or annuity benefits
shall be treated like death proceeds for the purposes of division under
this Agreement.
X. TERMINATION OF AGREEMENT
2
<PAGE>
This Agreement shall terminate at the option of the Bank following
thirty (30) days written notice to the Insured upon the happening of
any one of the following:
1. The Insured's right to receive benefits under that certain
Executive Salary Continuation Agreement effective as of July
23, 1999 shall terminate for any reason other than the
Insured's death, or
2. The Insured shall be discharged from service with the Bank for
cause. The term "for cause" shall mean:
a. A termination "for cause" as this term may be defined
in any written employment agreement entered into by
and between the Bank and the Insured or
b. Any act of personal dishonesty, willful misconduct,
embezzlement, fraud, intentional failure to comply
with the Bank's policies or the willful violation of
any banking law, rule or regulation.
Except as provided above, this Agreement shall terminate upon
distribution of the death benefit proceeds in accordance with Paragraph
VI above.
XI. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the prior written consent of the Bank,
assign to any individual, trust or other organization, any right, title
or interest in the Policy nor any rights, options, privileges or duties
created under this Agreement.
XII. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall be binding upon the Insured and the Bank, and
their respective heirs, successors, personal representatives and
assigns, as applicable.
XIII. NAMED FIDUCIARY AND PLAN ADMINISTRATOR
The Bank is hereby designated the "Named Fiduciary" until resignation
or removal by its Board of Directors. As Named Fiduciary, the Bank
shall be responsible for the management, control and administration of
this Agreement as established herein. The Named Fiduciary may allocate
to others certain aspects of the management and operational
responsibilities of this Agreement, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
XIV. FUNDING POLICY
3
<PAGE>
The funding Policy for this Agreement shall be to maintain the Policy
in force by paying, when due, all premiums required.
XV. CLAIM PROCEDURES
Claim forms or claim information as to the subject Policy can be
obtained by contacting The Benefit Marketing Group, Inc. ((770)
952-1529). When the Named Fiduciary has a claim which may be covered
under the provisions described in the Policy, it should contact the
office named above, and they will either complete a claim form and
forward it to an authorized representative of the Insurer or advise the
named Fiduciary what further requirements are necessary. The Insurer
will evaluate and make a decision as to payment. If the claim is
payable, a benefit check will be issued to the Named Fiduciary.
In the event that a claim is not eligible under the Policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the
requirements under the terms of the Policy. If the Named Fiduciary is
dissatisfied with the denial of the claim and wishes to contest such
claim denial, it should contact the office named above and they will
assist in making inquiry to the Insurer. All objections to the
Insurer's actions should be in writing and submitted to the office
named above for transmittal to the Insurer.
XVI. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine
or neuter gender, whenever they should so apply.
XVII. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as set forth herein upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the Policy provisions shall fully discharge the Insurer
from any and all liability.
IN WITNESS WHEREOF, the Insured and a duly authorized Bank officer have signed
this Agreement as of the above written date.
COAST BANCORP INSURED
By:/S/ DAVID V. HEALD /S/ BRUCE H. KENDALL
-------------------------- -------------------------
Bruce H. Kendall
Its: EXECUTIVE VICE PRESIDENT
4
<PAGE>
COAST COMMERCIAL BANK
By:/S/ DAVID V. HEALD
-----------------------
Its: EXECUTIVE VICE PRESIDENT
5
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<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 18,746
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<TOTAL-ASSETS> 350,088
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0
0
<COMMON> 21,049
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<INCOME-PRETAX> 8,205
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,003
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<LOANS-NON> 1,836
<LOANS-PAST> 353
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