<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
COAST BANCORP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
April 15, 1999
[LOGO]
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders of
Coast Bancorp, which will be held at the Museum of Art and History, 705 Front
Street, Santa Cruz, California on Tuesday, May 18, 1999 at 4:00 p.m.
You will be asked to elect as directors, the eight individuals nominated by
the Board of Directors and to ratify the appointment of the Company's
independent public accountants.
Although you may presently plan to attend the meeting, we strongly suggest
that you indicate your approval by voting FOR the election of the directors
named in the attached Proxy Statement and FOR the ratification of the Board of
Directors' selection of independent accountants, in the spaces provided on the
enclosed proxy card and sign, date and return it promptly in the enclosed
business reply envelope. If you attend the meeting, which we hope you will, you
may vote in person even if you have previously mailed a proxy.
We look forward to seeing you.
Very truly yours,
<TABLE>
<S> <C>
/s/ James C. Thompson /s/ Harvey J. Nickelson
James C. Thompson Harvey J. Nickelson
CHAIRMAN OF THE BOARD OF DIRECTORS PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
<PAGE>
COAST BANCORP
740 FRONT STREET, SUITE 240
SANTA CRUZ, CALIFORNIA 95060
(831) 458-4500
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 18, 1999
4:00 P.M.
------------------------
The Annual Meeting of Shareholders of Coast Bancorp, a California
corporation (the "Company") and the bank holding company for Coast Commercial
Bank (the "Bank"), will be held at the Museum of Art and History, 705 Front
Street, Santa Cruz, California, on Tuesday, May 18, 1999 at 4:00 P.M., for the
following purposes:
1. To elect eight directors. The names of the nominees for the Board of
Directors of Coast Bancorp are set forth in the accompanying proxy
statement.
2. To ratify the appointment of Deloitte & Touche LLP to audit the
financial statements of Coast Bancorp for the year ending December 31,
1999.
3. To consider and transact such other business as may properly be brought
before the meeting and any adjournment or adjournments thereof.
The foregoing proposals are more fully described in the accompanying Proxy
Statement to which your attention is invited.
Shareholders of record at the close of business on April 5, 1999 are
entitled to notice of and to vote at the meeting.
Provisions of the Bylaws of Coast Bancorp govern nominations for election of
members of the Board of Directors as follows:
NOMINATION OF DIRECTORS. Nominations for election of members of the board may
be made by the board or by any holder of any outstanding class of capital stock
of the corporation entitled to vote for the election of directors. Notice of
intention to make any nominations (other than for persons named in the notice of
the meeting called for the election of directors) shall be made in writing and
shall be delivered or mailed to the President of the corporation by the later
of: (i) the close of business twenty-one (21) days prior to any meeting of
shareholders called for the election of directors; or (ii) seven (7) days after
the date of mailing of notice of the meeting to shareholders. Such notification
shall contain the following information to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the number of shares of
capital stock of the corporation owned by each proposed nominee; (d) the name
and residence address of the notifying shareholder; (e) the number of shares of
capital stock of the corporation owned by the notifying shareholder; (f) the
number of shares of capital stock of any bank, bank holding company, savings and
loan association or other depository institution owned beneficially by the
nominee or by the notifying shareholder and the identities and locations of any
such institutions; and (g) whether the proposed nominee has ever been convicted
or pleaded nolo contendere to any criminal offense involving dishonesty or
breach of trust, filed a petition in bankruptcy or been adjudged bankrupt. The
notification shall be signed by the nominating shareholder and by each nominee,
and shall be accompanied by a written consent to be named as a nominee for
election as a director from each proposed nominee. Nominations not made in
accordance with these procedures shall be disregarded by the chairman of the
meeting, and upon his or her instructions, the inspectors of election shall
disregard all votes cast for each such nominee.
<PAGE>
All shareholders are cordially invited to attend the Meeting in person. To
insure your representation at the Meeting, you are requested to date, execute
and return the enclosed proxy card, without delay, in the enclosed postage-paid
envelope whether or not you plan to attend the Meeting. Any shareholder present
at the Meeting may vote personally on all matters brought before the meeting in
which event your proxy will not be used.
By Order of the Board of Directors,
/s/ Sandra Anderson
Sandra Anderson
SECRETARY
April 15, 1999
Santa Cruz, California
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
COAST BANCORP
----------------
PROXY STATEMENT
---------------------
INFORMATION CONCERNING PROXY
The following information is furnished in connection with the solicitation
of the enclosed proxy by and on behalf of Coast Bancorp (the "Company"), the
bank holding company for Coast Commercial Bank (the "Bank"), for use at the
Annual Meeting of Shareholders of the Company to be held at the Museum of Art
and History, 705 Front Street, Santa Cruz, California on Tuesday, May 18, 1999
at 4:00 P.M., and at any adjournment or adjournments thereof (the "Meeting").
(References to the Company include the Bank.)
As many of our shareholders are unable to personally attend the Meeting, the
Company solicits proxies so that each shareholder is given an opportunity to
vote. Shares represented by duly executed proxies in the accompanying form
received by management prior to the Meeting will be voted at the Meeting. A
shareholder executing and delivering the enclosed proxy may revoke such proxy at
any time prior to exercise of the authority thereby given. A proxy may be
revoked (i) by written notice to Sandra Anderson, Secretary of the Company; (ii)
by a subsequently dated proxy; or (iii) by attending the Meeting and voting by
ballot. If a shareholder specifies a choice with respect to any matter to be
acted upon by means of the ballot provided in the accompanying form of proxy,
the shares will be voted accordingly. If no specification is made, the shares
represented by this proxy will be voted in favor of election of the nominees
specified and in favor of the specified proposals. A shareholder who attends the
Meeting may vote by ballot at the Meeting, thereby canceling any proxy the
shareholder may previously have given.
The Proxy Committee is composed of three directors of the Company, Douglas
D. Austin, John C. Burroughs and Ronald M. Israel, who will vote all shares of
Common Stock represented by the proxies. However, the Proxy Committee cannot
vote the shares of a shareholder unless the shareholder signs and returns a
proxy. Proxy cards also confer upon the Proxy Committee discretionary authority
to vote the shares represented thereby on any matter that was not known at the
time this Proxy Statement was mailed which may properly be presented for action
at the Meeting and may include: approval of minutes of the prior annual meeting
which will not constitute ratification of the actions taken at such meeting;
action with respect to procedural matters pertaining to the conduct of the
Meeting; and election of any persons to any office for which a bona fide nominee
is named herein if such nominee is unable to serve or for good cause will not
serve.
The principal solicitation of proxies is being made by mail. However,
additional solicitations may be made by telephone, telegraph or personal visits
by directors, officers and employees of the Company or Bank. The Company may, at
its discretion, engage the services of a proxy solicitation firm to assist in
the solicitation of proxies. The total expense of this solicitation will be
borne by the Company and will include reimbursement paid to brokerage firms and
others for their expenses in forwarding soliciting material and such expenses as
may be paid to any proxy soliciting firm engaged by the Company. This Proxy
Statement and the accompanying form of proxy are being mailed to shareholders on
or about April 15, 1999.
The proxy card makes provisions to enable you to record your vote on each
matter. If you wish to withhold your vote for any one or more directors, place
an X in the box marked FOR and circle the name of each of the directors for whom
you wish to withhold your vote. You may withhold authority to vote for all of
the directors by placing an X in the box marked WITHHOLD AUTHORITY. You may vote
FOR or AGAINST each other item by placing an X in the box appropriately marked.
Please note that a vote to ABSTAIN may have the same effect as a vote AGAINST.
<PAGE>
VOTING SECURITIES
OUTSTANDING VOTING SECURITIES AND RECORD DATE
The Company has only one class of voting securities outstanding, identified
as the Common Stock. Shareholders of record entitled to notice of and to vote at
the Meeting have been determined as of the close of business on April 5, 1999
(the "Record Date"), and as of such date 4,778,858 shares were outstanding, all
of which will be entitled to vote at the Meeting.
CUMULATIVE VOTING
Each shareholder of record is entitled to one vote for each share held on
all matters to come before the Meeting, except that the shareholders may have
cumulative voting rights with respect to the election of directors. Pursuant to
California law, no shareholder can cumulate votes unless the name(s) of the
candidate(s) for which such votes are to be cast has been placed in nomination
prior to the voting and, also prior to the voting at the meeting, a shareholder
has given notice of the shareholder's intention to cumulate the shareholder's
votes at such Meeting. If any shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. Management
does not, at this time, intend to give such notice or to cumulate the votes it
may hold pursuant to the proxies solicited herein unless the required notice by
a shareholder is given in proper form at the Meeting, in which instance
management intends to cumulatively vote all of the proxies held by it in favor
of the nominees for office as set forth herein or for such of said nominees as
it may determine is required in the case of cumulative voting. Therefore,
discretionary authority to cumulate votes in such event is solicited in this
Proxy Statement.
If cumulative voting shall be utilized, each shareholder may give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or may distribute the same number of votes among as many candidates as
the shareholder desires. The candidates (up to the number of directors to be
elected) receiving the highest number of votes are elected.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company is of the opinion that there is no person who possesses directly
or indirectly the power to direct or cause to direct the management and policies
of the Company, nor is it aware of the existence of a group of persons formed
for such purpose, whether through the ownership of voting securities, by
contract, or otherwise.
The following sets forth information as of April 5, 1999, pertaining to
securities ownership by persons known to the Company to own 5% or more of any
class of the Company's voting securities. The information contained herein has
been obtained from the Company's records, and from information furnished
directly by the individual or entity to the Company.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF
NAME AND ADDRESS RELATIONSHIP BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER WITH COMPANY OWNERSHIP(1) OF CLASS
- ------------------------------------------------------------ ------------ ------------ ----------
<S> <C> <C> <C>
Richard E. Alderson(2)...................................... Director 390,710(3)(4) 8.16%
Ronald M. Israel, M.D.(2)................................... Director 395,630(3)(7) 8.27%
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the beneficial owner of these securities has
sole voting and investment powers.
(2) The address is c/o Coast Bancorp, 740 Front Street, Suite 240, Santa Cruz,
California 95060.
2
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors of the
Company may be no less than seven (7) and no more than thirteen (13) with the
exact number to be fixed from time to time by resolution of the Board of
Directors. The number of directors is presently fixed at eight (8). Such
directors, if elected, shall hold office for a term continuing until the next
Annual Meeting and until their successors are duly elected and qualified. Each
nominee is at present a member of the Board of Directors of the Company. If any
nominee should become unable or unwilling to serve as a director, the proxies
will be voted for such person as shall be designated by the Board of Directors
to replace the nominee. The Board presently has no knowledge that any of the
nominees will be unable or unwilling to serve.
The following information is supplied with respect to each person nominated
and recommended to be elected by the current Board of Directors of the Company
and is based upon the records of the Company and information furnished to it by
the nominees.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF
RELATIONSHIP DIRECTOR SINCE BENEFICIAL PERCENTAGE
NAME OF NOMINEE AGE WITH COMPANY (COMPANY/BANK) OWNERSHIP(1) OF CLASS
- ------------------------ --- -------------------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Richard E. Alderson..... 60 Director 1995/1993 390,710(3)(4) 8.16%
Douglas D. Austin....... 58 Director 1995/1982 47,004(3) 0.98%
John C. Burroughs....... 54 Director and Vice 1995/1982 60,280(6) 1.26%
President
Bud W. Cummings......... 67 Director 1995/1982 112,200(5) 2.35%
Ronald M. Israel, M. 62 Director 1995/1982 395,630(5)(7) 8.27%
D.......................
Harvey J. Nickelson..... 55 President, Chief 1995/1982 158,400(8) 3.30%
Executive Officer
and Director
Gus J.F. Norton......... 58 Director 1995/1982 122,634(9) 2.56%
James C. Thompson....... 59 Chairman of the 1995/1982 414,004(5)(10) 8.66%
Board
All Executive Officers and
Directors of the Company
as a Group (11 in number)......................................... 1,807,048(11) 36.95%
</TABLE>
- ------------------------
(3) Includes options for 8,800 shares exercisable within sixty days of the
Record Date.
(4) Mr. Alderson disclaims beneficial ownership of 9,746 shares held in trust
for his children. Mr. Alderson has sole voting and disposition power over
360,904 shares held in various trusts.
(5) Includes options for 4,400 shares exercisable within six days of the Record
Date.
(6) Includes options for 5,280 shares exercisable within sixty days of the
Record Date. Also includes 50,600 shares held in a trust over which Mr.
Burroughs has shared voting and investment power.
(7) Includes 135,770 shares in a trust over which Dr. Israel has sole voting and
investment power.
(8) Includes 132,000 shares in a trust over which Mr. Nickelson has shared
voting and investment power. Also includes 26,400 shares exercisable within
sixty days of the Record Date.
(9) Includes 105,034 shares in a trust over which Mr. Norton has sole voting and
investment power. Also includes options for 17,600 shares exercisable within
sixty days of the Record Date.
(10) Includes 185,048 shares in a trust over which Mr. Thompson has shared
voting and investment power. Also includes 220,208 shares as trustee of the
1982 Moore Trust, over which he holds voting power, although he is not the
beneficial owner but disclaims beneficial ownership.
(11) Includes options for 111,760 shares exercisable within sixty days of the
Record Date.
3
<PAGE>
There are no family relationships between any two or more of the directors,
officers or persons nominated or chosen by the Board of Directors to become a
director or officer. No officer or director of the Company serves as a director
of any company required to report under the Securities Exchange Act of 1934 or
any investment company registered under the Investment Company Act of 1940.
Set forth below are brief summaries of the background and business
experience of all the directors and persons nominated to become a director of
the Company. Unless otherwise indicated, each person has been engaged in the
noted occupation with the same entity for more than 5 years.
RICHARD E. ALDERSON is engaged in personal investments.
DOUGLAS D. AUSTIN is President of Austin Insurance Agency, Inc.
JOHN C. BURROUGHS is Vice President and Manager of the Bank's Investment
Services Department.
BUD W. CUMMINGS retired in 1986 from serving as the proprietor of the Santa
Cruz Coin Exchange.
RONALD M. ISRAEL, M.D. is a private investor. Previously, he was a
self-employed physician and an Assistant Professor of Clinical Medicine at the
University of California Medical Center, San Francisco from 1971 to 1994.
HARVEY J. NICKELSON is President, Chief Executive Officer and a director of
the Company and Bank.
GUS J. F. NORTON is the broker of record and a partner in Sun Properties, a
real estate sales and development association.
JAMES C. THOMPSON is a partner with the law firm of Comstock, Thompson,
Kontz and Brenner since August 1, 1994. Prior to this he was with the law firms
of Comstock, Shannon and Thompson from June 1, 1992 to August 1, 1994 and
Comstock, Shanle, Shannon & Thompson from August 1, 1989 to June 1992.
RECOMMENDATION OF MANAGEMENT
THE BOARD OF DIRECTORS INTENDS TO VOTE ALL PROXIES HELD BY IT IN FAVOR OF
ELECTION OF EACH OF THE NOMINEES. YOU ARE URGED TO VOTE FOR PROPOSAL 1: TO ELECT
THE EIGHT (8) NOMINEES SET FORTH HEREIN TO SERVE UNTIL THE NEXT ANNUAL MEETING
OF SHAREHOLDERS AND UNTIL THEIR RESPECTIVE SUCCESSORS SHALL BE ELECTED AND
QUALIFIED.
4
<PAGE>
INFORMATION PERTAINING TO ELECTION OF DIRECTORS
COMMITTEES OF THE BOARD OF DIRECTORS; DIRECTOR ATTENDANCE
The Board of Directors maintains the following committees, which perform the
following functions and are comprised of the members listed below. The Company
and the Bank each have an Audit Committee composed of the same members.
<TABLE>
<CAPTION>
NAME FUNCTIONS; NUMBER OF MEETINGS IN 1998 MEMBERS
- --------------------------------- --------------------------------------------------- -------------------------
<S> <C> <C>
Audit Committee.................. Monitors significant accounting policies; approves Alderson, Austin,
services rendered by the auditors; reviews audit Cummings, Israel, Norton
and management reports; makes recommendations and Thompson.
regarding the appointment of independent auditors
and the fees payable for their services. The Audit
Committee met three times in 1998.
Compensation Committee........... Determines salaries of the Company's executive Alderson, Austin,
officers and stock options to be granted to them Cummings, Israel, Norton
based upon recommendations of the Company's Chief and Thompson.
Executive Officer and the Chairman of the Board of
Directors. Consults with the Chief Executive
Officer regarding incentive compensation to be paid
to the executive officers of the Company. The
Compensation Committee met one time in 1998.
</TABLE>
The Company does not have a nominating committee. The Board of Directors
performs the functions of this committee.
During 1998, the Company's Board of Directors held seven regular meetings
and two special meetings. Each director attended at least 75% of the aggregate
of: (1) the total number of meeting of the Board of Directors; and (2) the total
number of meetings of committees of the Board on which they served.
EXECUTIVE OFFICERS
Set forth below is certain information as of April 5, 1999, with respect to
each executive officer of the Company, not previously discussed.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES OFFICER SINCE
NAME AGE WITH THE COMPANY AND THE BANK (COMPANY/BANK)
- ----------------------- --- ------------------------------------------------------------ --------------
<S> <C> <C> <C>
David V. Heald......... 50 Executive Vice President of the Company; Executive Vice 1995/1982
President and Chief Banking Officer of the Bank
Richard G. 44 Senior Vice President and Senior Lending Officer of the Bank --/1987
Hofstetter.............
Bruce H. Kendall....... 41 Senior Vice President and Chief Financial Officer of the 1995/1995
Company and the Bank
</TABLE>
DAVID V. HEALD is Executive Vice President of the Company and Executive Vice
President and Chief Banking Officer of the Bank.
5
<PAGE>
RICHARD G. HOFSTETTER is Senior Vice President and Senior Lending Officer of
the Bank. Prior to 1992, Mr. Hofstetter was Manager of the Bank's Real Estate
Department.
BRUCE H. KENDALL became Senior Vice President and Chief Financial Officer of
the Company and the Bank in 1995. From October 1990 to August 1994, Mr. Kendall
was employed by Silicon Valley Bank, most recently as Senior Vice President of
Finance.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid (for
services rendered in all capacities) during the past three fiscal years to the
executive officers of the Company whose annual compensation for 1998 exceeded
$100,000. All compensation is presently paid by the Bank.
<TABLE>
<CAPTION>
LONG-TERM
OTHER COMPENSATION
ANNUAL AWARDS
NAME POSITION YEAR SALARY BONUS COMPENSATION(12) OPTIONS
- -------------------------- --------------------------- --------- --------- --------- --------------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Harvey J. Nickelson....... President and Chief 1998 $ 170,250 $ 154,000 -0- -0-
Executive Officer 1997 $ 164,000 $ 128,000 -0- -0-
1996 $ 156,250 $ 107,000 -0- -0-
David V. Heald............ Executive Vice President 1998 $ 122,833 $ 80,000 -0- -0-
and Chief Banking Officer 1997 $ 118,250 $ 68,000 -0- -0-
1996 $ 112,552 $ 55,000 -0- -0-
Richard G. Hofstetter..... Senior Vice President and 1998 $ 103,425 $ 60,000 -0- -0-
Senior Loan Officer 1997 $ 99,300 $ 50,000 -0- -0-
1996 $ 94,425 $ 42,500 -0- -0-
Bruce H. Kendall.......... Senior Vice President and 1998 $ 98,500 $ 55,000 -0- -0-
Chief Financial Officer 1997 $ 94,000 $ 47,500 -0- -0-
1996 $ 88,000 $ 37,500 -0- -0-
<CAPTION>
ALL OTHER
NAME COMPENSATION
- -------------------------- -------------
<S> <C>
Harvey J. Nickelson....... $ 65,953(13)(14)
$ 71,378(13)(14)
$ 102,799(13)(14)
David V. Heald............ $ 36,917(14)
$ 36,734(14)
$ 53,364(14)
Richard G. Hofstetter..... $ 16,233(15)
$ 11,868(15)
$ 11,694(15)
Bruce H. Kendall.......... $ 11,801(15)
$ 11,671(15)
$ 11,131(15)
</TABLE>
- ------------------------------
(12) No perquisites are reported as Other Annual Compensation as they did not
exceed the lesser of $50,000 or 10% of the total of the annual salary and
bonus reported for the named executive officer.
(13) Includes director's fees of $12,000 per year.
(14) Includes profit sharing distributions, amounts contributed to a 401(k)
Plan, accrued under a Salary Continuation Agreement and additional health
insurance benefits.
(15) Includes profit sharing distributions, amounts contributed to a 401(k) Plan
and additional health insurance benefits.
During 1998 non-employee directors of the Company received a retainer of
$4,800 per year and also received $850 for attending Bank Board meetings, $350
for loan committee meetings and $250 for other committee meetings. The Chairman
of the Company receives a retainer of $8,500 per quarter for his services to the
Bank and receives no other cash compensation. Employee directors of the Company
receive $3,000 per quarter for attending Bank Board meetings. There is no
compensation for attending Coast Bancorp meetings.
In addition, non-employee directors of the Company received a stock option
grant for 4,400 shares each year for five years beginning in 1995.
DIRECTORS' DEFERRED COMPENSATION
In November 1992, the Bank entered into Deferred Compensation Agreements
("Compensation Agreements") with its directors, except Harvey J. Nickelson.
Under the Compensation Agreements, the directors may elect before January 1 of
each year to defer all or a part of their directors' fees, and they will be
credited with interest based upon the deferred amount. The interest rate on the
deferred amount of the directors' compensation is presently 5.87%. The deferred
amount of the directors' compensation is to be paid to each director at the
earlier of termination of their service as a director of the Bank; attainment of
6
<PAGE>
age 65; or upon 180 days advance notice to the director by the Bank. In the
event of a director's death prior to termination of his service with the Bank or
age 65, his beneficiary will be entitled to receive the payments under the
Compensation Agreement. The Bank has purchased an insurance policy on the life
of each of the participating directors to enable the Bank to make payments as
required by the Compensation Agreements.
EXECUTIVE SALARY CONTINUATION PLANS
On September 19, 1992, the Bank entered into Executive Salary Continuation
Agreements ("Salary Continuation Agreements") with Harvey J. Nickelson and David
V. Heald (collectively "Recipient"). Under the Salary Continuation Agreements
upon retirement at age 65, Mr. Nickelson is entitled to $75,000 per year and Mr.
Heald is entitled to $50,000 per year, each for 15 years. If the Recipient
elects early retirement after age 55 but prior to attaining age 65, the annual
payments shall be reduced by 2% per year for each year such retirement precedes
age 65 and payments are limited to the vested portion of the benefit. In the
event of the Recipient's death or disability, their designated beneficiary would
be entitled to the benefits. The Bank has purchased insurance policies on the
life of each of these officers to enable the Bank to make payments as required
by the Salary Continuation Agreements.
COAST COMMERCIAL BANK EMPLOYEE STOCK OWNERSHIP PLAN
In November 1991, the Bank amended and restated the Coast Commercial Bank
Employee Savings Plan and it was renamed the Coast Commercial Bank Employee
Stock Ownership Plan, which contains 401(k) provisions ("KSOP"). The KSOP is
considered by the Board of Directors to be a means of recognizing the
contributions made to the Bank's successful operation by its employees and to
reward such contributions. Under the KSOP, there is both a purchase of the
Company's Common Stock for the account of employees as part of the employee
stock ownership provisions and a contribution by the Bank and an opportunity for
employee contributions and matching under the 401(k) provisions. During 1998,
the Bank contributed $72,000 to the 401(k) portion of the KSOP. The Bank
established a profit sharing plan during 1998 in lieu of contributions to the
ESOP. Distributions under the profit sharing plan are tied to the Bank's net
income. The Bank accrued $180,000 during 1998 for profit sharing distributions.
All employees who are 21 years old and have been credited with 1,000 hours
of service are eligible to participate in the KSOP. When an employee retires or
in the event of death or total disability, an employee will be entitled to their
distribution not later than the end of the year following termination of
employment. An employee who has attained age 55 and has 15 years of service may
elect to receive benefits pursuant to the early retirement provisions of the
KSOP. If employment is terminated for any other reason, an employee is entitled
to the payment of their KSOP account.
COAST BANCORP 1995 STOCK OPTION PLAN
On February 22, 1995, the Company adopted the Coast Bancorp 1995 Stock
Option Plan ("1995 Plan") which sets aside 880,000 shares of no par value Common
Stock of the Company for which options may be granted to key, full-time salaried
employees and officers of the Company, as well as non-employee directors of the
Company.
The exercise price of all options to be granted under the 1995 Plan must be
at least 100% of the fair market value of the Company's Common Stock on the
granting date and be paid in full at the time the option is exercised either in
cash, shares of the Company's Common Stock with a fair market value equal to the
purchase price or a combination thereof. Under the 1995 Plan, all options expire
no more than ten years after the date of grant.
In the case of termination of employment or status as a director, no
additional options become exercisable, and exercise rights cease after three (3)
months unless employment or status as a director is terminated because of death
or disability, in which case the option may be exercised for not more than one
7
<PAGE>
year following termination. In case of termination of employment for cause, or
cessation of status as a director as a result of being removed from office by a
bank regulatory authority or by judicial process, exercise rights cease after
thirty (30) days.
The following table shows information regarding stock options granted during
1998 to the executive officers of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
---------------------------------------------------------------- RATES
NUMBER OF OF STOCK PRICE
SECURITIES % OF TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM
OPTIONS EMPLOYEES PRICE ----------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SH) EXPIRATION DATE 5%($) 10%($)
- --------------------------- ----------- ------------------- ----------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harvey J. Nickelson........ 22,000 33% $ 17.13 March 18, 2008 $ 237,015 $ 600,642
David V. Heald............. 11,000 17% $ 17.13 March 18, 2008 $ 118,507 $ 300,321
Richard G. Hofstetter...... 8,800 13% $ 17.13 March 18, 2008 $ 94,806 $ 240,257
Bruce H. Kendall........... 6,600 10% $ 17.13 March 18, 2008 $ 71,104 $ 108,193
</TABLE>
The following table shows information regarding the value at December 31,
1998 of unexercised stock options held by the executive officers of the Company.
No stock options were exercised during 1998 by the executive officers of the
Company.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL FISCAL
YEAR-END(#) YEAR-END(4)
--------------------- ---------------------------
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) VALUE REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------ ----------------------- --------------------- --------------------- ---------------------------
<S> <C> <C> <C> <C>
Harvey J. Nickelson..... -0- -0- 13,200/52,800 $ 108,500/$218,999
David V. Heald.......... -0- -0- 6,600/26,400 $ 54,250/$109,500
Richard G. Hofstetter... -0- -0- 5,280/21,120 $ 43,400/$87,600
Bruce H. Kendall........ -0- -0- 3,960/15,840 $ 32,550/$65,700
</TABLE>
8
<PAGE>
PERFORMANCE GRAPH
As part of the proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, the Company is required to provide a
five-year comparison of the cumulative total stockholder return on its Common
Stock with that of a broad equity market index and either a published industry
index or a Company-constructed peer group index.
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock assuming that all cash
dividends have been reinvested, during the five years ended December 31, 1998
with the cumulative total return on the NASDAQ Bank Index, the SNL Securities,
Inc. Index for Banks under $500 million in asset size, and the S&P 500 Total
Return Index. The comparison assumes $100 was invested on December 31, 1993 in
the Company's Common Stock in each of the foregoing indices and the reinvestment
of dividends.
There can be no assurance as to future trends in the cumulative total return
of the Company's Common Stock or of the following indices. The Company does not
make or endorse any predictions as to future stock performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COAST BANCORP
<S> <C> <C> <C> <C>
Total Return Performance
Index Value
Coast Bancorp S&P 500 NASDAQ Bank Index SNL
12/31/93 100.00 100.00 100.00 100.00
12/31/94 87.13 101.32 99.64 107.55
12/31/95 120.21 139.39 148.38 147.13
12/31/96 174.37 171.26 195.91 189.37
12/31/97 357.56 228.42 328.02 322.82
12/31/98 350.16 293.69 324.90 294.76
</TABLE>
9
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and any person who owns more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and holders of more than ten percent are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. To the best knowledge of the Company, no person owns ten percent or
more of the Company's Common Stock.
Based solely on its review of the copies of such forms received by it, or
written representations from certain persons that no Form 5 was required to be
filed, the Company believes that for the period from January 1, 1998 through
December 31, 1998, its officers and directors complied with all applicable
filing requirements.
INDEBTEDNESS OF MANAGEMENT AND OTHER TRANSACTIONS
The Company has had and expects to have in the future, banking transactions
in the ordinary course of its business with its directors, executive officers,
principal shareholders, and their associates, on substantially the same terms,
including interest rates and collateral on loans comparable to transactions with
others, and such transactions did not involve more than the normal risks of
collectibility or present other unfavorable features.
REPORT ON EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE
The following report is made by the Company's Compensation Committee.
Presently, the Bank is paying all compensation of the executive officers.
The Compensation Committee has considered the tax law limitation of
deductibility of executive compensation of $1,000,000 per executive for publicly
held corporations. The Compensation Committee does not believe that this
limitation will affect the Company as it does not anticipate that its
executives' compensation will approach this limit.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is to incent the performance of its
executive officers so that the Company will achieve financial performance at the
upper levels of profitability for a company of its size in the banking industry.
The Company believes that it has achieved this objective, particularly during
the last several years. Accordingly, the Company makes incentive compensation a
significant part of the total compensation paid to its executive officers.
CORPORATE PERFORMANCE FACTORS
The Company determines the salary of executive officers based in part upon
the salaries paid by industry peers consisting of other banks located in
California of similar asset size. As the Company's compensation philosophy is to
incent the performance of its executive officers to achieve greater performance,
salaries are kept in line with median salaries of its industry peers.
In keeping with the Company's philosophy of incenting the performances of
its executive officers, in determining bonuses it takes into consideration the
Company's Return on Assets and Return on Equity.
10
<PAGE>
INDIVIDUAL PERFORMANCE FACTORS
Annual increases to an executive officer's salary is based upon their annual
review as measured by their achievement of goals and objectives as discussed
with them at their annual review for the prior year, their level of performance
and their responsibilities.
COMPENSATION--SALARIES AND AWARD OF INCENTIVE COMPENSATION
The Chief Executive Officer of the Company makes a recommendation to the
Compensation Committee for the salary of each executive officer based upon the
attainment of goals and objectives for each officer as discussed with them at
their annual review for the prior year, and an evaluation of their performance
and responsibilities. Industry peer group data is also considered. The Chairman
of the Company's Board of Directors makes the recommendation for the Chief
Executive Officer's salary to the Compensation Committee.
The amount available to be paid as incentive compensation to the executive
officers of the Company is determined by the Chief Executive Officer after
considering the Company's pre-tax income. The amount of incentive compensation
to be paid to each executive officer is then determined by the Chief Executive
Officer using the same criteria used for the determination of salary. The amount
of the incentive compensation to be paid to other executive officers is
discussed by the Chief Executive Officer with the Compensation Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION
Harvey J. Nickelson is the President and Chief Executive Officer of the
Company and the Bank.
Mr. Nickelson's salary is based upon the same factors as used for the
determination of salary for the other executive officers. However, the Chairman
of the Board of Directors of the Company performs Mr. Nickelson's annual review
and determination of salary after discussion with the other outside directors.
Mr. Nickelson's incentive compensation is thirty-five percent (35%) of the
amount available for payment of incentive compensation to those employees at the
level of Senior Vice President and above. This level includes four executive
officers and two officers who are not considered to be executive officers.
STOCK OPTIONS
The amount of stock options to be granted to executive officers of the
Company is recommended by the Chief Executive Officer to the Company's Stock
Option Committee. The same criterion as used for the determination of salary is
used for the recommendation of stock option grants.
Coast Bancorp Compensation Committee:
Richard E. Alderson
Douglas D. Austin
Gilbert "Bud" W. Cummings
Ronald M. Israel, M.D.
Gus J. F. Norton
James C. Thompson
THE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of six outside Directors. None of
these individuals is or has been employed as an officer or employee of the
Company or the Bank or any subsidiaries.
11
<PAGE>
PROPOSAL 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected and appointed Deloitte & Touche LLP,
independent public accountants, to examine the financial statements of the
Company for the year ending December 31, 1999. In recognition of the important
role of the independent public accountants, the Board of Directors has
determined that its selection of the independent public accountants should be
submitted to the shareholders for review and ratification on an annual basis.
Deloitte & Touche LLP has served as the Company's independent public accountants
since 1985. If ratified, Deloitte & Touche LLP will serve as the independent
certified public accountants for the Company and the Bank.
In the event the appointment is not ratified through the affirmative vote of
a majority of the outstanding shares, the adverse vote will be deemed to be an
indication to the Board of Directors that it should consider selecting other
independent public accountants for 1999. Because of the difficulty and expense
of making any substitution of auditors after the beginning of the current year,
it is the intention of the Board of Directors that the appointment of Deloitte &
Touche LLP for the year 1999 will stand unless for other reasons the Board of
Directors deems it necessary or appropriate to make a change. The Board of
Directors also retains the power to appoint another independent public
accountant to replace an independent public accountant ratified by the
shareholders in the event the Board of Directors determines that the interests
of the Company require such a change.
A representative of Deloitte & Touche LLP is expected to be present at the
Meeting, will be provided the opportunity to make a statement if he so desires,
and will be available to respond to appropriate questions of shareholders.
RECOMMENDATION
THE BOARD OF DIRECTORS INTENDS TO VOTE ALL PROXIES HELD BY IT IN FAVOR OF
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP TO AUDIT THE FINANCIAL
STATEMENTS OF THE COMPANY AND THE BANK AND URGES YOU TO VOTE FOR PROPOSAL 2.
PROPOSAL 3. OTHER MATTERS
Management is not aware of any other matters to come before the Meeting. If
any other matter not mentioned in this Proxy Statement is brought before the
Meeting, the persons named in the enclosed form of proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors,
/s/ Sandra Anderson
Sandra Anderson
SECRETARY
April 15, 1999
Santa Cruz, California
12
<PAGE>
PROXY
COAST BANCORP
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS
MAY 18, 1999
The undersigned holder of Common Stock acknowledges receipt of a copy of the
Notice of Annual Meeting of Shareholders of Coast Bancorp and the accompanying
Proxy Statement dated April 15, 1999, and, revoking any Proxy heretofore given,
hereby constitutes and appoints Douglas D. Austin, John C. Burroughs and Ronald
M. Israel, and each of them, with full power of substitution, as attorneys and
proxies to appear and vote all of the shares of Common Stock of Coast Bancorp, a
California corporation, standing in the name of the undersigned which the
undersigned could vote if personally present and acting at the Annual Meeting of
Shareholders of Coast Bancorp, to be held at the Museum of Art and History, 705
Front Street, Santa Cruz, California, on Tuesday, May 18, 1999, at 4:00 P.M. or
at any adjournment thereof, upon the following items as set forth in the Notice
of Meeting and Proxy Statement and to vote according to their discretion on all
matters which may be properly presented for action at the meeting or any
adjournments thereof. All properly executed proxies will be voted as indicated.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING
ITEMS:
1. To elect as directors FOR all nominees listed below WITHHOLD AUTHORITY
the nominees set forth (EXCEPT AS MARKED TO THE TO VOTE FOR ALL
below: CONTRARY BELOW). / / NOMINEES LISTED
BELOW. / /
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, CIRCLE
AND INITIAL THE NOMINEE'S NAME IN THE LIST BELOW:
R. Alderson, D. Austin, J. Burroughs, B. Cummings, R. Israel, H. Nickelson, G.
Norton and J. Thompson
2. To approve the proposal to ratify the appointment of Deloitte & Touche LLP
as independent public accountants for the Company's 1999 fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
<PAGE>
3. To transact such other business as may properly come before the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN AND RETURN THIS
PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE.
I/WE do
------ or; I/WE do not
- ------ expect to attend this meeting.
THIS PROXY IS SOLICITED BY AND ON THE BEHALF OF THE BOARD OF DIRECTORS AND
MAY BE REVOKED PRIOR TO ITS EXERCISE. THIS PROXY WHEN PROPERLY EXECUTED WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 and 2 AND DISCRETIONARY AUTHORITY
WILL BE GRANTED AS TO PROPOSAL 3.
Signature ____________________
Signature ____________________
Date: ________________________
Please date and sign exactly
as your name(s) appear below.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title. If more than
one trustee, all should sign.
All joint owners should sign.
