-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IwFMYUpH5JXbtCu9p3PDuAxk+Pa50wUL3V58gRaLSDpiz1FIV4qFwTpVfEnpj4eU PMLyYRwmFODG3D2uk3EAXA== 0000912057-99-004813.txt : 19991115 0000912057-99-004813.hdr.sgml : 19991115 ACCESSION NUMBER: 0000912057-99-004813 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COAST BANCORP CENTRAL INDEX KEY: 0001021006 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 770401327 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12253 FILM NUMBER: 99746906 BUSINESS ADDRESS: STREET 1: 740 FRONT ST STREET 2: SUITE 240 CITY: SANTA CRUZ STATE: CA ZIP: 95066 BUSINESS PHONE: 4084584500 MAIL ADDRESS: STREET 1: 740 FRONT ST STREET 2: SUITE 240 CITY: SANTA CRUZ STATE: CA ZIP: 95066 10-Q 1 10-Q 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 --------- COAST BANCORP FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 TABLE OF CONTENTS PART I
Page 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
PART I Item 1. Financial Statements COAST BANCORP CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 DECEMBER 31, 1998 ASSETS ------------------ ----------------- (unaudited) 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 ======================================
See notes to unaudited condensed consolidated financial statements -1- COAST BANCORP CONDENSED CONSOLIDATED INCOME STATEMENTS (unaudited)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, -------------------------------- ------------------------------- 1999 1998 1999 1998 ---- ---- ---- ---- 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 =====================================================================
See notes to unaudited condensed consolidated financial statements -2- COAST BANCORP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1999 1998 ---- ---- 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
See notes to unaudited condensed consolidated financial statements -3- 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:
Three months ended September 30, ------------------------------------------------ 1999 1998 ---- ---- 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 =============================================== =============================================== Nine months ended September 30, ----------------------------------------------- 1999 1998 ---- ---- 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 ===============================================
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:
Three Months Ended September 30, ---------------------------------------- 1999 1998 ---------------------------------------- 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 ======================================== Nine Months Ended September 30, ---------------------------------------- 1999 1998 ---------------------------------------- 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 ========================================
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- 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- Table I Components of Net Interest Income
THREE MONTHS ENDED SEPTEMBER 30, --------------------------------------------------------------------------------------- 1999 1998 ---- ---- AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE BALANCE -------- RATE (4) BALANCE -------- RATE (4) ------- -------- ------- -------- (DOLLARS IN THOUSANDS) 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% ============== ===============
(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- Table I Components of Net Interest Income
NINE MONTHS ENDED SEPTEMBER 30, --------------------------------------------------------------------------------------- 1999 1998 ---- ---- AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE BALANCE -------- RATE (4) BALANCE -------- RATE (4) ------- -------- ------- -------- (DOLLARS IN THOUSANDS) 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% ============= =============
(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- 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)
THREE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1999 1998 ---- ---- 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 ====================== NINE MONTHS ENDED SEPTEMBER 30, ----------------- 1999 1998 ---- ---- 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 ======================
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- 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)
THREE MONTHS ENDED SEPTEMBER 30, -------------------------------- 1999 1998 ---- ---- 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% ====================================================== NINE MONTHS ENDED SEPTEMBER 30, ------------------------------- 1999 1998 ---- ---- 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% ======================================================
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- 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)
SEPTEMBER 30, 1999 ------------------- 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%
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- 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)
NINE MONTHS ENDED SEPTEMBER 30, 1999 --------------------------- 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%
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- 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- 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)
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) 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
-13- 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:
SEPTEMBER 30, 1999 DECEMBER 31,1998 ------------------ ---------------- 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%
Coast Commercial Bank:
SEPTEMBER 30, 1999 DECEMBER 31,1998 ------------------ ---------------- 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%
-14- 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- 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- 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
Exhibit Number 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
b. Reports on Form 8-K Not applicable -17- 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- EX-10.20 2 EXHIBIT 10.20 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 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 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 3 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. 4 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: 5 Its: 6 EX-10.21 3 EXHIBIT 10.21 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 1 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 2 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 3 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 4 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 5 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 6 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, 7 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 8 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. 9 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 10 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 11 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 - ------------- 12 EX-10.22 4 EXHIBIT 10.22 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 1 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 2 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 3 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 4 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 5 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 6 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, 7 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 8 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. 9 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 10 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 11 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 EX-10.23 5 EXHIBIT 10.23 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: 1 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) 2 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 3 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 4 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 5 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. 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 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 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 8 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 9 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 10 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. 11 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 - -------------------------------- 12 EX-10.24 6 EXHIBIT 10.24 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: 1 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) 2 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 3 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 4 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. 5 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, 6 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 7 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 8 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 9 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 10 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. 11 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 12 EX-10.25 7 EXHIBIT 10.25 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: 1 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) 2 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 3 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 4 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. 5 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, 6 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 7 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 8 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 9 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 10 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. 11 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 ------------------------------ 12 EX-10.26 8 EXHIBIT 10.26 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 1 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. 2 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 3 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 4 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 5 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 6 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 7 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 8 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. 9 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. 10 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. 11 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 12 EX-10.27 9 EXHIBIT 10.27 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. 1 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 2 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 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 ------------------------------ 4 COAST COMMERCIAL BANK By: /s/ BRUCE H. KENDALL ------------------------------- Its: SENIOR VICE PRESIDENT & CFO ------------------------------- 5 EX-10.28 10 EXHIBIT 10.28 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 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 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 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 COAST COMMERCIAL BANK By: /s/ BRUCE H. KENDALL -------------------------------- Its: Senior Vice President & CFO ------------------------------ 5 EX-10.29 11 EXHIBIT 10.29 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 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 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 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 COAST COMMERCIAL BANK By: /s/ BRUCE H. KENDALL -------------------------------- Its: Senior Vice President & CFO ------------------------------- 5 EX-10.30 12 EXHIBIT 10.30 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 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 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 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 COAST COMMERCIAL BANK By: /s/ BRUCE H. KENDALL --------------------- Its: Senior Vice President & CFO ---------------------------- 5 EX-10.31 13 EXHIBIT 10.31 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 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 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 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 COAST COMMERCIAL BANK By: /s/ BRUCE H. KENDALL ------------------------------- Its: Senior Vice President & CFO ------------------------------ 5 EX-10.32 14 EXHIBIT 10.32 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. 1 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 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 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 COAST COMMERCIAL BANK By:/S/ DAVID V. HEALD ----------------------- Its: EXECUTIVE VICE PRESIDENT 5 EX-27 15 EXHIBIT 27
9 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 18,746 0 6,800 0 116,729 0 116,729 197,131 3,668 350,088 282,799 31,500 3,856 0 0 0 21,049 13,045 350,088 13,603 5,086 691 19,380 4,476 5,144 9,076 0 52 9,884 8,205 8,205 0 0 5,003 1.05 1.02 .063 1,836 353 0 0 3,871 256 53 3,668 3,668 0 0
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