-----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, Bcx/FlWrxGRCswvyfk3mkStLCbG1PiRZRIlwtGtfBhEod0cm6cR0WmAYeXU/C6Em rbAf08oJQZWLW2spzpOp7w== /in/edgar/work/0000912057-00-048427/0000912057-00-048427.txt : 20001114 0000912057-00-048427.hdr.sgml : 20001114 ACCESSION NUMBER: 0000912057-00-048427 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA INDEPENDENT BANCORP CENTRAL INDEX KEY: 0000948976 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 680349947 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26552 FILM NUMBER: 758085 BUSINESS ADDRESS: STREET 1: 1227 BRIDGE STREET STREET 2: SUITE C CITY: YUBA CITY STATE: CA ZIP: 95992 BUSINESS PHONE: 9166744444 MAIL ADDRESS: STREET 1: P O BOX 1575 STREET 2: 1005 STAFFORD WAY CITY: YUBA CITY STATE: CA ZIP: 95992 10-Q 1 a2030130z10-q.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 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 0-265520 California Independent Bancorp ------------------------------------------------------ (Exact name of registrant as specified in its charter) California 68-0349947 ------------------------------- ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1227 Bridge St., Suite C, Yuba City, California 95991 ----------------------------------------------------- (Address of principal executive offices) (Zip Code) (530) 674-6025 ---------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------- (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. Yes |X| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at Class September 30, 2000 ----- ------------------ Common stock, no par value 2,008,395 shares This report contains 99 pages. The Exhibit Index is on pages 24 and 25. 1 PART I- FINANCIAL INFORMATION ITEM 1 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS 3 CONSOLIDATED STATEMENTS OF INCOME FOR THREE-MONTHS 4 CONSOLIDATED STATEMENTS OF INCOME FOR NINE-MONTHS 5 CONSOLIDATED STATEMENTS OF CASH FLOWS 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-8 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-22 ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 23 PART II- OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS 24 ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS 24 ITEM 3 DEFAULTS UPON SENIOR SECURITIES 24 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 24 ITEM 5 OTHER INFORMATION 24 ITEM 6 EXHIBITS AND REPORTS ON FORM 8K 24-25 SIGNATURES 26 2 PART I- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31, September 30, 2000 1999 1999 Assets Cash and Due From Banks $ 13,392,673 $ 15,887,475 $ 21,438,797 Federal Funds Sold 1,100,000 22,000,000 -- ----------------------------------------------- Cash and Cash Equivalents 14,492,673 37,887,475 21,438,797 Investment securities: Held-to-Maturity Securities, at amortized cost (fair value of $5,346,321, $16,098,247 and $9,398,162, respectively) 5,381,349 16,178,653 9,434,194 Available-for-Sale Securities, at fair value 85,438,796 70,819,851 59,727,193 ----------------------------------------------- Total Investments 90,820,145 86,998,504 69,161,387 Loans and Leases 161,732,799 116,032,691 141,315,269 Loans and Leases Held-for-Sale 20,653,705 45,287,979 45,813,845 ----------------------------------------------- Gross Loans and Leases 182,386,504 161,320,670 187,129,114 Less: Allowance for Loan and Lease Losses (6,147,648) (6,770,523) (6,633,727) ----------------------------------------------- Net Loans and Leases 176,238,856 154,550,147 180,495,387 Premises and Equipment, Net 7,032,861 7,342,659 7,470,704 Interest Receivable 3,399,975 3,282,957 3,341,518 Other Real Estate Owned 657,507 1,299,637 1,444,257 Cash Surrender Value of Insurance Policies 4,812,963 4,648,123 4,594,120 Deferred Taxes 2,558,374 3,650,310 3,686,412 Income Tax Receivable 950,697 324,738 66,800 Other Assets 1,759,372 375,912 978,347 Net Assets From Discontinued Operations 165,854 -- 405,886 ----------------------------------------------- Total Assets $ 302,889,277 $ 300,360,462 $ 293,083,615 =============================================== Liabilities and Shareholders' Equity Deposits: Noninterest-Bearing $ 54,084,065 $ 60,483,798 $ 47,296,883 Interest-Bearing 206,416,537 212,975,320 212,464,835 ----------------------------------------------- Total Deposits 260,500,602 273,459,118 259,761,718 Interest Payable 1,732,522 1,533,539 1,390,681 Federal Agency and Other Borrowings 15,287,417 941,676 6,825,317 Other Liabilities 799,110 1,079,148 1,304,232 Net Liabilities From Discontinued Operations -- 112,134 -- ----------------------------------------------- Total Liabilities 278,319,651 277,125,615 269,281,948 Shareholders' Equity Common stock, no par value- Authorized - 20,000,000. Shares issued and outstanding-2,008,395 shares September 30, 2000, 1,904,618 shares December 31, 1999 and 1,901,449 shares September 30, 1999 19,899,306 17,950,525 17,875,958 Retained Earnings 5,952,379 6,233,226 6,958,738 Debt Guarantee of ESOP (200,000) -- (40,000) Accumulated Other Comprehensive Loss (1,082,059) (948,904) (993,029) ----------------------------------------------- Total Shareholders' Equity 24,569,626 23,234,847 23,801,667 ----------------------------------------------- Total Liabilities and Shareholders' Equity $ 302,889,277 $ 300,360,462 $ 293,083,615 ===============================================
The accompanying notes are an integral part of these consolidated statements 3 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three-months Three-months ended ended September 30, 2000 September 30, 1999 ---------------------------------------- Interest Income: Interest and Fees on Loans and Leases $ 4,535,206 $ 4,801,369 Interest on Investments- Taxable Interest Income 1,480,342 976,639 Nontaxable Interest Income 28,587 39,319 Interest on Federal Funds Sold and Other Interest Income 658 -- --------------------------------- Total Interest Income 6,044,793 5,817,327 --------------------------------- Interest Expense: Interest on Deposits 2,258,170 2,105,734 Interest on Other Borrowings 262,288 138,570 --------------------------------- Total Interest Expense 2,520,458 2,244,304 --------------------------------- Net Interest Income 3,524,335 3,573,023 Provision for Loan and Lease Losses -- 50,000 --------------------------------- Net Interest Income After Provision for Loan and Lease Losses 3,524,335 3,523,023 --------------------------------- Noninterest Income: Service Charges on Deposit Accounts 253,088 251,198 Servicing and Brokered Loan Fees 281,543 256,613 Alternative Investment Fee Income 54,278 76,578 Cash Surrender Value of Life Insurance Policies 65,641 38,100 Other 70,943 139,605 --------------------------------- Total Noninterest Income 725,493 762,094 --------------------------------- Noninterest Expense: Salaries and Employee Benefits 1,675,141 1,620,159 Occupancy Expense 179,196 189,103 Furniture and Equipment Expense 289,998 326,714 Legal and Professional Fees 34,921 81,993 Other 755,582 1,243,600 --------------------------------- Total Noninterest Expense 2,934,838 3,461,569 --------------------------------- Income Before Provision for Income Taxes 1,314,990 823,548 Provision for Income Taxes 496,550 256,750 --------------------------------- Net Income From Continuing Operations 818,440 566,798 Loss on Discontinued Operations, net of tax effect (16,491) (175,047) --------------------------------- Net Income $ 801,949 $ 391,751 ================================= Share Data: Earnings Per Share: Basic-From Continuing Operations $ 0.43 $ 0.31 Basic-After Discontinuance of Subsidiary 0.42 0.21 Diluted-From Continuing Operations 0.39 0.30 Diluted-After Discontinuance of Subsidiary 0.38 0.21 Shares Outstanding 2,008,395 1,901,449 Weighted Average Basic Shares 1,924,711 1,841,000 Weighted Average Diluted Shares 2,086,025 1,859,517
The accompanying notes are an integral part of theses consolidated statements 4 CALIFORNIA INDEPENDENT BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine-months Nine-months ended ended September 30, 2000 September 30, 1999 ------------------------------------------ Interest Income: Interest and Fees on Loans and Leases $ 12,526,952 $ 14,171,783 Interest on Investments- Taxable Interest Income 4,389,011 2,844,201 Nontaxable Interest Income 91,397 125,622 Interest on Federal Funds Sold and Other Interest Income 536,927 241,974 ------------------------------------ Total Interest Income 17,544,287 17,383,580 ------------------------------------ Interest Expense: Interest on Deposits 6,734,305 6,165,866 Interest on Other Borrowings 288,120 172,434 ------------------------------------ Total Interest Expense 7,022,425 6,338,300 ------------------------------------ Net Interest Income 10,521,862 11,045,280 Provision for Loan and Lease Losses 200,000 850,000 ------------------------------------ Net Interest Income After Provision for Loan and Lease Losses 10,321,862 10,195,280 ------------------------------------ Noninterest Income: Service Charges on Deposit Accounts 756,152 710,324 Servicing and Brokered Loan Fees 546,417 677,009 Alternative Investment Fee Income 158,462 168,703 Cash Surrender Value of Life Insurance Policies 193,375 108,135 Other 306,069 255,315 ------------------------------------ Total Noninterest Income 1,960,475 1,919,486 ------------------------------------ Noninterest Expense: Salaries and Employee Benefits 4,835,140 4,808,533 Occupancy Expense 510,361 559,275 Furniture and Equipment Expense 883,893 1,023,516 Legal and Professional Fees 192,179 290,766 Other 2,358,700 3,307,598 ------------------------------------ Total Noninterest Expense 8,780,273 9,989,688 ------------------------------------ Income Before Provision for Income Taxes 3,502,064 2,125,078 Provision for Income Taxes 1,318,325 727,000 ------------------------------------ Net Income From Continuing Operations 2,183,739 1,398,078 Income (loss) on Discontinued Operations, net of tax effect 3,870 (182,789) ------------------------------------ Net Income $ 2,187,609 $ 1,215,289 ==================================== Share Data: Earnings Per Share: Basic-From Continuing Operations $ 1.14 $ 0.78 Basic-After Discontinuance of Subsidiary 1.14 0.68 Diluted-From Continuing Operations 1.05 0.77 Diluted-After Discontinuance of Subsidiary 1.06 0.67 Shares Outstanding 2,008,395 1,901,449 Weighted Average Basic Shares 1,911,787 1,793,978 Weighted Average Diluted Shares 2,073,101 1,812,495
The accompanying notes are an integral part of theses consolidated statements 5 CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine-Months ended September 30, 2000 and September 30, 1999 (UNAUDITED)
September 30, September 30, 2000 1999 ------------------------------- Cash Flows From Operating Activities Net income $ 2,187,609 $ 1,215,289 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 731,139 814,392 Provision for loan and lease losses 200,000 850,000 Write-down of other real estate owned (44,700) 0 Investment security (gains) losses, net 0 (14,141) Proceeds from loan and lease sales 1,135,000 19,074,269 Gain on sale of premises and equipment 18,316 0 (Increase) decrease in assets- Interest receivable (117,018) (486,844) Other assets (973,378) (3,485,141) Net Assets from Discontinued Operations of Subsidiary (277,988) (76,117) Increase (decrease) in liabilities- Interest payable 198,983 (231,978) Fed Funds purchased, other borrowings and other liabilities 13,865,703 7,120,040 ------------------------------ Net cash provided by operating activities 16,923,666 24,779,769 Cash Flows From Investing Activities Net (increase) decrease in loans (20,297,324) (8,633,307) Origination of loans and leases held-for-sale (2,726,385) (18,439,565) Purchase of securities (16,302,982) (31,188,842) Proceeds from maturity of HTM Securities 10,712,105 1,685,000 Proceeds from sales/maturity of AFS Securities 1,527,136 19,968,971 Proceeds from sales of other real estate owned 686,830 313,537 Purchases of premises and equipment (439,657) (527,196) ------------------------------ Net cash used for investing activities (26,840,277) (36,821,402) Cash Flows From Financing Activities Net (decrease) in noninterest bearing deposits (6,399,733) (18,500,216) Net increase (decrease) in interest bearing deposits (6,558,783) 9,664,420 Cash dividends (628,859) (589,942) Stock options exercised 118,906 557,553 Cash paid in lieu of fractional shares (9,722) (9,445) ------------------------------ Net cash provided by (used in) financing activities (13,478,191) (8,877,630) ------------------------------ NET INCREASE (DECREASE) (23,394,802) (20,919,263) Cash and Cash Equivalents, Beginning of Year 37,887,475 42,358,060 ------------------------------ Cash and Cash Equivalents, End of Period $ 14,492,673 $ 21,438,797 ==============================
The accompanying notes are an integral part of these consolidated statements 6 Note 1 - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). In the opinion of Management, the unaudited consolidated financial statements contain all adjustments that are necessary to present fairly the financial position of California Independent Bancorp ("Company") and its subsidiaries at September 30, 2000, December 31, 1999, and September 30, 1999, and the results of its operations for the three and nine-month periods ended September 30, 2000, and September 30, 1999. Certain information and footnote disclosures normally presented in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with SEC rules or regulations. The results of operations for the periods ended September 30, 2000, are not necessarily indicative of the operating results for the full year ending December 31, 2000. It is suggested that these financial statements be read in conjunction with the financial statements and notes included in the Company's Annual Report for the year ended December 31, 1999. Note 2 - Principles of Consolidation The accompanying financial statements include the accounts of the Company and its wholly owned subsidiary, Feather River State Bank ("Bank") and its wholly owned subsidiary, E.P.I. Leasing Company, Inc. ("EPI"). Significant intercompany balances and transactions between the Company and the Bank have been eliminated in consolidation. Note 3 - Loans to Directors In the ordinary course of business, the Company makes loans to directors of the Company. Loans to directors amounted to approximately $3,215,428, $3,362,874, and $5,380,000 at September 30, 2000, December 31, 1999,and September 30, 1999, respectively. Note 4 - Commitments and Contingent Liabilities In the normal course of business, there are various outstanding commitments and contingent liabilities, such as commitments to extend credit and letters of credit, which are not reflected in the financial statements. Management does not anticipate any material loss as a result of these transactions. Note 5 - Cash and Stock Dividends In February, May, August, and November of 1999, and March, June, and August of 2000, the Company paid an eleven-cent per share cash dividend. On August 17, 1999, the Company's Board of Directors authorized and declared a five-percent stock dividend for shareholders of record as of August 31, 1999. The dividend was distributed on September 17, 1999, and resulted in the issuance of 90,084 additional shares of common stock. On August 15, 2000, the Company's Board of Directors authorized and declared a five-percent stock dividend for shareholders of record as of August 31, 2000. The dividend was distributed on September 15, 2000, and resulted in the issuance of 94,881 additional shares of common stock. 7 Note 6 - Earnings Per Share The Company calculates earnings per share ("EPS") in accordance with the Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 establishes standards for computing and presenting EPS. It replaced the presentation of primary EPS with a presentation of basic EPS. It also required dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and required reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution and is computed by dividing income available to the common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted into common stock, or resulted in the issuance of common stock that then shared the earnings of the Company. Note 7 - Financial Accounting Pronouncements On January 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for the reporting and displaying of comprehensive income and its components in the financial statements. Comprehensive income refers to revenues, expenses, gains, and losses that generally accepted accounting principles recognize as changes in value to an enterprise but are excluded from net income. For the Company, comprehensive income includes net income and changes in the fair value of its available-for-sale investment securities. Total comprehensive income for the nine-months ended September 30, 2000 and September 30, 1999 was $1,105,548 and $222,260, respectively. On January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for reporting enterprise segments of a company in the footnotes to the financial statements. The Company has no segments that meet the requirements of a reportable segment according to the guidelines set forth in SFAS 131. In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal years beginning after June 15, 2000. This statement established accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. The Company will adopt this statement on January 1, 2001 and does not expect that it will have a material impact on its financial position or results of operations. On January 1, 1999, the Company adopted SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise." This statement amends SFAS No. 65, "Accounting for Certain Mortgage Banking Activities," to require that after the securitization of mortgage loans held for sale, an entity engaged in mortgage banking activities classify the resulting mortgage-backed securities or other retained interest based on its ability and intent to sell or hold those investments. SFAS 134 did not have an impact on the Company's financial statements. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS California Independent Bancorp ("Company") through its wholly owned subsidiary, Feather River State Bank (the "Bank") engages in a broad range of financial service activities. The Bank commenced operations in 1977 as a California state chartered commercial bank. The Company was formed in 1994 and, after receiving regulatory and shareholder approval, became the holding company for the Bank in May 1995. In October 1996, the Bank acquired E.P.I. Leasing Co., Inc. ("EPI"), and operates this equipment leasing company as a subsidiary. As a part of the Company and Bank's restructuring efforts, EPI is no longer originating leases. It is anticipated that the business affairs of EPI will be dissolved and wound up during the year 2000. Certain statements in this Form 10-Q quarterly report include forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are subject to the "safe harbor" provisions created by those sections. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: competitive pressure in the banking industry; changes in the interest rate environment; general economic conditions, either nationally or regionally, that are less favorable than expected, resulting in, among other things, a deterioration in credit quality and an increase in the provision for possible loan and lease losses; the loss of key personnel; changes in the regulatory environment; changes in business conditions; volatility of rate sensitive deposits; operational risks including data processing system failures or fraud; asset/liability matching risks and liquidity risks; and changes in the securities markets. In addition, such risks and uncertainties include mortgage banking activities, merchant card processing, concentration of lending activities and the costs and steps necessary to address the residual effects, if any, of the Year 2000 issues. The following sections discuss significant changes and trends in the financial condition, capital resources and liquidity of the Company from September 30, 1999 and December 31, 1999 to September 30, 2000. The sections also discuss significant changes and trends in the Company's results of operations for the three and nine-months ended September 30, 2000, compared to the same periods in 1999. OVERVIEW OF CHANGES IN THE FINANCIAL STATEMENTS Total assets at September 30, 2000 were $302,889,277. This figure represents an increase from $300,360,462 at December 31, 1999 and $293,083,615 at September 30, 1999. Gross loans and leases were $182,386,504 at September 30, 2000, a 13.1% increase from $161,320,670 at December 31, 1999, and a 2.5% decrease from $187,129,114 at September 30, 1999. The decrease in gross loans and leases over the past twelve-month period was primarily due to the collection of certain problem loans and leases and the Bank's enhanced credit standards. The increase over December's figure reflects the seasonal nature of the Company's loan portfolio and the Bank's aggressive marketing efforts. Historically, the Company's total loan balances decrease during the first and fourth quarters of each year as payments are received from its agricultural borrowers. In contrast, during the second and third quarters total loans rise in conjunction with the increased demand for agricultural and construction loans. Contributing to the decline in gross loans and leases at September 30, 2000 in comparison to September 30, 1999 was a reduction in lease financing which is the result of normal portfolio amortization. The Company's investment portfolio at September 30, 2000 was $90,820,145, compared to $86,998,504 at December 31, 1999 and $69,161,387 at September 30, 1999. Cash and cash equivalents, which consisted of cash and due from banks and federal funds sold, were $14,492,673 at September 30, 2000, $37,887,475 at December 31, 1999, and $21,438,797 as of September 30, 1999. The higher balance at December 31,1999, is attributed to the Company's investment in overnight federal funds. 9 Total deposits of the Company remain strong at $260,500,602, $273,459,118 and $259,761,718 as of September 30, 2000, December 31, 1999 and September 30, 1999, respectively. The increase at December 31, 1999, compared to the other two periods, is indicative of normal seasonal fluctuations in deposits. The ratios of gross loans to deposits were 70.0%, 59.0% and 72.0% at September 30, 2000, December 31, 1999 and September 30, 1999, respectively. LOANS AND LEASES The Company lends primarily to small and medium sized businesses, small to large sized farmers and consumers within its market area. The Company's market area is comprised principally of Sutter, Yuba, Colusa, and Yolo counties; and secondarily Placer, Sacramento, El Dorado, Butte and Glenn counties. Gross loans and leases outstanding as of September 30, 2000 were $182,386,504. This represents an increase of $21,065,834, or 13.1% since December 31, 1999 and a decrease of $4,742,610, or 2.5% compared to September 30, 1999. Consistent with Management's objectives, the composition of the Bank's loan portfolio has changed in the past twelve months. Generally speaking, agricultural loans and lease financing receivables have declined and loans secured by real estate have increased to 57.2% of the Bank's loan portfolio. This shift has occurred as part of a strategic effort by Bank management to diversify credit risk and enhance earnings. Management believes that the strategy has been successful. Based upon plans currently in place further diversification is anticipated in the area of commercial and consumer lending. Due to the loan portfolio's composition, the Company sustains moderate variations in outstanding loan totals. More specifically, certain seasonal variations are expected to occur in the agricultural and construction loan portfolios. The table below sets forth the composition of the Company's loan portfolio as of September 30, 2000, December 31, 1999, and September 30, 1999. COMPOSITION OF THE LOAN PORTFOLIO --------------------------------------------------------------------------- September 30, December 31, September 30, Loan Category 2000 1999 1999 --------------------------------------------------------------------------- Commercial & Agricultural $51,838,235 $55,111,154 $81,457,717 Real Estate Construction 33,625,057 30,513,920 31,705,637 Other Real Estate Loans 70,774,629 46,003,764 44,858,787 Lease Financing 21,983,239 27,009,815 25,864,092 Consumer 4,109,855 2,523,695 3,182,257 Other 55,489 158,322 60,624 --------------------------------------------------------------------------- TOTAL $182,386,504 $161,320,670 $187,129,114 --------------------------------------------------------------------------- The principal changes in the loan portfolio between September 30, 1999 and September 30, 2000 are discussed below: 1. Commercial and agricultural loans declined $29,619,482, or 36.4%. The Company provides a wide range of loan products to agricultural, commercial, retail and industrial businesses throughout its trade area. The entire decline in loan volume in this category occurred in the Bank's agricultural loan portfolio. Agricultural loans declined $33.6 million between September 30, 1999 and September 30, 2000. Three primary factors contributed to this event. First, the Bank closed its Madera Loan Production office during the fourth quarter of 1999. As a result, most of the agricultural loan borrowers serviced from that office have left the Bank. Second, the Bank's enhanced credit standards have resulted in lower agricultural loan production during the past twelve months. Third, increased competition in the Bank's market area has resulted in some agricultural borrowers leaving the Bank. In contrast, the total portfolio of commercial and business loans at the Bank has increased $4.4 million, or 20.9%, between September 30, 1999 and September 30, 2000. The increase is attributed to a strategically focused marketing effort in this area. 10 2. Other Real Estate Loans include those loans secured by residential (single family and multi-family), commercial and agricultural real property. Between September 30, 1999 and September 30, 2000, Other Real Estate loans increased by $25,915,842. Commercial real estate loans account for $23.3 million, or 89.0%, of the Other Real Estate Loan growth. The increase is due to successful business development efforts and the Company's intensified focus on the core real estate markets in its served geographic area. 3. Lease financing receivables declined $3,880,853, or 15.0%, between September 30, 1999 and September 30, 2000. The Company's March 2000 announcement that EPI would cease lease origination activities resulted in the discontinuance of leases purchased from EPI. Consequently, the Company expects an ongoing, steady reduction in its lease financing receivables. 4. A modest increase of $1,919,420 occurred in Real Estate Construction loans between September 30, 1999 and September 30, 2000. The Company extends construction loans primarily to individual borrowers and real estate developers for the construction of single family residences. The increase is attributable to successful business development efforts with local homebuilders. 5. A modest increase of $927,598 occurred in Consumer loans between September 30, 1999 and September 30, 2000. Consumer and installment loans are made for household, family and other personal expenditures. These loans are made on both a secured and unsecured basis. The increase in this loan category was due to the Bank's enhanced focus on retail banking products. During the third quarter of 2000, there were no significant changes in the Company's loan management, lending philosophy or credit delivery procedures. LOAN AND LEASE QUALITY The Company places loans on nonaccrual status when either principal or interest has been past due for 90 days or more. Exceptions to this policy can be made if the loan is well secured and in the process of collection. The Company also places loans on nonaccrual when payment in full of principal or interest is not expected or the financial condition of the borrower has significantly deteriorated. The following table summarizes the composition of nonperforming loans and leases that consists of "Accruing Loans and Leases Past Due 90 Days or More" and "Nonaccrual Loans and Leases" as of September 30, 2000, December 31, 1999 and September 30, 1999 as well as the changes between the periods. 11 Composition of Nonperforming Loans and Leases ($ in 000's) - -------------------------------------------------------------------------------- Accruing Loans Past Due $ Amt. Change $ Amt. Change $ Amt. 90 Days or More 9/30/00 From 9/99 12/31/99 From 9/99 9/30/99 ----------------------------------------------------- Commercial $ 0 N/A $ 0 N/A $ 0 Agricultural 0 N/A 0 N/A 0 Real Estate 661 N/A 0 N/A 0 Leases 0 N/A 0 N/A 0 Consumer 1 N/A 0 N/A 0 TOTAL $ 662 N/A $ 0 N/A $ 0 Nonaccrual Loans Commercial $ 2,421 90.33% $ 868 -31.76% 1,272 Agricultural 3,720 -18.10% 3,851 -15.21% 4,542 Real Estate 236 -87.64% 1,237 -35.24% 1,910 Leases 0 -100.00% 51 -37.04% 81 Consumer 134 N/A 0 N/A 0 TOTAL $ 6,511 -16.58% $ 6,007 -23.04% $ 7,805 - -------------------------------------------------------------------------------- Total Nonperforming $ 7,173 -8.10% $ 6,007 -23.04% $ 7,805 - -------------------------------------------------------------------------------- Total nonperforming loans and leases at September 30, 2000 were $7,172,985, an increase of $1,166,037, or 19.4%, from December 31, 1999. In comparison to September 30, 1999, nonperforming loans and leases at September 30, 2000 have decreased $631,811, or 8.1%. Total nonperforming loans and leases comprised 4.2% of the portfolio on September 30, 1999, and decreased to 3.7% of the portfolio on December 31, 1999. Nonperforming loans and leases at September 30, 2000, or 3.9% of total loans and leases. While comparisons to the December 31, 1999 figure show a significant increase, since June 30, 2000 the Company's total nonperforming loans and leases have decreased by $1,545,207. As Of June 30, 2000, total nonperforming loans were $8,718,192, or 5.1% of gross loans and leases. The Company had no loans and leases in the "Accruing Loans Past Due 90 Days or More" category as of September 30, 1999 and December 31, 1999. The increased level at September 30, 2000 of $662,059 in this category reflects the addition of three agriculture and residential real estate related loans. These loans are believed to be adequately secured and are in the process of collection. Nonaccrual loans and leases were $6,510,926 at September 30, 2000, an increase of $503,980, or 8.4%, in comparison to December 31, 1999 and a decrease of $1,293,870 or 16.6% in comparison to September 30, 1999. The increase since December 31, 1999 was centered in the Bank's agriculture portfolio and the agriculture related portion of its commercial portfolio. The rise was primarily the result of the impact of adverse weather conditions on crop production and lower commodity pricing due to rising crop supply. The Company's nonaccrual loans and leases are concentrated in four credit relationships that comprise 90.8% of the total at September 30, 2000. The remaining 9.2% of the nonperforming loans are distributed among the commercial, agricultural, real estate, and lease portfolios. The largest relationship comprises 43.0% of the total nonaccrual classification. This borrower sustained financial difficulty stemming from a combination of adverse weather, labor issues and uncollectable receivables. The Company is adequately collateralized and no loss is presently expected. 12 The second largest relationship represents 20.0% of the total nonaccrual loans. This borrower is negotiating takeout funding and the Bank has recently entered into a written workout agreement with the borrower. The borrower is actively trying to liquidate real property to retire the debt. The Company's loan position is adequately secured by real property and full collection is expected. The third largest nonaccrual loan, representing 14.0% of the total nonaccrual classification, is a commercial loan to a contractor that has experienced cash flow shortages. The loan balance has been charged down to a level of anticipated collection. The borrower is restructuring his operation and a formal workout agreement is expected prior to December 31, 2000. The fourth largest nonaccrual loan comprises 13.0% of the total nonaccrual loans. This loan is an agricultural related loan. The supporting collateral has been reappraised. As a result, this loan was partially charged down to the level supported by the fair value appraisal. No payment default has been experienced to date. Recovery of the reduced principal and all interest is expected at this time. An additional factor that has impacted the level of nonperforming loans and leases is the Company's objective to substantially reduce the level of all classified loans and leases during the year 2000. The Bank established a Special Asset Department in November 1999 that focuses on the prompt identification and resolution of classified loans and leases. Workout plans are in place for each classified loan and lease and adjustments are taken immediately if full recovery is not expected. These intensified collection actions have contributed to the increased levels of nonperforming loans and leases. The actions are intended to accelerate collection and include the following: 1) loan restructuring, 2) potential takeout funding, 3) foreclosure action, and 4) formalizing the workout agreement with the borrower before renewal of the existing loan position is allowed. This aggressive collection approach tends to temporarily increase the category of accruing loans past due 90 days or more. The Company's practice with regard to all nonperforming loans and leases is to reassess the value of the collateral underlying the loan and, if necessary, write the loan or lease down to the level supported by the collateral valuation. Additionally, workout plans are in place for each nonperforming loan and lease and, at this time, current analysis does not indicate any further loss content. All of the nonperforming loans listed in the previous table are in the process of collection. In terms of specific resolution plans, 11.0% of the nonperforming loans based on dollars (approximately $0.8 million) are in the process of collateral liquidation, 76.0% of the loans (approximately $5.4 million) are currently in a workout arrangement, and 13.0% of the loans (approximately $0.9 million) are in the process of formal workout negotiations. Management projects additional progress toward the resolution of these troubled loans during the fourth quarter of 2000. However, due to particular factors surrounding specific nonperforming loans, management projects that some of these credits will require several additional quarters to resolve. The Company's allowance for loan and lease losses ("ALLL") totaled $6,147,648, or 3.4% of gross loans and leases, as of September 30, 2000. This amount compares to $6,770,523, or 4.2%, of gross loans and leases as of December 31, 1999. The Company uses the allowance method in providing for possible loan and lease losses. Loan and lease losses are charged against the ALLL and recoveries are credited to it. Management believes that the total ALLL is adequate to cover potential losses in the loan and lease portfolios. While Management uses all available information to provide for loan and lease losses, future additions to ALLL may be necessary based on changes in economic conditions and other factors. Additions to the ALLL are made by provisions for possible losses. The provision for possible loan and lease losses is charged to operating expense and is based upon past loss experience and estimates of potential losses which, in Management's judgment and in accordance with generally accepted accounting principles, deserves current recognition. Other factors considered by Management include growth, composition and overall quality of the loan and lease portfolio, review of specific problem loans and leases, and current economic conditions that may affect the customer's ability to repay the obligation. Actual losses may vary from current estimates. The estimates are reviewed regularly and adjustments, as necessary, are charged to operations in the period in which they become known. 13 Contributions to the ALLL totaled $200,000 and $850,000 for the nine-months ended September 30, 2000 and September 30, 1999, respectively, and $0 and $250,000 for the three-months ended September 30, 2000 and September 30, 1999, respectively. Total contributions to the ALLL for year ending December 31, 1999 equaled $1,000,000. Loan and lease charge-offs for the nine-months ended September 30, 2000 totaled $1,244,486 as compared to $998,651 for the nine-months ended September 30, 1999. Loan recoveries were $421,611 for the nine-months ended September 30, 2000 compared to $758,267 for the nine-months ended September 30, 1999. The Company has no foreign loans and therefore none of the allowance is for foreign loans. INVESTMENTS The Company's investment portfolio was $90,820,145 at September 30, 2000, as compared to $69,161,387 at September 30, 1999. The increase in 2000 over 1999 is consistent with the year-over-year decrease in the Company's loan portfolio, a relatively stable deposit base, and the Company's objective to most effectively utilize its excess seasonal funds flow. As of September 30, 2000, the Company's "available-for-sale" category market valuation allowance reflected a net unrealized loss of $1,082,059 net of taxes. The approximate market value of the Company's entire investment portfolio at September 30, 2000 was $90,785,117. As of September 30, 1999, the Company's "available-for-sale" category adjustment reflected a net unrealized loss of $993,029 net of taxes, and the approximate market value of the Company's entire investment portfolio was $69,125,355. The $88,971 increase between the two periods in the net unrealized loss on the Company's available for sale securities is primarily the result of increasing interest rates and, to a lesser extent, volatility in the bond markets. 14 RESULTS OF OPERATIONS Three and Nine-months Ended September 30, 2000 Compared with Three and Nine-months Ended September 30, 1999 The Company recognized net income for the first nine months of 2000 of $2,187,609 resulting in diluted earnings per share of $1.06. Net income for the three-month period ending September 30, 2000, was $801,949 resulting in diluted earnings of $0.38 per share. The net income for the three and nine-month periods ending September 30, 2000 was substantially higher than the comparable 1999 periods. The Company reported net income of $391,751 or $0.21 per share on a diluted basis for the three-month period of 1999 and $1,215,289 or $0.67 per share on a diluted basis for the nine-month period of 1999, respectively. The increase in 2000 net income over the same period for 1999 was due to several factors as discussed in this section. One of the primary factors contributing to the increase in net income was a 76.5% decline in the provision for loan and lease losses for the two comparative nine-month periods ended September 30th. The provision for loan and lease loss also declined substantially between the two comparative three-month periods. These declines were primarily due to lower than anticipated charge-offs, higher than anticipated recoveries on previously charged-off loans and leases, and the successful resolution of certain problem credits; all of which mitigated the need to further build reserves via provisions charged to income. Additionally, total noninterest expense declined $1,209,415, or 12.1%, from the nine-month period ending September 30, 2000 versus September 30, 1999. Noninterest expense declined $526,731, or 15.2%, for the three-month period ending September 30, 2000 over September 30, 1999. These declines are discussed in more detail later in this section. Net interest income declined for the nine-month period ending September 30, 2000 to $10,521,862 from $11,045,280 for the same nine-month period in 1999, a decrease of $523,418 or 4.7%. Net interest income also declined for the three-month period ending September 30, 2000 to $3,524,335, or 1.4%, from the September 30, 1999 amount of $3,523,023. These decreases reflect the combined effect of a variety of factors affecting interest income and interest expense as described below. The Company's primary source of income is interest and fees on loans and leases. The table below depicts average loans and leases and yields for the three and nine-month periods ended September 30, 2000 and 1999. - -------------------------------------------------------------------------------- Three-months Three-months Nine-months Nine-months ended ended ended ended September 30, September 30, September 30, September 30, 2000 1999 2000 1999 ------------------------------------------------------------ Average loans and $180,666,159 $193,855,528 $163,586,430 $184,063,912 leases outstanding Average yields 10.04% 9.91% 10.21% 10.27% Interest & fees $ 4,535,206 $ 4,801,369 $ 12,526,952 $ 14,171,783 earned Average prime rate 9.50% 8.10% 9.14% 8.03% - -------------------------------------------------------------------------------- The three and nine-month average outstanding loans and leases at September 30, 2000, were down $13,189,369, or 6.8%, and $20,477,482, or 11.1%, respectively, from the same three and nine-month periods in 1999. This decline has adversely impacted the fees and interest earned on loans and leases. The decline in average outstanding loans and leases is reflective of the increasing interest rate environment, tightening of the Bank's underwriting standards, and increasing competitive pressures. Narrower margins are in part the result of 15 obtaining business under a more stringent credit underwriting process. This has a direct trade off in risk that is not reflected in the yield calculation. Both volume and rate are further impacted as a result of competitive pressure to acquire and retain quality customers for the Company. As an offset to the decline in interest income and fees on loans and leases, the Company experienced an increase in its investment income, including interest on fed funds sold of $493,629, or 48.6%, for the three-month periods and $1,805,538, or 56.2%, for the nine-month periods ending September 30, 2000 over September 30, 1999, respectively. These increases are primarily the result of a rise in total investments outstanding between the two periods reported and higher yielding investments. The Company has experienced an increase in total interest expense on deposits of 7.2%, or $152,436, for the three-month period and 9.2%, or $568,439, for the nine-month period ending September 30, 2000 over 1999. This is primarily attributed to rising interest rates and a change in the mix of deposits. Average rates paid on deposits increased from 3.1% at September 30, 1999 to 3.4% at September 30, 2000. Interest-bearing deposits consisted of 79.2% of total deposits at September 30, 2000 as compared to 81.8% at September 30, 1999. Rates and amounts paid on average deposits, including noninterest-bearing deposits for the three and nine-month periods ended September 30, 2000, compared to the same periods in 1999, are set forth in the following table:
- ------------------------------------------------------------------------------------------------------------------ Three-months Three-months Nine-months Nine-months ended ended ended ended September 30, September 30, September 30, September 30, 2000 1999 2000 1999 - ------------------------------------------------------------------------------------------------------------------ Average deposits outstanding $256,649,271 $260,007,340 $265,204,160 $260,787,716 Average rates paid 3.52% 3.24% 3.39% 3.15% Amount of interest paid or accrued $ 2,258,170 $ 2,105,734 $ 6,734,305 $ 6,165,866 - ------------------------------------------------------------------------------------------------------------------
The Company experienced a slight decrease in total noninterest income of $36,601 or 4.8% for the three-month period ending September 30, 2000 over the same period in 1999. Total noninterest income increased $40,989 or 2.1% for the nine-month period ended September 30, 2000 compared to the same 1999 period. Total noninterest income consists primarily of service charges on deposit accounts, servicing and brokered loan fees and other noninterest income. Service charge income on deposit accounts, one of the primary components in noninterest income, showed an increase between the nine-month periods of 2000 over 1999. Income derived from service charges on deposit accounts was $756,152 and $710,324 for the nine-month periods ending September 30, 2000 and 1999, respectively. Income from servicing and brokered loan fees for the three-months ended September 30, 2000, increased by $24,930, or 9.7%, in comparison to the same three-month period of 1999. Alternatively, these fees declined by $130,592, or 19.3%, during the nine-month period ended September 30, 2000 in comparison to the nine-month period ended September 30, 1999. The decrease in servicing and brokered loan fee income between the two nine-month periods can in part be traced to the Company's decision, during the first half of 1999, to hold selected real estate loans in its portfolio instead of selling those loans into secondary markets. The intent of this strategy was to diversify the Company's loan portfolio and benefit from the long-term, higher yielding interest income stream created by the real estate loans, instead of the one-time brokerage fee earned from the loans' sale. Additionally, income generated from brokered loan fees has been adversely impacted by a general slowing in the home refinance market which has accompanied the increase in general market interest rates and, to a lesser extent, staff reductions implemented at the Company's real estate loan production offices as a result of the slowing market. 16 All other noninterest income decreased 24.9% for the three-month period from $254,283 at September 30, 1999 to $190,862 at September 30, 2000. For the nine-month period ending September 30, 2000, all other noninterest income increased by 23.6% to $657,906 over $532,153 at September 30, 1999. The primary source of this rise was an increase in the cash surrender value recognized on life insurance policies owned by the Bank. The Company experienced a decrease of $526,731, or 15.2%, and $1,209,415, or 12.1%, in total noninterest expense during the three and nine-month periods ending September 30, 2000, over the same periods in 1999, respectively. Total noninterest expense stood at $2,934,838 and $3,461,569 for the three-month periods and $8,780,273 and $9,989,688 for the nine-month periods ending September 30, 2000 and 1999, respectively. Noninterest expenses consist of salaries and employee benefits, occupancy and furniture and equipment expense, legal and professional fees, and other general and administrative operating expenses. Salaries and employee benefits increased slightly during the nine-month period of 2000 over 1999. This net increase is primarily due to the Company's conversion in 2000 to a common review date for annual salary increases and other personnel activity, which was substantially offset by staff reductions related to the Company's restructuring efforts. Collectively, occupancy and furniture and equipment expenses decreased by 9.0% and 11.9% for the three and nine-month periods, respectively. These two categories stood jointly at $1,394,254 and $1,582,791 for the nine-months ended September 30, 2000 and 1999, respectively. This decrease is in large part due to the closures, during the later part of 1999 of the Bank's loan production offices in Madera and Chico, California. Additionally, during 1999, the Company had nonrecurring expenses associated with Year 2000 equipment upgrades. Legal and professional fees declined 33.9% to $192,179 for the nine-months ended September 30, 2000 from $290,766 at September 30, 1999. This decrease is associated with continued progress towards the resolution of problem loans and leases, and resultant reduction in legal fees associated with the collection of such loans and leases. Other noninterest general and administrative operating expenses decreased by $488,018, or 39.2%, for the three-month period and $948,898, or 28.7%, for the nine-month period ending September 30, 2000 versus September 30, 1999. These decreases are primarily associated with a variety of non-recurring expenses recognized during the first nine-months of 1999, including $281,060 incurred under the Company's 1989 Stock Option Plan. Furthermore, the Company incurred expenses of approximately $504,222 during the first nine-months of 1999 associated with the recruitment and hiring of its new president and chief executive officer, along with a severance and consulting agreement entered into with its former president and chief executive officer. Promotional expenses also declined by $160,027 between the nine-month periods. Additionally, other operating efficiencies were recognized that contributed to the overall net decline in this category during the three and nine-month periods ending September 30, 2000 over the same periods in 1999. These net decreases were partially offset by an increase of $70,483 in FDIC assessments. Applicable income taxes from continuing operations for the three and nine-month periods ended September 30, 2000, were $496,550 and $1,318,325, respectively. This is compared to $256,750 and $727,000 for the three and nine-month periods, respectively, ended September 30, 1999. The increase in 2000 over 1999 is reflective of the increase in pre-tax income between the two periods. The Company's effective tax rate was 37.8% and 37.6% for the three and nine-month periods in 2000 and 31.2% and 34.2% for the three and nine-month periods, respectively, in 1999. 17 LIQUIDITY Historically, during the first two quarters of each year the Bank experiences excess liquidity. The Bank's seasonal agricultural loan demand, which occurs each year during the second and third quarters, tends to absorb excess liquidity and frequently results in a net borrowed position during that timeframe. The Bank's short-term liquid assets consist of cash and due from banks, federal funds sold and investment securities with maturities of one year or less (exclusive of pledged securities). Irrespective of maturity, U.S. Government and Agency securities qualify as collateral for borrowings at the Federal Home Loan Bank and with broker-dealers. In order to fund its liquidity needs, the Bank has formal and informal borrowing arrangements with the Federal Reserve Bank to meet unforeseen deposit outflows or seasonal loan funding demands. The Bank also entered an agreement to borrow funds from the Federal Home Loan Bank of San Francisco. Additionally, the Bank has an agreement with Lehman Brothers for a standby short-term loan secured by U.S. Government and Agency Obligations contained in the Bank's investment portfolio. As of September 30, 2000, December 31, 1999, and September 30 1999, the Bank had $14,000,000, $0, and $5,770,000 outstanding on these lines, respectively. The Bank monitors its credit facility availability and unencumbered qualifying collateral in conjunction with its asset/liability management process. Policy limits are established and monitored for maximum borrowings and minimum contingency liquidity levels. Management believes the Company maintains adequate amounts of liquidity to meet its needs. MARKET RISK Market risk is the risk of loss in a financial instrument arising from adverse changes in market rates/prices such as interest rates, foreign currency exchange rates, commodity prices, and equity prices. The Company's primary market risk exposure is interest rate risk. The on-going monitoring and management of the risk is an important component of the Company's asset/liability management process, which is governed by policies established by its Board of Directors that are reviewed and approved annually. The Board of Directors delegates responsibility for carrying out the asset/liability management policies to Management. In this capacity, Management develops guidelines and strategies impacting the Company's asset/liability management related activities based upon estimated market risk sensitivity, policy limits and overall market interest rate levels and trends. INTEREST RATE RISK Interest rate risk represents the sensitivity of earnings to changes in market interest rates. As interest rates change the interest income and expense streams associated with the Company's financial instruments also change thereby impacting net interest income ("NII"), the primary component of the Bank's earnings. Management utilizes the results of a detailed and dynamic simulation model to quantify the estimated exposure of NII to sustained interest rate changes. The Company believes, individually and in the aggregate, the many assumptions incorporated in the simulation model are reasonable. However, the complexity of the simulation modeling process is only expected to produce reasonable estimates, not an absolutely precise calculation of exposure. This sensitivity analysis is compared to the Company's policy limits which specify a maximum tolerance level for NII exposure over a one year horizon, assuming no balance sheet growth, given both a 200 basis point ("bp") upward and downward shift in interest rates. A parallel and pro rata shift in rates over a 12-month period is assumed. The Bank's assessment of interest rate risk reflects an exposure of NII to a sustained falling interest rate environment. The Bank has been operating within the Board approved policy limit of 10.0%. Additionally, Management monitors NII sensitivity over a two-year horizon and utilizes additional tools to monitor potential longer-term interest rate risk. 18 The composition of the Company's statement of condition is planned and monitored by Management of the Bank. The results of the interest rate sensitivity analysis are utilized by Management to develop and initiate strategies for managing interest rate risk. CAPITAL RESOURCES The Company and the Bank, respectively, are subject to the capital adequacy requirements of the Federal Reserve Board and Federal Deposit Insurance Corporation ("FDIC"). These guidelines are intended to reflect the degree of risk associated with financial institution's on and off balance sheet items. Financial institutions are expected to comply with a minimum ratio of qualifying total capital to risk-weighted assets of 8%, at least half of which must be in Tier 1 Capital. Federal regulatory agencies have also adopted a minimum leverage ratio of 4%, which is intended to supplement the risk-based capital requirements and to ensure that all financial institutions continue to maintain a minimum level of core capital. Total shareholders' equity on September 30, 2000, increased by $1,334,779 to $24,569,626 over December 31, 1999, total shareholders' equity of $23,234,847. During the nine-month period from January 1, 2000 through September 30, 2000, shareholders' equity was increased by net income of $2,187,609 and stock options exercised of $118,906. These increases were offset by the Bank's guaranty of its Employee Stock Ownership Plan debt of $200,000, the payment of cash dividends of $638,581, and an increase in the net unrealized loss related to the Company's available-for-sale securities of $133,155, net of taxes. As can be seen by the following tables, the Company and Bank exceeded all regulatory capital ratios on September 30, 2000, and December 31, 1999. Risk Based Capital Ratio As of September 30, 2000 - ------------------------------------------------------------------------------ Company Bank ------------------------------------------------- (Dollars in thousands) Amount Ratio Amount Ratio - ------------------------------------------------------------------------------ Tier 1 Risk-Based Capital $ 25,652 11.31% $ 24,859 10.95% Tier 1 Capital Minimum Requirement 9,072 4.00% 9,081 4.00% ------------------------------------------------- Excess $ 16,580 7.31% $ 15,778 6.95% ================================================= Total Risk-Based Capital 28,528 12.58% 27,738 12.22% Total Capital Minimum Requirement 18,144 8.00% 18,162 8.00% ------------------------------------------------- Excess $ 10,384 4.58% $ 9,576 4.22% ------------------------------------------------- Net Risk-Weighted Assets $226,799 $227,019 ================================================= Leverage Capital Ratio Tier 1 Capital to total assets $ 25,652 8.52% $ 24,859 8.26% Minimum leverage requirement 12,040 4.00% 12,033 4.00% ------------------------------------------------- Excess $ 13,612 4.52% $ 12,826 4.26% ================================================= Average total assets $301,000 $300,833 ================ ============ - ------------------------------------------------------------------------------ 19 Risk Based Capital Ratio As of December 31, 1999 - ------------------------------------------------------------------------------ Company Bank ------------------------------------------------- (Dollars in thousands) Amount Ratio Amount Ratio - ------------------------------------------------------------------------------ Tier 1 Risk-Based Capital $ 24,184 10.56% $ 24,058 10.51% Tier 1 Capital Minimum Requirement 9,158 4.00% 8,676 4.00% ------------------------------------------------- Excess $ 15,026 6.56% $ 15,382 6.51% ================================================= Total Risk-Based Capital $ 27,046 11.81% $ 26,918 11.76% Total Capital Minimum Requirement 18,316 8.00% 18,306 8.00% ------------------------------------------------- Excess $ 8,730 3.81% $ 8,612 3.76% ------------------------------------------------- Net Risk-Weighted Assets $228,955 $228,828 ================================================= Leverage Capital Ratio Tier 1 Capital to Quarterly Tier 1 Capital to total assets $ 24,184 7.97% $ 24,058 7.94% Minimum leverage requirement 12,134 4.00% 11,660 4.00% ------------------------------------------------- Excess $ 12,050 3.97% $ 12,398 3.94% ================================================= Average total assets $303,345 $303,133 ================ ============ - ------------------------------------------------------------------------------ SUPERVISION AND REGULATION As a result of the Company's and Bank's 1999 financial performance, the final results of the FDIC and California Department of Financial Institutions' ("DFI") most recent examination of the Bank, and continued concerns regarding the quality of the Bank's loan portfolio, the Bank's Board of Directors passed a resolution to address the concerns. The resolution requires the Bank to: (1) maintain management acceptable to the FDIC and DFI, (2) to seek approval of the agencies prior to appointing any individual as a director or senior officer, (3) continue with the diligent implementation of a previously adopted plan to reduce the level of nonperforming and problem loans and leases, (4) maintain an adequate reserve for loan and lease losses, and (5) seek prior approval of the FDIC and DFI before the payment of any cash dividends. Additionally, the Board passed a resolution in 1998 requiring the Bank to maintain a minimum Tier 1 Leverage ratio of 7% which remains in effect. It is anticipated that during the fourth quarter of 2000 the Board will pass an updated resolution re-affirming its existing resolution and, in addition, requiring the Bank to maintain a Tier 1 Leverage ratio of at least 7.5%. Furthermore, the FDIC and Federal Reserve Bank of San Francisco have notified the Bank and Company, respectively, that the condition of the Bank and Company are such that prior approval of the regulatory agency is necessary before adding or replacing any member of the boards of directors, employing any person as a senior executive officer, or changing the responsibilities of any senior executive officer so that the individual would be assuming a different senior executive officer position. Finally, due to the Bank's condition, the FDIC is also restricting the Company's and the Bank's ability to enter into any contracts to pay or make any golden parachute and indemnification payments to institution-affiliated parties. 20 APPROVAL FOR THE OPENING OF A NEW LINCOLN, CALIFORNIA BRANCH On July 21, 2000, Feather River State Bank received approval from the FDIC to establish a branch in Lincoln, California. Approval was also granted by the DFI on July 3, 2000. It is anticipated that the new branch will open during the first quarter of 2001. DIVIDENDS Federal and State banking and corporate laws could limit the Bank's ability to pay dividends to the Company. The Federal Reserve Board has issued a policy statement that a bank holding company should not declare or pay a cash dividend to its shareholders if the dividend would place undue pressure on the capital of its subsidiary banks or if the dividend could be funded only through additional borrowings or other arrangements that may adversely affect the financial position of the holding company. In addition, a bank holding company may not continue its existing rate of cash dividends on its common stock unless its net income is sufficient to fully fund each dividend, and its prospective rate of earnings retention is sufficient to fully fund each dividend and appears consistent with its capital needs, asset quality and overall financial condition. As a result of the Bank's disappointing 1999 financial performance and continued concerns regarding the quality of the Bank's loan portfolio, the Bank's Board of Directors has passed a resolution which requires the Bank to seek the prior approval of the FDIC and DFI for the payment of any cash dividends. Thus far, all such requests have been approved as submitted. SEGMENT REPORTING SFAS No. 131 establishes standards for public business enterprises' reporting of information about operating segments in annual financial statements. The Statement requires that the enterprise report selected information concerning operating segments in interim financial reports issued to shareholders. Additionally, the Statement establishes requirements for related disclosures about products, services, geographic areas, and major customers. SFAS No. 131 requires public business enterprises to report a measure of segment profit or loss, certain specific revenue and expense items, and segment assets. The Statement further requires reconciliation of total segment revenues, total segment profit or loss, total segment assets, and other amounts disclosed for segments to corresponding amounts in the enterprise's general purpose financial statements. It requires that all public business enterprises report information about the revenues derived from the enterprise's products or services (or groups of similar products and services), about the countries in which the enterprise earns revenues and holds assets, and about major customers regardless of whether that information is used in making operating decisions. However, SFAS No. 131 does not require an enterprise to report information that is not prepared for internal use if reporting it would be impracticable. SFAS No. 131 is effective for financial statements for periods beginning after December 15, 1997. The Company has adopted SFAS No. 131. The adoption of the applicable provisions did not have a material effect on the Company, as Management believes that the Company operates only in one segment, the commercial banking segment. YEAR 2000 COMPLIANCE The "Year 2000 issue" has generally been described as the inability of computer systems, software, and other equipment utilizing microprocessors to distinguish the year 1900 from the year 2000. The Year 2000 issues posed significant risks for all businesses, households, and governments and could have resulted in system failures and miscalculations causing disruptions in normal business and governmental operations if actions were not taken to fix the problem before the year 2000 arrived. 21 As a result of the Company's persistent commitment to its Year 2000 compliance efforts, it was able to roll into the new millennium without interruption. The Company will continue to manage its Year 2000 compliance efforts to assure rollover of other key dates in the Year 2000. Additionally, the Bank continues to carry reserves for loan and lease losses that could arise with its borrowers that may experience any Year 2000 related problems. There were minimal expenses associated with the Year 2000 compliance efforts during the first three-quarters of 2000. NEW ACCOUNTING PRONOUNCEMENTS SFAS No. 130 -"Reporting Comprehensive Income" For financial statements issued after December 31, 1997, the FASB mandates compliance with SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in the financial statements. Comprehensive income refers to revenues, expenses, gains, and losses that generally accepted accounting principles recognize as changes in value to an enterprise but are excluded from net income. The Company has adopted SFAS No. 130, and does not expect the statement to have a material impact on its financial statements. SFAS No. 133 - "Accounting for Derivative Instruments and Hedging Activities" In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires recognition of all derivatives as either assets or liabilities in the statement of financial condition and the measurement of those instruments at fair value. Recognition of changes in fair value will be recognized into income or as a component of other comprehensive income depending upon the type of the derivative and its related hedge, if any. As issued, SFAS No. 133 was to be effective for the Company beginning January 1, 2000. However, in July 1999, the FASB issued Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133." Statement 137 amended the required effective date of Statement 133, requiring adoption of Statement 133 in years beginning after June 15, 2000. The Corporation expects to adopt Statement 133 effective January 1, 2001. The Company is in the process of determining the impact of SFAS No. 133 on the Company's financial statements, which is not expected to be material. SFAS No. 134 - "Accounting for Mortgage-Backed Securities Retained After the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" FASB issued SFAS No. 134 in October of 1998, to be effective the first fiscal quarter after December 31, 1998. SFAS No. 134 amends SFAS No. 65 to require entities engaged in mortgage banking activities to classify their mortgage-backed securities, or other retained interests, based upon their ability and intent to sell or hold those investments. The intent of the statement is to conform the subsequent accounting for securities retained after mortgage loan securitization with the subsequent accounting for securities retained after the securitization of other types of assets by mortgage banking entities. The adoption of the applicable provisions of SFAS No. 134 did not have a material effect on the Company. End to Pooling-of-Interests Accounting for Business Combinations In April 1999, FASB announced its tentative decision to no longer deem the pooling-of-interests method of accounting as an acceptable method to account for business combinations between independent parties. The FASB expects a final standard will be issued and become effective during 2001. A portion of the Company's business strategy is to pursue appropriate acquisition opportunities to expand its market presence. A change in the accounting for business combinations could have a negative impact on the Company's ability to realize those business strategies. 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In Management's opinion, the Company's market risk and interest rate risk profiles are within reasonable tolerances at this time. (See Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations, sections discussing "Liquidity", "Market Risk" and "Interest Rate Risk" at pages 18-19). No significant changes to the market risk or interest rate risk of the Company have occurred since December 31, 1999. 23 PART II- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None reported ITEM 2.CHANGES IN SECURITIES AND USE OF PROCEEDS. No changes. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None reported ITEM 5. OTHER INFORMATION. None reported. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K. (a) Exhibits. Exhibit No. 2.1 Plan of Reorganization and Merger Agreement dated January 30, 1995 by and between Feather River State Bank, FRSB Merger Company and California Independent Bancorp. Filed as Exhibit 2.1 to the Company's General Form for Registration of Securities on Form 10 (File No. 0-26552).* 3.1 Secretary's Compiled, Amended and Restated Articles of Incorporation for California Independent Bancorp as of April 26, 1999. Filed as Exhibit 3.1 to the Company's Quarterly Report filed on Form 10Q for the period ended March 31, 1999.* 3.2 Secretary's Compiled, Amended and Restated Bylaws of California Independent Bancorp as of September 30, 1999. Filed as Exhibit 3.2 to the Company's Quarterly Report filed on Form 10Q for the period ended September 30, 1999.* 10.22 California Independent Bancorp Revised 2000 Equity Incentive Plan. 10.23 California Independent Bancorp 2000 Equity Incentive Plan Form Nonqualifying Stock Option Agreement. 10.24 California Independent Bancorp 2000 Equity Incentive Plan Form Nonqualifying Stock Option Exercise Agreement. 10.25 California Independent Bancorp 2000 Equity Incentive Plan Form Incentive Stock Option Agreement. 10.26 California Independent Bancorp 2000 Equity Incentive Plan Form Incentive Stock Option Exercise Agreement. 24 10.27 Severance Agreement and Release of Claims dated August 11, 2000 between Feather River State Bank and Annette Bertolini. 10.28 Consulting Agreement dated July 5, 2000 between Feather River State Bank and Annette Bertolini. 10.29 Lease by and between Eureka Corporate Plaza, Ltd., L.P. and Feather River State Bank, for the premises at 1552 Eureka Road, Roseville, California 10.30 Pursuant to the 2000 Equity Incentive Plan as referenced in Exhibit 10.22, Nonqualifying Stock Options amounting to 825 shares at $20.75 per share, were granted to non-employee directors on September 19, 2000. The options vest 20% after twelve months and 20% each year thereafter. Such options terminate September 19, 2010. The following Directors were granted shares under these terms: John Dowdell, Harold Eastridge, William Gilbert, John Jelavich, Don Livingstone, Alfred Montna, David Offutt, William Retzer, Ross Scott and Michael Wheeler . Each Director has entered into Nonqualifying Stock Option Agreements with the Company in the form attached as Exhibit 10.23. 10.31 Pursuant to the 2000 Equity Incentive Plan as referenced in Exhibit 10.22, Nonqualifying Stock Options amounting to 10,000 shares were granted at $22.62 per share on July 18, 2000, to Robert Lampert, Executive Vice President/Chief Operating Officer of the Bank. The options vest 20% after twelve months and 20% each year thereafter. Such options terminate July 18, 2010. Mr. Lampert has entered into a Nonqualifying Stock Option Agreement with the Company in the form attached as Exhibit 10.23. 10.32 Pursuant to the 2000 Equity Incentive Plan as referenced in Exhibit 10.25, Incentive Stock Options were granted to the following executive and senior officers of the Bank. The options were granted on September 19, 2000 at $20.75 per share. The options vest 20% after twelve months and 20% each year thereafter. Such options terminate September 19, 2010. Each officer has entered into an Incentive Stock Option Agreement with the Company in the form attached as Exhibit 10.25. Larry Hartwig, President/CEO 15,000 shares Robert Lampert, Chief Operating Officer 5,000 shares Blaine Lauhon, Chief Lending Officer 4,000 shares Kenneth Anderson, Marketing & Branch Services Officer 4,000 shares Douglas Marr, Chief Credit Officer 5,000 shares Don McDonel, Senior Loan Officer 5,000 shares 27 Financial Data Schedule - ---------- *Document incorporated herein by reference. (b) Reports on Form 8K. No reports on Form 8K were filed during the period. 25 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. California Independent Bancorp Date: November 8, 2000 /S/ Larry D. Hartwig ---------------- -------------------- Larry D. Hartwig President/Chief Executive Officer Date: November 8, 2000 /S/ Robert J. Lampert ---------------- --------------------- Robert J. Lampert Executive Vice President/Chief Operating Officer (Principal Financial and Accounting Officer) 26 EX-10.22 2 a2030130zex-10_22.txt EXHIBIT 10.22 CALIFORNIA INDEPENDENT BANCORP 2000 EQUITY INCENTIVE PLAN - Revised As Adopted by the Board March 21, 2000 As Adopted by the Shareholders May 17, 2000 As Revised by the Board July 18, 2000 1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company by offering them an opportunity to participate in the Company's future performance through awards of Options, Restricted Stock and Stock Bonuses. Capitalized terms not defined in the text are defined in Section 2. 2. DEFINITIONS. As used in this Plan, the following terms will have the following meanings: 2.1. Award. "Award" means any award under this Plan, including any Option, Restricted Stock or Stock Bonus. 2.2. Award Agreement. "Award Agreement" means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award. 2.3. Board. "Board" means the Board of Directors of the Company. 2.4. Code. "Code" means the Internal Revenue Code of 1986, as amended. 2.5. Committee. "Committee" means the committee appointed by the Board to administer this Plan, or if no such committee is appointed, the Board. 2.6. Company. "Company" means California Independent Bancorp and its subsidiaries or any successor corporation. 2.7 Disability. "Disability" means a disability, whether permanent and total within the meaning of Section 22(e)(3) of the Code, or partial or temporary. 2.8. Exchange Act. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.9. Exercise Price. "Exercise Price" means the price at which a holder of an Option may purchase the Shares upon exercise of the Option. 2.10. Fair Market Value. "Fair Market Value" means, as of any date, the value of a share of the Company's Common Stock, determined as follows: 27 (a) if such Common Stock is quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal; (b) if such Common Stock is publicly traded and is listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal. If the closing price is not reported in The Wall Street Journal, the closing price for the applicable composite-transactions report for such date shall be applied; (c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal. In the event that the closing bid and asked prices are not reported in The Wall Street Journal, the closing bid and asked prices as reported on the applicable principal automated inter-dealer quotation system shall be utilized, or if not quoted on any such system, the last reported bid and asked prices as published in the "Pink Sheets" by the National Quotation Bureau, shall be deemed appropriate; or (d) if none of the foregoing is applicable, by the Committee in good faith using earnings history, book value and company prospects in light of market conditions generally. 2.11 Incentive Stock Options. "Incentive Stock Options" ("ISOs") as defined within the meaning of Section 422 of the Code. 2.12. Insider. "Insider" means an officer or director of the Company or any other person whose transactions in the Company's Common Stock are subject to Section 16 of the Exchange Act. 2.13. Outside Director. "Outside Director" shall have the meaning as the term is used in Section 162(m) of the Code and defined in Treasury Regulation 1.162-27, as amended from time to time. 2.14. Option. "Option" means an award of an option to purchase Shares pursuant to Section 5. 2.15. Participant. "Participant" means a person who receives an Award under this Plan. 2.16. Plan. "Plan" means this California Independent Bancorp 2000 Equity Incentive Plan, as amended from time to time. 28 2.17. Restricted Stock Award. "Restricted Stock Award" means an award of Shares pursuant to Section 7. 2.18. SEC. "SEC" means the Securities and Exchange Commission. 2.19. Securities Act. "Securities Act" means the Securities Act of 1933, as amended. 2.20. Shares. "Shares" means shares of the Company's Common Stock reserved for issuance under this Plan, as adjusted pursuant to Sections 3 and 19, and any successor security. 2.21. Stock Bonus. "Stock Bonus" means an award of Shares, or cash in lieu of Shares, pursuant to Section 8. 2.22 Ten Percent Shareholder. "Ten Percent Shareholder" means any shareholder who owns or controls 10% of the total combined voting power or value of all classes of stock of the Company or a subsidiary corporation. The attribution rules of Section 424(d) of the Code shall apply in the determination of ownership of stock for these purposes. 2.23. Termination. "Termination" or "Terminated" means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director, consultant, independent contractor or advisor of the Company. An employee will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee; provided, that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing. In the case of any employee on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the employ of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Option agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the "Termination Date"). 2.24. Unvested Shares. "Unvested Shares" means "Unvested Shares" as defined in the Award Agreement. 2.25. Vested Shares. "Vested Shares" means "Vested Shares" as defined in the Award Agreement. 29 3. SHARES SUBJECT TO THE PLAN. 3.1. Number of Shares Available. Subject to Sections 3.2 and 19, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be one hundred thousand (100,000) Shares. Subject to Sections 3.2 and 19, Shares that are subject to (i) issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option; (ii) an Award granted hereunder but are forfeited or are repurchased by the Company at the original issue price; or (iii) an Award that otherwise terminates without Shares being issued, will again be available for grant and issuance in connection with future Awards under this Plan. At all times, the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under this Plan and all other outstanding but unvested Awards granted under this Plan. 3.2. Adjustment of Shares. In the event of a Company stock split, reverse stock split, stock dividend, recapitalization, combination, reclassification, subdivision, or similar change in the capital structure of the Company without consideration, then each of (i) the number of Shares reserved for issuance under this Plan, (ii) the Exercise Prices of and number of Shares subject to outstanding Options, and (iii) the number of Shares subject to other outstanding Awards, will be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and compliance with applicable securities laws. Fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction or will be rounded up to the nearest whole Share, as determined by the Committee. 4. ELIGIBILITY. ISOs may be granted only to employees (including officers and directors who are also employees) of the Company. All other Awards may be granted to employees, officers, directors, consultants, independent contractors and advisors of the Company; provided, such consultants, contractors and advisors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. 5. ADMINISTRATION. 5.1. Committee Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to: (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; (b) prescribe, amend and rescind rules and regulations relating to this Plan; (c) select persons to receive Awards; 30 (d) determine the form and terms of Awards; (e) determine the number of Shares or other consideration subject to Awards; (f) determine whether Awards will be granted separately, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company; (g) grant waivers of Plan or Award conditions; (h) determine the vesting, exercisability and payment of Awards; (i) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement; (j) determine whether an Award has been earned; and (k) make all other determinations necessary or advisable for the administration of this Plan. 5.2. Committee Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan to Participants who are not Insiders of the Company. 5.3. Committee Members. If two or more members of the Board are Outside Directors, the Committee will be comprised of at least two (2) members of the Board who are Outside Directors and satisfy the requirements under the Exchange Act for administering this Plan. 6. OPTIONS. The Committee may grant Options to eligible persons and will determine (i) whether such Options will be ISOs or Nonqualified Stock Options ("NQSO"), (ii) the number of Shares subject to the Options, (iii) the Exercise Price of the Options, (iv) the period during which the Options may be exercised, and (v) all other terms and conditions of the Options, subject to the following: 6.1. Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an 31 NQSO ("Stock Option Agreement"), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan. 6.2. Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option. 6.3. Exercise Period. Options may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that (i) no Option will be exercisable after the expiration of one hundred twenty (120) months from the date the Option is granted; (ii) no ISO granted to a Ten Percent Shareholder shall be exercisable after the expiration of five (5) years from the date the ISO is granted, and (iii) regarding an ISO granted to an employee who is not a Company officer, director or consultant, such ISO shall be exercisable at a rate which is at least twenty percent (20%) per year over five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines. 6.4. Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant; provided, that: (i) the Exercise Price of an ISO will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (ii) the Exercise Price of any ISO granted to a Ten Percent Shareholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased shall be made in accordance with Section 9 of this Plan. 6.5. Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the "Exercise Agreement") in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding the Participant's investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price for the number of Shares being purchased. 6.6. Termination. Notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following: (a) In the event of a Participant's death or Disability, the term of the Option shall expire twelve (12) months (or such other period specified in the Participant's 32 Stock Option Agreement provided that such period is at least six (6) months from the date of termination) after such death or Disability but not later than the original expiration date specified in the Stock Option Agreement. 33 (b) In the event that the Board determine that a Participant be terminated by the Company for cause, the term of the Option shall expire immediately after the Company's notice or advice of such termination is dispatched to the Participant. For purposes of this Paragraph (b), "cause" shall mean an act of embezzlement, fraud, dishonesty, breach of fiduciary duty to the Company, or the deliberate disregard of rules of the Company which results in loss, damage or injury to the Company, the unauthorized disclosure of any of the secrets or confidential information of the Company, the inducement of any client or customer of the Company to break any contract with the Company, or the inducement of any principal for whom the Company acts as agent to terminate such agency relationship, the engagement of any conduct which constitutes unfair competition with the Company, the removal of Participant from office by any court or bank regulatory agency, or such other similar acts which the Committee in its discretion determine to constitute good cause for termination of Participant's service. In making such determination of cause, the Board shall give the Participant an opportunity to appear before the Board and present evidence on the Participant's behalf. As used in this Paragraph (b), Company includes any subsidiaries of the Company. (c) As a result of termination for any reason other than death, Disability or cause, the term of the Option shall expire three (3) months (or such other period specified in the Stock Option Agreement, provided that the period is at least thirty (30) days from the date of termination ) after such termination, but not later than the original expiration date specified in the Stock Option Agreement. 6.7. Minimum Share Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option; provided that such minimum number will not prevent the Participant from exercising the Option for the full number of Shares for which it is then exercisable. 6.8. Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company) will not exceed One Hundred Thousand Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date of this Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. 6.9. Modification, Extension or Renewal of Options. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor; provided that any such action may not, without the written consent of a Participant, impair any of such Participant's rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of 34 outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 6.4 of this Plan for Options granted on the date the action is taken to reduce the Exercise Price. 6.10. No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code. 7. RESTRICTED STOCK. A Restricted Stock Award shall mean an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the price to be paid (the "Purchase Price"), the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following: 7.1. Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement ("Restricted Stock Purchase Agreement") that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The offer of Restricted Stock will be accepted by the Participant's execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee. 7.2. Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee and will be at least eighty-five percent (85%) of the Fair Market Value of the Shares on the date the Restricted Stock Award is granted, except in the case of a sale to a Ten Percent Shareholder, in which case the Purchase Price will be one hundred percent (100%) of the Fair Market Value. Payment of the Purchase Price may be made in accordance with Section 9 of this Plan. 7.3. Restrictions. Restricted Stock Awards will be subject to such restrictions (if any) as the Committee may impose. The Committee may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions, in whole or part, based on length of service, performance or such other factors or criteria as the Committee may determine. 8. STOCK BONUSES. 8.1. Awards of Stock Bonuses. A Stock Bonus shall mean an award of Shares (which may consist of Restricted Stock) for services rendered to the Company. A Stock Bonus may be awarded for past services already rendered to the Company, pursuant to an Award Agreement (the "Stock Bonus Agreement") that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and 35 be subject to the terms and conditions of this Plan. A Stock Bonus may be awarded upon satisfaction of such performance goals as are set out in advance in the Participant's individual Award Agreement (the "Performance Stock Bonus Agreement") that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. Stock Bonuses may vary from Participant to Participant and between groups of Participants, and may be based upon the achievement of the Company and/or individual performance factors or upon such other criteria as the Committee may determine. 8.2. Terms of Stock Bonuses. The Committee will determine the number of Shares to be awarded to the Participant pursuant to this Section 8 and whether such Shares will be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of performance goals pursuant to a Performance Stock Bonus Agreement, then the Committee will determine (i) the nature, length and starting date of any period during which performance is to be measured (the "Performance Period ") for each Stock Bonus; (ii) the performance goals and criteria to be used to measure the performance, if any; (iii) the number of Shares that may be awarded to the Participant; and (iv) the extent to which such Stock Bonuses have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Stock Bonuses that are subject to different Performance Periods and different performance goals and other criteria. The number of Shares may be fixed or may vary in accordance with such performance goals and criteria as may be determined by the Committee. The Committee may adjust the performance goals applicable to the Stock Bonuses to take into account changes in law and accounting or tax rules and to make such adjustments as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events or circumstances to avoid windfalls or hardships. 8.3. Form of Payment. The earned portion of a Stock Bonus may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as the Committee may determine. Payment may be made in the form of cash, whole Shares, including Restricted Stock, or a combination thereof, either in a lump sum payment or in installments, all as the Committee determines. 8.4. Termination During Performance Period. If a Participant is Terminated during a Performance Period for any reason, then such Participant will be entitled to payment (whether in Shares, cash or otherwise) with respect to the Stock Bonus only to the extent earned as of the Termination Date in accordance with the Performance Stock Bonus Agreement, unless the Committee determines otherwise. 9. PAYMENT FOR SHARE PURCHASES. 9.1 General Rule. The entire Exercise Price of Shares issued under the Plan shall be payable in lawful money of the United States of America or its equivalent (e.g. certified check, official bank check or money order) at the time when such Shares are purchased, except as follows: (a) ISOs. In the case of an ISO granted under the Plan, payment shall be made only pursuant to the express provisions of the applicable Stock Option Agreement. However, the Committee (at its sole discretion) may specify in the Stock Option Agreement that 36 payment may be made pursuant to Subsections 9.2, 9.3, 9.4 or 9.5 below. (b) NQSOs. In the case of a NQSO granted under the Plan, the Committee (at its sole discretion) may accept payment pursuant to Subsections 9.2, 9.3, 9.4 or 9.5 below. 9.2 Surrender of Stock. Payment may be made all or in part with Shares which have already been owned by the Participant or their representative for more than six months and which are surrendered to the Company in good form for transfer. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased under the Plan. 9.3 Exercise/Sale. Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. 9.4 Exercise/Pledge. Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. 9.5 Combination. By any combination of the permissible forms of payment. 10. WITHHOLDING TAXES. As a condition to the exercise of an Option, the Participant shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that arise in connection with such exercise. The Participant shall also make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the disposition of Shares acquired by exercising an Option. The Committee may permit the Participant to satisfy all or part of his or her tax obligations related to the Option by having the Company withhold a portion of any Shares that otherwise would be issued to him or her or by surrendering any Shares that previously were acquired by him or her. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. The payment of taxes by assigning Shares to the Company, if permitted by the Committee, shall be subject to such restrictions as the Committee may impose. 11. PRIVILEGES OF STOCK OWNERSHIP. 11.1. Voting and Dividends. No Participant will have any of the rights of a shareholder with respect to any Shares until the Shares (and not simply an Option) are issued to the Participant. After Shares are issued to the Participant, the Participant will be a shareholder and have all the rights of a shareholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares. If such Shares are Restricted Stock, any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same 37 restrictions as the Restricted Stock. Furthermore, Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Participant's original Purchase Price pursuant to Section 13. 11.2. Financial Statements. The Company will provide to each Participant prior to the Participant's purchase of Shares under this Plan, and to each Participant annually during the period the Participant has Awards outstanding, annual reports and all other information provided to all shareholders of the Company. The Company will not be required to provide such information to Participants whose services in connection with the Company assure them access to equivalent information. 12. TRANSFERABILITY. Awards granted under this Plan, and any interest therein, are not transferable or assignable by the Participant other than by will, the laws of descent and distribution, by an instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor), or as consistent with the Award Agreement provisions related thereto. During the lifetime of the Participant, an Award will be exercisable only by the Participant and any elections with respect to an Award may be made only by the Participant. 13. REPURCHASE. At the discretion of the Committee, the Company may reserve unto itself and/or its assignee(s) in the Award Agreement a right to repurchase all or a portion of the Unvested Shares held by a Participant following such Participant's Termination at any time within ninety (90) days after the later of the Participant's Termination Date and the date Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant's Exercise Price or Purchase Price, as the case may be; provided that the right to repurchase at such price lapses at the rate of at least twenty percent (20%) of the Shares per year over five (5) years from the date that the Option is granted. 14. CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities laws, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted. 15. ESCROW. To enforce any restrictions on a Participant's Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. 16. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree. 38 17. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (ii) completion of any registration or other qualification of such Shares under any state or federal laws or rulings of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. 18. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or limit in any way the right of the Company to terminate such Participant's employment or other relationship at any time, with or without cause. 19. CORPORATE TRANSACTIONS. 19.1 Reorganizations. In the event that the Company is a party to a merger or other reorganization involving a Change in Control (as defined below), the outstanding Options shall be subject to the agreement of merger or reorganization. such agreement may provide, without limitation, for the assumption of outstanding Options by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for payment of a cash settlement equal to the difference between the amount to be paid for one Share under such agreement and the Exercise Price, or for the acceleration of their exercisability followed by the cancellation of Options not exercised, in all cases without the Participants' consent. Any cancellation shall not occur until after such acceleration is effective and Participants have been notified of such acceleration and have had reasonable opportunity to exercise their Options. In no event will a Participant be given fewer than five (5) business days following notice of acceleration to exercise their Options. (a) "Change in Control" means the occurrence of any of the following events: (i) A change in the composition of the Board, which results in fewer than one-half of the incumbent directors who either: (A) had been directors of the Company 24 months prior to such change; or (B) were elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the directors who had been directors of the Company 24 months prior to such change and who were still in office at the time of the election or nomination; (ii) Any "person" (as such term is used in sections 13(d) and 14(d) of 39 the Exchange Act) who by the acquisition or aggregation of securities is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing twenty-five percent (25%) or more of the combined voting power of the Company's then outstanding securities. For purposes of this Paragraph (ii), the term "person" shall not include an employee benefit plan maintained by the Company; (iii) A tender offer shall be made and consummated for the ownership of twenty-five percent (25%) or more of the outstanding voting securities of the Company; (iv) The Company or its subsidiary bank shall be merged or consolidated with another bank or corporation and as a result of such merger or consolidation less than seventy-five percent (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 Company, other than affiliates (within the meaning of the Securities Exchange Act of 1934) of any party to such merger or consolidation, as the same shall have existed immediately prior to such merger or consolidation. 19.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 19, in the event of the occurrence of any transaction described in Section 19.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, sale of assets or other corporate transaction. 19.3. Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (a) granting an Award under this Plan in substitution of such other company's award; or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of Shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. 20. ADOPTION AND SHAREHOLDER APPROVAL. This Plan shall become effective upon approval of this Plan by the shareholders of the Company, consistent with applicable laws, provided that such shareholder approval shall be within twelve (12) months before or after the date this Plan is adopted by the Board ("Effective Date"). 21. TERM OF PLAN. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date. 40 22. GOVERNING LAW. This Plan and all agreements thereunder shall be governed by and construed in accordance with the laws of the State of California, excluding its conflict of laws rules. 23. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the shareholders of the Company, amend this Plan in any manner that requires such shareholder approval pursuant to the Code or the regulations promulgated thereunder as such provisions apply to ISO plans or (if the Company is subject to the Exchange Act or Section 16(b) of the Exchange Act) pursuant to the Exchange Act or Rule 16b-3 (or its successor), as amended, respectively. 24. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the shareholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 41 EX-10.23 3 a2030130zex-10_23.txt EXHIBIT 10.23 CALIFORNIA INDEPENDENT BANCORP NONQUALIFIED STOCK OPTION AGREEMENT This Nonqualified Stock Option Agreement (the "Agreement") is made and entered into as of the ______ day of _____________, _____, by and between California Independent Bancorp (the "Company") and _____________________, ("Optionee"); WHEREAS, pursuant to the 2000 Equity Incentive Plan (the "Plan"), a copy of which is attached hereto, the Board of Directors of the Company has authorized granting to Optionee a nonqualified stock option to purchase all or any part of _______________ (_______) authorized but unissued shares of the Company's common stock at the price of _____________ dollars and _______ cents ($__.__) per share, subject to the terms and conditions hereinafter stated (the "Option") ; NOW, THEREFORE, it is hereby agreed: 1. GRANT OF OPTION. The Company's Board of Directors hereby grants to Optionee, an option to purchase a total of _____________ shares of common stock of the Company, at the price provided herein, and subject to the terms, definitions and provisions of the Plan. The capitalized terms defined in the Plan shall have the same defined meanings herein. The grant of this option shall not impose an obligation on the Optionee to exercise the Option. 2. NATURE OF THE OPTION. This Option is intended by the Company and the Optionee to be a nonstatutory stock option and does not qualify for any special tax benefits to the Optionee. This option is not an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 3. EXERCISE PRICE. The Exercise Price of the Option is _____________ dollars and _______________ cents ($__.__) per share, which is not less than the Fair Market Value per share of the common stock of the Company on the Grant Date. 4. OPTION TERM. Subject to earlier termination as provided in the Plan, this Option shall terminate on ______________________, and may be exercised during such term only in accordance with the Plan and the terms of this Option. 5. EXERCISE OF OPTION. This Option shall be exercisable during its term in accordance with the provisions of Section 6 of the Plan as follows: (a) Right to Exercise. This Option shall vest cumulatively, the date of grant of the Option, exercisable during a period of ________ months after the Grant Date as follows: (1) This Option may be exercised immediately to the extent of not more than ____ percent (__%) of the Shares; (2) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares; 42 (3) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares; (4) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares; and (5) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares. Any portion of the Option not exercised shall accumulate and can be exercised any time prior to or upon the expiration of _________ (__) months from the Grant Date. (b) Minimum Exercise. This Option may not be exercised for less than ___ Shares nor for a fraction of a Share. (c) Method of Exercise. This Option shall be exercisable only by delivery to the Company of a written stock option exercise agreement (the "Exercise Agreement") in a form approved by the Committee. The Exercise Agreement shall state the election to exercise the Option, specify the number of whole Shares in respect of which the Option is being exercised, any restrictions imposed on the Shares purchased, and such representations and agreements as required by the Company to comply with applicable securities laws. Such Exercise Agreement shall be signed by the Optionee and shall be delivered, in person or by certified mail, to the Secretary of the Company accompanied by payment of the Exercise Price as specified below. No Shares will be issued pursuant to the exercise of the Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange or inter-dealer quotation system upon which the shares of the Company's common stock may then be listed or quoted. Assuming such compliance, the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. An Optionee shall have no rights as a shareholder of the Company with respect to any Shares until the issuance of a stock certificate to the Optionee for such Shares. (d) Method of Payment. The entire Exercise Price of Shares issued under the Plan shall be payable in lawful money of the United States of America or its equivalent (e.g. certified check, official bank check or money order) at the time when such Shares are purchased. Such payment also shall include the amount of any withholding tax obligation which may arise in connection with the exercise, as determined by the Company. In addition, payment may be made in any of the following forms as indicated by an "x" in the preceding parenthesis: ( ) Surrender of Stock. Payment of all or part of the Exercise Price and any withholding taxes may be made all or in part with Shares which have already been owned by the Optionee or Optionee's representative for more than 6 months and which are surrendered to the Company in good form for transfer. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased pursuant to exercise of the Option. ( ) Exercise/Sale. Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities 43 broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. ( ) Exercise/Pledge. Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. ( ) Combination. By any combination of the permissible forms of payment. (e) Restrictions on Exercise. Notwithstanding the exercise periods set forth in this Agreement, exercise of an Option will always be subject to the following: (1) In the event of a Optionee's death or Disability, the term of the Option shall expire [specify a period from 12 to 6 months] after such death or Disability but not later than the original expiration date specified in Section 4 of this Agreement. (2) In the event that the Board determine that a Optionee be terminated by the Company for cause, the term of the Option shall expire immediately after the Company's notice or advice of such termination is dispatched to the Optionee. For purposes of this Paragraph (2), "cause" shall mean an act of embezzlement, fraud, dishonesty, breach of fiduciary duty to the Company, or the deliberate disregard of rules of the Company which results in loss, damage or injury to the Company, the unauthorized disclosure of any of the secrets or confidential information of the Company, the inducement of any client or customer of the Company to break any contract with the Company, or the inducement of any principal for whom the Company acts as agent to terminate such agency relationship, the engagement of any conduct which constitutes unfair competition with the Company, the removal of Optionee from office by any court or bank regulatory agency, or such other similar acts which the Committee in its discretion determine to constitute good cause for termination of Optionee's service. In making such determination of cause, the Board shall give the Optionee an opportunity to appear before the Board and present evidence on the Optionee's behalf. As used in this Paragraph (2), Company includes any subsidiaries of the Company. (3) As a result of termination for any reason other than death, Disability or cause, the term of the Option shall expire three (3) months after such termination, but not later than the original expiration date specified in Section 4 of this Agreement. (4) This Option shall not be exercisable by Optionee in any part unless at all times beginning with the date of grant and ending no more than ______ (_) months prior to the date of exercise, Optionee has, except for military service leave, sick leave or other bona fide leave of absence (such as temporary employment by the United States Government) been in the continuous service of the Company or a Subsidiary thereof, except that such period of _______ (__) months shall instead be the period specified in Paragraph 5(e)(1) above, following any 44 termination of Optionee's affiliation by reason of Optionee's permanent and total disability. 6. NO OBLIGATION TO EMPLOY. Notwithstanding any provision of this Agreement, the grant of this Option shall in no way be construed so as to confer on Optionee the rights to employment, affiliation or continued employment or affiliation by the Company or a subsidiary thereof. Nothing in the Plan or hereunder shall confer upon Optionee any right to employment or affiliation or to continue in the employ, directorship or consultancy of the Company or a Subsidiary thereof. Nothing in the Plan or hereunder shall confer upon Optionee any right to interfere with or restrict in any way the rights of the Company or a subsidiary thereof, which are hereby expressly reserved, to terminate or discharge Optionee at any time for any reason whatsoever, with or without cause, subject to applicable laws and the terms of any written employment agreement the Optionee has entered into with the Company or subsidiary. 7. TRANSFERABILITY. This Option, and any interest therein, is not transferable or assignable by the Optionee other than by will, the laws of descent and distribution, or by an instrument to an inter vivos or testamentary trust in which the Option is to be passed to beneficiaries upon the death of the trustor (settlor). During the lifetime of the Optionee, an Option will be exercisable only by the Optionee and any elections with respect to an Option may be made only by the Optionee. 8. ADJUSTMENT OF SHARES. In the event of a Company stock split, reverse stock split, stock dividend, recapitalization, combination, reclassification, subdivision, or similar change in the capital structure of the Company without consideration, then each of the number of Shares reserved for issuance under this Option will be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and compliance with applicable securities laws. Fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction or will be rounded up to the nearest whole Share, as determined by the Committee. The grant of this Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. 9. CORPORATE TRANSACTIONS. (a) Reorganizations. In the event that the Company is a party to a merger or other reorganization involving a Change in Control (as defined in Section 19.1(a) of the Plan), the Option shall be subject to the agreement of merger or reorganization. such agreement may provide, without limitation, for the assumption of outstanding options by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for payment of a cash settlement equal to the difference between the amount to be paid for one Share under such agreement and the Exercise Price, or for the acceleration of their exercisability followed by the cancellation of options not exercised, in all cases without the Optionee's consent. Any cancellation shall not occur until after such acceleration is effective and the Optionee has been notified of such acceleration and have had reasonable opportunity to exercise their options. 45 (b) Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Paragraph 9, in the event of the occurrence of any transaction described in Paragraph 9(a), the Option will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, sale of assets or other corporate transaction. 10. NO PRIVILEGES OF STOCK OWNERSHIP. No Optionee will have any of the rights of a shareholder with respect to any Shares represented by the Option, until the Shares (and not simply an Option) are issued to the Optionee. After Shares are issued to the Participant, the Participant will be a shareholder and have all the rights of a shareholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares. If such Shares are Restricted Stock, any new, additional or different securities the Optionee may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock. Furthermore, Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Optionee's original Purchase Price. 11. TAXATION UPON THE OPTION'S EXERCISE. Optionee understands that upon exercise of this Option, he will generally recognize income for tax purposes in an amount equal to the excess of the then Fair Market Value of the Shares over the exercise price. The Company will be required to withhold tax from Optionee's current compensation with respect to such income; to the extent that Optionee's current compensation is insufficient to satisfy the withholding tax liability, the Company may require the Optionee to make a cash payment to cover such liability as a condition of exercise of this Option. The Optionee may elect to pay such tax by (i) requesting the Company to withhold a sufficient number of shares from the shares otherwise due upon exercise or (ii) by delivering a sufficient number of shares of the Company's common stock which have been previously held by the Optionee for such period of time as the Committee may require. The aggregate value of the shares withheld or delivered, as determined by the Committee must be sufficient to satisfy all such applicable taxes, except as otherwise permitted by the Committee. If the Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as amended, the Optionee's election must be made in compliance with rules and procedures established by the Committee. 12. 2000 EQUITY INCENTIVE PLAN. This Agreement is subject to, and the Company and Optionee agree to be bound by, all of the terms and conditions of the Plan, as the same shall have been amended from time to time in accordance with the terms thereof, provided that no such amendment shall deprive Optionee, without Optionee's consent, of this Option or any of Optionee's rights hereunder. Should a conflict exist between the Plan and this Agreement, the terms of the Plan shall control. A copy of the Plan in its present form is available for inspection during business hours by Optionee or other persons entitled to exercise this Option at the Company's principal office. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors or its duly appointed Committee upon any questions arising under the Plan. 46 13. REQUIREMENTS OF LAW AND STOCK EXCHANGES. By accepting this Option, Optionee represents and agrees that Optionee and their transferees by will or the laws of descent and distribution that, unless a registration statement under the Securities Act of 1933 is in effect as to shares purchased upon any exercise of this Option, (i) any and all shares so purchased shall be acquired for Participant's personal account and not with a view to or for sale in connection with any distribution, and (ii) each notice of the exercise of any portion of this Option shall be accompanied by a representation and warranty in writing, signed by the person entitled to exercise the same, that the shares are being so acquired in good faith for that person's own account and not with view to or for sale in connection with any distribution. No certificate or certificates for shares of stock purchased upon exercise of this Option shall be issued and delivered prior to the admission of such shares to listing on notice of issuance on any stock exchange or other securities market on which shares of that class are then listed, nor unless and until, in the opinion of counsel for the Company, such securities may be issued and delivered without causing the Company to be in violation of or incur any liability under any federal, state or other securities law, any requirement of any securities exchange listing agreement to which the Company may be a party, or any other requirement of law or of any regulatory body having jurisdiction over the Company. 14. NOTICES. Any notice to be given to the Company shall be addressed to the Company in care of its Secretary at its principal office, and any notice to be given to Optionee shall be addressed to Optionee at the address given beneath Optionee's signature hereto or at such other address as Optionee may hereafter designate in writing to the Company. Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as described above, registered or certified, and deposited, postage and registry or certification fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service. 15. ARBITRATI0N. Any controversy, dispute or claim arising out of or relating to this Option which cannot be amicably settled including, but not limited to, the suspension or termination of the rights granted to Optionee, shall be settled by arbitration conducted in Sutter County or such other mutually agreed upon location. Such arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association at a time and place within the above-referenced location as selected by the arbitrator(s). 16. ATTORNEYS FEES. In the event of any litigation, arbitration, or other proceeding arising out of this Option the prevailing party shall be entitled to an award of costs, including an award of reasonable attorneys' fees. Any judgment, order, or award entered in any such proceeding shall designate a specific sum as such an award of attorneys' fees and costs incurred. 17. LAWS APPLICABLE TO CONSTRUCTION. This Agreement has been executed and delivered by the Company in California, and this Agreement shall be construed and enforced in accordance with the laws of California. 18. COUNTERPARTS. This Option may be executed in one or more counterparts, each of which when taken together shall constitute one and the same instrument. 47 CALIFORNIA INDEPENDENT BANCORP By: _______________________________________ (_______________________) Address: P.O. Box 929002 Yuba City, CA 95992 Optionee:___ (________________________) Address: ___________________________ ___________________________ ACKNOWLEDGMENT: I hereby acknowledge receipt of a copy of this Agreement as well as a copy of the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors or its duly appointed Committee upon any questions arising under the Plan. Optionee: __________________________________________ (________________________) 48 EX-10.24 4 a2030130zex-10_24.txt EXHIBIT 10.24 CALIFORNIA INDEPENDENT BANCORP NONQUALIFIED STOCK OPTION EXERCISE AGREEMENT This Nonqualified Stock Option Exercise Agreement (the "Exercise Agreement") is made as of the ______ day of _____________, _____, by and between California Independent Bancorp (the "Company") and______________________, (the "Purchaser"); WHEREAS, pursuant to the Non-qualified Stock Option Agreement dated _______________ ("Option Agreement") the Company granted to Purchaser an nonqualified stock option to acquire all or any part of _______________ (_______) authorized but unissued shares of the Company's common stock at the price of _____________ dollars and _______ cents ($__.__) per share (the "Exercise Price"), subject to the terms and conditions hereinafter stated (the "Option"); WHEREAS, pursuant to the Company's 2000 Equity Incentive Plan (the "Plan") the total number of shares subject to the Options has been adjusted to _______________ (_______) authorized but unissued shares of common stock (the "Shares"); WHEREAS, Purchaser desires to exercise the Option; NOW, THEREFORE, it is hereby agreed: 1. EXERCISE OF OPTION. (a) Exercise. Subject to the terms and conditions of this Exercise Agreement, the Plan, and the Option Agreement, Purchaser hereby irrevocably elects to exercise the Option as follows: Purchaser purchases from the Company, and the Company hereby sells to Purchaser, ____________________ (____) shares of its common stock at the Exercise Price for an aggregate purchase price of $_________________ (the "Purchase Price"). (b) Title to Shares. The exact spelling of the name(s) under which Purchaser will take title to the Shares is: ________________________________________ ________________________________________ Purchaser desires to take title to the Shares as follows: [_] Individual, as separate property [_] Husband and wife, as community property [_] Joint Tenants [_] Alone or with spouse as trustee(s) of the following trust (including date): ______________________________________________ [_] Other; please specify:______________________________ ______________________________________________ (c) Purchaser hereby delivers payment of the Exercise Price of $____________ and 49 the withholding tax obligation in the amount of $________________ in the manner permitted in the Option Agreement as follows (check and complete as appropriate): $___________ [_] Cash $___________ [_] Cash equivalent (e.g., certified check, official bank check or money order) $___________ [_] ___________ shares of Company common stock $___________ [_] Direction to _______________, an approved securities broker, to sell _______________ shares of the Company's common stock and to deliver all or part of the sales proceeds to the Company $___________ [_] Irrevocable direction to pledge shares of Company common stock to _______________________, a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company. 2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to the Company that: (a) Agrees to Terms of the Plan. Purchaser has received a copy of the Plan and the Option Agreement, has read and understands the terms of the Plan, the Option Agreement and this Exercise Agreement, and agrees to be bound by their terms and conditions. Purchaser acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares, and that Purchaser should consult a tax adviser prior to such exercise or disposition. (b) Access to Information. Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Purchaser reasonably considers important in making the decision to purchase the Shares, and Purchaser has had ample opportunity to ask questions of the Company's representatives concerning such matters and this investment. (c) Understanding of Risks. Purchaser is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Purchaser may not be able to sell or dispose of the Shares or use them as collateral for loans); (iv) the qualifications and backgrounds of the management of the Company; and (v) the tax consequences of investment in the Shares. Purchaser is capable of evaluating the merits and risks of this investment, has the ability to protect Purchaser's own interests in this transaction and is financially capable of bearing a total loss of this investment. 50 (d) No General Solicitation. At no time was Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Shares. 3. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE. 4. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the Shares will be subject to and conditioned upon compliance by the Company and Purchaser with all applicable state and U.S. Federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company's common stock may be listed or quoted at the time of such issuance or transfer. 5. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this Exercise Agreement. This Exercise Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Agreement will be binding upon Purchaser and Purchaser's heirs, executors, administrators, legal representatives, successors and assigns. 6. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California. If any provision of this Exercise Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable. 7. HEADINGS. The captions and headings of this Exercise Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Exercise Agreement. All references herein to Sections will refer to Sections of this Exercise Agreement. 8. ENTIRE AGREEMENT. The Plan, the Option Agreement and this Exercise Agreement, together with all of its Exhibits, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Exercise Agreement, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. 9. COUNTERPARTS. This Exercise Agreement may be executed in one or more counterparts, each of which when taken together shall constitute one and the same instrument. 51 CALIFORNIA INDEPENDENT BANCORP By:_______________________________________ (_______________________) Address: P.O. Box 929002 Yuba City, CA 95992 Purchaser: ____________________________________ (________________________) Address: ___________________________ ___________________________ 52 EX-10.25 5 a2030130zex-10_25.txt EXHIBIT 10.25 CALIFORNIA INDEPENDENT BANCORP INCENTIVE STOCK OPTION AGREEMENT THE STOCK OPTION GRANTED HEREIN IS INTENDED TO BE AND SHALL BE TREATED AS AN INCENTIVE STOCK OPTION UNDER SECTION 422 OF THE INTERNAL REVENUE CODE. This Incentive Stock Option Agreement (the "Agreement") is made as of the ______ day of _____________, _____, by and between California Independent Bancorp (the "Company") and______________________, ("Optionee"); WHEREAS, pursuant to the 2000 Equity Incentive Plan (the "Plan"), a copy of which is attached hereto, the Board of Directors of the Company has authorized granting to Optionee a incentive stock option to purchase all or any part of _______________ (_______) authorized but unissued shares of the Company's common stock at the price of _____________ dollars and _______ cents ($__.__) per share, subject to the terms and conditions hereinafter stated (the "Option") ; NOW, THEREFORE, it is hereby agreed: 1. GRANT OF OPTION. The Company's Board of Directors hereby grants to Optionee, an option to purchase a total of _____________ shares of common stock of the Company, at the price provided herein, and subject to the terms, definitions and provisions of the Plan. The capitalized terms defined in the Plan shall have the same defined meanings herein. The grant of this option shall not impose an obligation on the Optionee ro exercise the Option. 2. NATURE OF THE OPTION. This Option is intended to qualify as an incentive stock option ("ISO") as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). However, the Company does not represent or warrant that this Option qualifies as an incentive stock option. If for any reason the Option fails to be deemed an ISO, the Option shall thereafter be governed by the Plan's provisions regarding nonqualified stock options. Optionee acknowledges that Optionee is responsible to consult with Optionee's own tax advisor regarding the tax effects of the Option and the requirements necessary to obtain income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. Optionee acknowledges, and the Company affirms, that the methodology by which the Fair Market Value of the Shares has been determined by the Company represents a good faith attempt, as defined in the Code and the regulations thereunder, at reaching an accurate appraisal of the Fair Market Value of the Shares; and the Company shall not be responsible for any additional tax liability incurred by Optionee in the event that the Internal Revenue Service were to determine that the Option does not qualify as an ISO for any reason. 3. EXERCISE PRICE. The Exercise Price of the Option is _____________ dollars and _______________ cents ($__.__) per share, which is not less than the Fair Market Value per share of the common stock of the Company on the Grant Date. In the case of Optionee-shareholders who own securities possessing more than ten percent (10%) of the total combined voting power of all classes of securities of the Company, the Exercise Price is not less than 110% of the Fair 53 Market Value of the stock on the Grant Date. 4. OPTION TERM. Subject to earlier termination as provided in the Plan, this Option shall terminate on ______________________, and may be exercised during such term only in accordance with the Plan and the terms of this Option. 5. EXERCISE OF OPTION. This Option shall be exercisable during its term in accordance with the provisions of Section 6 of the Plan as follows: (a) Right to Exercise. This Option shall vest cumulatively, the date of grant of the Option, exercisable during a period of ________ months after the Grant Date as follows: (1) This Option may be exercised immediately to the extent of not more than ____ percent (__%) of the Shares; (2) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares; (3) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares; (4) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares; and (5) Upon or after the expiration of _________ (__) months from the Grant Date, this Option may be exercised to the extent of an additional ____ percent (__%) of the Shares. Any portion of the Option not exercised shall accumulate and can be exercised any time prior to or upon the expiration of _________ (__) months from the Grant Date. (b) Minimum Exercise. This Option may not be exercised for less than ___ Shares nor for a fraction of a Share. (c) Method of Exercise. This Option shall be exercisable only by delivery to the Company of a written stock option exercise agreement (the "Exercise Agreement") in a form approved by the Committee. The Exercise Agreement shall state the election to exercise the Option, specify the number of whole Shares in respect of which the Option is being exercised, any restrictions imposed on the Shares purchased, and such representations and agreements as required by the Company to comply with applicable securities laws. Such Exercise Agreement shall be signed by the Optionee and shall be delivered, in person or by certified mail, to the Secretary of the Company accompanied by payment of the Exercise Price as specified below. No Shares will be issued pursuant to the exercise of the Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange or inter-dealer quotation system upon which the shares of the Company's common stock may then be listed or quoted. Assuming such compliance, the Shares shall be 54 considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. An Optionee shall have no rights as a shareholder of the Company with respect to any Shares until the issuance of a stock certificate to the Optionee for such Shares. (d) Method of Payment. The entire Exercise Price of Shares issued under the Plan shall be payable in lawful money of the United States of America or its equivalent (e.g. certified check, official bank check or money order) at the time when such Shares are purchased. Such payment also shall include the amount of any withholding tax obligation which may arise in connection with the exercise, as determined by the Company. In addition, payment may be made in any of the following forms as indicated by an "x" in the preceding parenthesis: ( ) Surrender of Stock. Payment of all or part of the Exercise Price and any withholding taxes may be made all or in part with Shares which have already been owned by the Optionee or Optionee's representative for more than 6 months and which are surrendered to the Company in good form for transfer. Such Shares shall be valued at their Fair Market Value on the date when the new Shares are purchased pursuant to exercise of the Option. ( ) Exercise/Sale. Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. ( ) Exercise/Pledge. Payment may be made by the delivery (on a form prescribed by the Company) of an irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company in payment of all or part of the Exercise Price and any withholding taxes. ( ) Combination. By any combination of the permissible forms of payment. (e) Restrictions on Exercise. Notwithstanding the exercise periods set forth in this Agreement, exercise of an Option will always be subject to the following: (1) In the event of a Optionee's death or Disability, the term of the Option shall expire [specify a period from 12 to 6 months] after such death or Disability but not later than the original expiration date specified in Section 4 of this Agreement. (2) In the event that the Board determine that a Optionee be terminated by the Company for cause, the term of the Option shall expire immediately after the Company's notice or advice of such termination is dispatched to the Optionee. For purposes of this Paragraph (2), "cause" shall mean an act of embezzlement, fraud, dishonesty, breach of fiduciary duty to the Company, or the deliberate disregard of rules of the Company which results in loss, damage or 55 injury to the Company, the unauthorized disclosure of any of the secrets or confidential information of the Company, the inducement of any client or customer of the Company to break any contract with the Company, or the inducement of any principal for whom the Company acts as agent to terminate such agency relationship, the engagement of any conduct which constitutes unfair competition with the Company, the removal of Optionee from office by any court or bank regulatory agency, or such other similar acts which the Committee in its discretion determine to constitute good cause for termination of Optionee's service. In making such determination of cause, the Board shall give the Optionee an opportunity to appear before the Board and present evidence on the Optionee's behalf. As used in this Paragraph (2), Company includes any subsidiaries of the Company. (3) As a result of termination for any reason other than death, Disability or cause, the term of the Option shall expire three (3) months) after such termination, but not later than the original expiration date specified in Section 4 of this Agreement. (4) This Option shall not be exercisable by Optionee in any part unless at all times beginning with the date of grant and ending no more than ______ (_) months prior to the date of exercise, Optionee has, except for military service leave, sick leave or other bona fide leave of absence (such as temporary employment by the United States Government) been in the continuous service of the Company or a Subsidiary thereof, except that such period of _______ (__) months shall instead be the period specified in Paragraph 5(e)(1) above, following any termination of Optionee's affiliation by reason of Optionee's permanent and total disability. (5) The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Optionee during any calendar year (under the Plan or under any other incentive stock option plan of the Company) cannot exceed One Hundred Thousand Dollars ($100,000). If this amount is exceeded for such ISOs, then the Options for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that calendar year will be nonqualified stock options. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date of this Plan to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any options granted after the effective date of such amendment. 6. NO OBLIGATION TO EMPLOY. Notwithstanding any provision of this Agreement, the grant of this Option shall in no way be construed so as to confer on Optionee the rights to employment, affiliation or continued employment or affiliation by the Company or a subsidiary thereof. Nothing in the Plan or hereunder shall confer upon Optionee any right to employment or affiliation or to continue in the employ, directorship or consultancy of the Company or a Subsidiary thereof. Nothing in the Plan or hereunder shall confer upon Optionee any right to interfere with or restrict in any way the rights of the Company or a subsidiary thereof, which are hereby expressly reserved, to terminate or discharge Optionee at any time for any reason whatsoever, with or without cause, subject to applicable laws and the terms of any written employment agreement the Optionee has entered into with the Company or subsidiary. 56 7. TRANSFERABILITY. This Option, and any interest therein, is not transferable or assignable by the Optionee other than by will, the laws of descent and distribution, or by an instrument to an inter vivos or testamentary trust in which the Option is to be passed to beneficiaries upon the death of the trustor (settlor). During the lifetime of the Optionee, an Option will be exercisable only by the Optionee and any elections with respect to an Option may be made only by the Optionee. 8. ADJUSTMENT OF SHARES. In the event of a Company stock split, reverse stock split, stock dividend, recapitalization, combination, reclassification, subdivision, or similar change in the capital structure of the Company without consideration, then each of the number of Shares reserved for issuance under this Option will be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and compliance with applicable securities laws. Fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value of such fraction or will be rounded up to the nearest whole Share, as determined by the Committee. The grant of this Option pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. 9. CORPORATE TRANSACTIONS. (a) Reorganizations. In the event that the Company is a party to a merger or other reorganization involving a Change in Control (as defined in Section 19.1(a) of the Plan), the Option shall be subject to the agreement of merger or reorganization. such agreement may provide, without limitation, for the assumption of outstanding options by the surviving corporation or its parent, for their continuation by the Company (if the Company is a surviving corporation), for payment of a cash settlement equal to the difference between the amount to be paid for one Share under such agreement and the Exercise Price, or for the acceleration of their exercisability followed by the cancellation of options not exercised, in all cases without the Optionee's consent. Any cancellation shall not occur until after such acceleration is effective and the Optionee has been notified of such acceleration and have had reasonable opportunity to exercise their options. (b) Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Paragraph 9, in the event of the occurrence of any transaction described in Paragraph 9(a), the Option will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation, sale of assets or other corporate transaction. 10. NO PRIVILEGES OF STOCK OWNERSHIP. No Optionee will have any of the rights of a shareholder with respect to any Shares represented by the Option, until the Shares (and not simply an Option) are issued to the Optionee. After Shares are issued to the Participant, the Participant will be a shareholder and have all the rights of a shareholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares. 57 If such Shares are Restricted Stock, any new, additional or different securities the Optionee may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock. Furthermore, Participant will have no right to retain such stock dividends or stock distributions with respect to Shares that are repurchased at the Optionee's original Purchase Price. 11. TAX EFFECTS. THE FEDERAL TAX CONSEQUENCES OF EMPLOYEE STOCK OPTIONS ARE COMPLEX AND SUBJECT TO CHANGE. A TAXPAYER'S PARTICULAR SITUATION MAY BE SUCH THAT SOME VARIATION OF THE GENERAL RULE IS APPLICABLE. ACCORDINGLY, AN OPTIONEE (OR HIS GUARDIAN, ESTATE OR LEGATEE) SHOULD CONSULT WITH HIS OWN TAX ADVISOR BEFORE EXERCISING ANY OPTION OR DISPOSING OF ANY SHARES ACQUIRED UPON THE EXERCISE OF AN OPTION. 12. 2000 EQUITY INCENTIVE PLAN. This Agreement is subject to, and the Company and Optionee agree to be bound by, all of the terms and conditions of the Plan, as the same shall have been amended from time to time in accordance with the terms thereof, provided that no such amendment shall deprive Optionee, without Optionee's consent, of this Option or any of Optionee's rights hereunder. Should a conflict exist between the Plan and this Agreement, the terms of the Plan shall control. A copy of the Plan in its present form is available for inspection during business hours by Optionee or other persons entitled to exercise this Option at the Company's principal office. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors or its duly appointed Committee upon any questions arising under the Plan. 13. REQUIREMENTS OF LAW AND STOCK EXCHANGES. By accepting this Option, Optionee represents and agrees that Optionee and their transferees by will or the laws of descent and distribution that, unless a registration statement under the Securities Act of 1933 is in effect as to shares purchased upon any exercise of this Option, (i) any and all shares so purchased shall be acquired for Participant's personal account and not with a view to or for sale in connection with any distribution, and (ii) each notice of the exercise of any portion of this Option shall be accompanied by a representation and warranty in writing, signed by the person entitled to exercise the same, that the shares are being so acquired in good faith for that person's own account and not with view to or for sale in connection with any distribution. No certificate or certificates for shares of stock purchased upon exercise of this Option shall be issued and delivered prior to the admission of such shares to listing on notice of issuance on any stock exchange or other securities market on which shares of that class are then listed, nor unless and until, in the opinion of counsel for the Company, such securities may be issued and delivered without causing the Company to be in violation of or incur any liability under any federal, state or other securities law, any requirement of any securities exchange listing agreement to which the Company may be a party, or any other requirement of law or of any regulatory body having jurisdiction over the Company. 14. NOTICES. Any notice to be given to the Company shall be addressed to the Company in care of its Secretary at its principal office, and any notice to be given to Optionee shall be 58 addressed to Optionee at the address given beneath Optionee's signature hereto or at such other address as Optionee may hereafter designate in writing to the Company. Any such notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as described above, registered or certified, and deposited, postage and registry or certification fee prepaid, in a post office or branch post office regularly maintained by the United States Postal Service. 15. ARBITRATI0N. Any controversy, dispute or claim arising out of or relating to this Option which cannot be amicably settled including, but not limited to, the suspension or termination of the rights granted to Optionee, shall be settled by arbitration conducted in Sutter County or such other mutually agreed upon location. Such arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association at a time and place within the above-referenced location as selected by the arbitrator(s). 16. ATTORNEYS FEES. In the event of any litigation, arbitration, or other proceeding arising out of this Option the prevailing party shall be entitled to an award of costs, including an award of reasonable attorneys' fees. Any judgment, order, or award entered in any such proceeding shall designate a specific sum as such an award of attorneys' fees and costs incurred. 17. LAWS APPLICABLE TO CONSTRUCTION. This Agreement has been executed and delivered by the Company in California, and this Agreement shall be construed and enforced in accordance with the laws of California. 18. COUNTERPARTS. This Option may be executed in one or more counterparts, each of which when taken together shall constitute one and the same instrument. CALIFORNIA INDEPENDENT BANCORP By:______________________________________ Address: P.O. Box 929002 Yuba City, CA 95992 Optionee: ___________________________________ Address: __________________________ ACKNOWLEDGMENT: I hereby acknowledge receipt of a copy of this Agreement as well as a copy of the Plan. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors or its duly appointed Committee upon any questions arising under the Plan. Optionee: _________________________________________ 59 EX-10.26 6 a2030130zex-10_26.txt EXHIBIT 10.26 CALIFORNIA INDEPENDENT BANCORP INCENTIVE STOCK OPTION EXERCISE AGREEMENT This Incentive Stock Option Exercise Agreement (the "Exercise Agreement") is made as of the ______ day of _____________, _____, by and between California Independent Bancorp (the "Company") and _____________________, (the "Purchaser"); WHEREAS, pursuant to the Incentive Stock Option Agreement dated _______________ ("Option Agreement") the Company granted to Purchaser an incentive stock option to acquire all or any part of _______________ (_______) authorized but unissued shares of the Company's common stock at the price of _____________ dollars and _______ cents ($__.__) per share (the "Exercise Price"), subject to the terms and conditions hereinafter stated (the "Option"); WHEREAS, pursuant to the Company's 2000 Equity Incentive Plan (the "Plan") the total number of shares subject to the Options has been adjusted to _______________ (_______) authorized but unissued shares of common stock (the "Shares"); WHEREAS, Purchaser desires to exercise the Option; NOW, THEREFORE, it is hereby agreed: 1. EXERCISE OF OPTION. (a) Exercise. Subject to the terms and conditions of this Exercise Agreement, the Plan, and the Option Agreement, Purchaser hereby irrevocably elects to exercise the Option as follows: Purchaser purchases from the Company, and the Company hereby sells to Purchaser, ____________________ (____) shares of its common stock at the Exercise Price for an aggregate purchase price of $_________________ (the "Purchase Price"). (b) Title to Shares. The exact spelling of the name(s) under which Purchaser will take title to the Shares is: _______________________________________________ _______________________________________________ Purchaser desires to take title to the Shares as follows: [_] Individual, as separate property [_] Husband and wife, as community property [_] Joint Tenants [_] Alone or with spouse as trustee(s) of the following trust (including date): _______________________________________________ _______________________________________________ [_] Other; please specify:______________________________ ______________________________________________ 60 (c) Purchaser hereby delivers payment of the Exercise Price of $____________ and the withholding tax obligation in the amount of $________________ in the manner permitted in the Option Agreement as follows (check and complete as appropriate): $___________ [_] Cash $___________ [_] Cash equivalent (e.g., certified check, official bank check or money order) $___________ [_] ___________ shares of Company common stock $___________ [_] Direction to _______________, an approved securities broker, to sell _______________ shares of the Company's common stock and to deliver all or part of the sales proceeds to the Company $___________ [_] Irrevocable direction to pledge shares of Company common stock to _______________________, a securities broker or lender approved by the Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company. 2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to the Company that: (a) Agrees to Terms of the Plan. Purchaser has received a copy of the Plan and the Option Agreement, has read and understands the terms of the Plan, the Option Agreement and this Exercise Agreement, and agrees to be bound by their terms and conditions. Purchaser acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition of the Shares, and that Purchaser should consult a tax adviser prior to such exercise or disposition. (b) Access to Information. Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Purchaser reasonably considers important in making the decision to purchase the Shares, and Purchaser has had ample opportunity to ask questions of the Company's representatives concerning such matters and this investment. (c) Understanding of Risks. Purchaser is fully aware of: (i) the highly speculative nature of the investment in the Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Purchaser may not be able to sell or dispose of the Shares or use them as collateral for loans); (iv) the qualifications and backgrounds of the management of the Company; and (v) the tax consequences of investment in the Shares. Purchaser is capable of evaluating the merits and risks of this investment, has the ability to protect Purchaser's own interests in this transaction and is financially capable of bearing a total loss of this investment. (d) No General Solicitation. At no time was Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Shares. 61 3. TAX CONSEQUENCES. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE. 4. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of the Shares will be subject to and conditioned upon compliance by the Company and Purchaser with all applicable state and U.S. Federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company's common stock may be listed or quoted at the time of such issuance or transfer. 5. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this Exercise Agreement. This Exercise Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Agreement will be binding upon Purchaser and Purchaser's heirs, executors, administrators, legal representatives, successors and assigns. 6. GOVERNING LAW; SEVERABILITY. This Exercise Agreement shall be governed by and construed in accordance with the internal laws of the State of California as such laws are applied to agreements between California residents entered into and to be performed entirely within California. If any provision of this Exercise Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable. 7. HEADINGS. The captions and headings of this Exercise Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Exercise Agreement. All references herein to Sections will refer to Sections of this Exercise Agreement. 8. ENTIRE AGREEMENT. The Plan, the Option Agreement and this Exercise Agreement, together with all of its Exhibits, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Exercise Agreement, and supersede all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. 62 9. COUNTERPARTS. This Exercise Agreement may be executed in one or more counterparts, each of which when taken together shall constitute one and the same instrument. CALIFORNIA INDEPENDENT BANCORP By:______________________________________ (_______________________) Address: P.O. Box 929002 Yuba City, CA 95992 Purchaser: _________________________________________ (________________________) Address: __________________________ 63 EX-10.27 7 a2030130zex-10_27.txt EXHIBIT 10.27 SEVERANCE AGREEMENT AND RELEASE OF CLAIMS Annette Bertolini (hereinafter "Employee") on the one hand, Feather River State Bank and California Independent Bancorp (collectively hereinafter, "Employer"), on the other hand, hereby enter into this Severance Agreement and Release of Claims (hereinafter, "Agreement") under the following terms and conditions: 1. Background and Purpose. 1.1 Employee was employed by Employer as Chief Financial Officer. 1.2 Employee, for her part, and Employer, for its part, desire to mutually sever the employment relationship between them on the terms and conditions set forth below. 2. Effective Date. This Agreement shall become effective June 15, 2000. 3. Consideration. In consideration of the release, and agreements set forth herein Employer agrees to provide Employee with the following severance benefits: 3.1 Employee shall receive any unpaid portion of her earned vacation; 3.2 Employer shall match, pursuant to the plan's limitations, any contributions made by Employee to Employer's 401(k) plan as permitted by law; 3.3 Employer for a two year period from the effective date of this Agreement shall provide to Employee all current life insurance, medical, dental, vision and hospitalization insurance and long term disability insurance with Employee continuing to make her contributions. After two years from the effective date of this Agreement, Employee shall be entitled to elect to receive COBRA benefits as provided by law; 3.4 Employer and Employee shall enter into a Consulting Agreement, a copy of which is attached hereto. 3.5 Employer shall vest the stock options that are not currently vested under the California Independent Bancorp 1996 Stock Option Plan. 3.6 Executive Salary Continuation Agreement. Employer and Employee previously entered into Executive Salary Continuation Agreement dated April 28, 1993 ("Salary Continuation Agreement"). Upon Employee attaining age 60, Employee shall receive payment under that Agreement. 3.7 Employee agrees that she is not entitled to any other payments, including bonuses or severance except for those payments expressly provided for in this Agreement. 3.8 Upon receipt of the notice specified in Paragraph 2, Employee will immediately provide Employer with a written resignation from all officer positions she currently holds with California Independent Bancorp, Feather River State Bank and with any subsidiaries or affiliates of either entity. 4. Non-Solicitation. To the fullest extent permissible under applicable law, Consultant agrees that both during the term of this Agreement and following termination of this Agreement, Consultant shall not take any action to induce employees, customers or independent contractors of FRSB or FRSB's Related Entities to sever their relationship with FRSB or FRSB's Related Entities or to accept an employment or an independent Consultant relationship with any other business. 5. Cooperation. Employee agrees to cooperate fully with Employer in the future in the event any litigation, arbitration or other legal or administrative proceeding or investigation is initiated by or against Employer. Said cooperation includes, but is not limited to, making herself available to Employer and/or the Employer's attorneys to answer questions regarding any finance or other activities of the Employer for which 64 Employee has knowledge, to assist the Employer by making herself available to testify as a witness at any proceeding or deposition, and to cooperate fully in any investigation the Employer may need to conduct in either prosecuting or defending any litigation involving the Employer. 6. Releases of Liability. 6.1 In consideration of the promises and covenants contained in this Agreement, Employer and Employee agree to the following releases, 6.2 Specific Release of Age Discrimination Claim. (a) Age Discrimination in Employment Act. Employee represents that she understands and acknowledges that the Age Discrimination in Employment Act provides her the right to bring a claim against Employer if the Employee believes that she has been discriminated against on the basis of age. Employee expressly warrants that she will not file any claim or action against Employer, its officers, directors, shareholders, agents, employees or any entity or employee associated with or employed by Employer based on any alleged violations of the Age Discrimination in Employment Act arising prior to the date she executes this Agreement. Employee hereby waives any right to assert a claim for relief under this Act, including but not limited to, back pay, attorneys' fees, damages, reinstatement or injunctive relief. (b) Older Workers Benefit Protection Act. Pursuant to the terms of the Older Workers' Benefit Protection Act (OWBPA), Employee acknowledges that she is waiving any claims she may have under the Age Discrimination in Employment Act arising prior to the date she executes this agreement. Employee acknowledges that she has had twenty-one (21) days in which to consider the terms of this Agreement. Employee acknowledges that, by the terms of this Agreement, Employee has been advised in writing that the Employee should Consult with an attorney regarding the terms and conditions of this Agreement. Employee further acknowledges that, by the terms of this Agreement, she has been advised that following execution of this Agreement, Employee has seven (7) days in which she may revoke this Agreement and that this Agreement does not become effective until the seventh day following execution of the Agreement. The date, seven (7) days following the execution of the Agreement, shall be the effective date of this Agreement. Employee further acknowledges that she has consulted with an attorney and is fully aware of the rights and claims being released by his execution of this Agreement. 6.3 Specific Release of Statutory Rights Claims. Employee understands and acknowledges that Title VII of the Civil Rights Act of 1964 as amended, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Vietnam Era Veterans Readjustments Assistance Act of 1974, the California Family Rights Act of 1991, the Federal Family and Medical Leave Act of 1993, and the California Fair Employment and Housing Act, as amended, and applicable provisions of California's Labor Code (including, but not limited to, the Worker's Compensation and Insurance provisions contained in sections 3200 et. seq.) provide the right to an employee to bring charges, claims or complaints against an employer if the employee believes she has been discriminated against on a number of bases, including race, ancestry, color, religion, sex, marital status, national origin, age, status as a veteran of the Vietnam era, request or need for family or medical leave, physical or mental disability, medical condition, or sexual preference. Employee, with full understanding of the rights afforded her under these federal and state laws, agrees that she will not file, or cause to be filed against Employer, any charges, complaints, or actions based on any alleged violation of these federal and slate laws, including California's Worker's Compensation laws, or any successor or replacement federal or state laws. Employee hereby waives any right to assert a claim for relief available under these federal and state laws including, but not limited to, back pay, attorneys' fees, damages, reinstatement, or injunctive relief, which Employee may otherwise recover based on any alleged violation of these federal and state laws, or any successor or replacement, federal or state laws. 6.4 General Release. Excepting the obligations that are expressly set forth in this Agreement, Employee shall and hereby does release and forever discharge Employer, and Employer's predecessors, successors, heirs, assigns, executors, administrators, agents, employees, representatives, attorneys, affiliates, subsidiaries, and any and all past or present officers, directors and shareholders of Employer, and all of them, as well as any and all persons acting or allegedly acting by, under, through or in concert with any of them, 65 against any and all claims, damages, actions, causes of action, liabilities, judgments, liens, contracts, agreements, rights, debts, suits, obligations, promises, acts, costs and expenses (including, but not limited to, attorneys' fees), damages and charges of whatsoever nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, fixed or contingent, or ever filed or prosecuted (hereinafter, collectively referred to as "Claims") which Employee may now have, or claims to have, or any time heretofore had, or claimed to have had, against Employer, or any other claim, as a result of things undertaken, said, stated, done or admitted to be done up to and including the date of this Agreement. Excepting the obligations that are expressly set forth in this Agreement, Employer shall and hereby does release and forever discharge Employee, as well as any and all persons acting or allegedly acting by, under, through or in concert with her, against any and all claims, damages, actions, causes of action, liabilities, judgments, liens, contracts, agreements, rights, debts, suits, obligations, promises, acts, costs and expenses (including, but not limited to, attorneys' fees), damages and charges of whatsoever nature, whether known or unknown, suspected or unsuspected, foreseen or unforeseen, fixed or contingent, or ever filed or prosecuted (hereinafter, collectively referred to as "Claims") which Employer may now have, or claims to have, or any time heretofore had, or claimed to have had, against Employee, or any other claim, as a result of things undertaken, said, stated, done or admitted to be done up to and including the date of this Agreement. 6.5 Waiver of Unknown and Unanticipated Claims. It is understood and agreed that the releases as referred to herein are full and final releases by Employee of Employer, and that such full and final releases include, without limitation, all unknown and unanticipated claims, injuries, debts, or damages, as well as those now known or disclosed. With respect to any claims by Employee against Employer, Employee expressly waives the Provisions of California Civil Code section 1542 which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." In that connection, Employee realizes and acknowledges that one or more of the Claims may include losses sustained by Employee on account of Employer, that are presently unknown or unsuspected, and that such losses as were sustained may give rise to additional losses and expenses in the future which are not now anticipated. Nevertheless, Employee acknowledges that this release has been negotiated and agreed upon and that in consideration for the rights and benefits under this Agreement, Employee intends and hereby does release, acquit and forever discharge Employer, and Employer's predecessors, successors, heirs, assigns, executors, administrators, agents, employees, representatives, attorneys, affiliates, subsidiaries, and any and all past or present officers, directors and shareholders of Employer, and all of them, as well as any and all persons acting or allegedly acting by, under, through or in concert with any of them, as set forth above, from any and all Claims, including those that are unknown, unsuspected or unforeseen or that are presently unknown and unanticipated. It is understood and agreed that the releases as referred to herein are full and final releases by Employer of Employee, and that such full and final releases include, without limitation, all unknown and unanticipated claims, injuries, debts, or damages, as well as those now known or disclosed. With respect to any claims by Employer against Employee, Employer expressly waives the Provisions of California Civil Code section 1542 which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." 66 In that connection, Employer realizes and acknowledges that one or more of the Claims may include losses sustained by Employer on account of Employee, that are presently unknown or unsuspected, and that such losses as were sustained may give rise to additional losses and expenses in the future which are not now anticipated. Nevertheless, Employer acknowledges that this release has been negotiated and agreed upon and that in consideration for the rights and benefits under this Agreement, Employer intends and hereby does release, acquit and forever discharge Employee, as well as any and all persons acting or allegedly acting by, under, through or in concert with her, from any and all Claims, including those that are unknown, unsuspected or unforeseen or that are presently unknown and unanticipated. 7. Confidential Data of the FRSB or FRSB's Related Entities and Their Customers. During the course of providing Services, Consultant may have access to business strategies, financial results, contractual agreements, strategies, ideas, compilations of information, records, in addition to financial, accounting, statistical, marketing and personnel data of FRSB, FRSB's Related Entities' and their respective customers. All such data is the FRSB or FRSB's Related Entities' property, is confidential and shall not be disclosed, directly or indirectly, or used by Consultant in any way, either during the term of this Agreement or at any time thereafter, except as required in the course of Consultant's performance of her Services, or with FRSB's permission. Consultant agrees not to disclose to any others, or take or use for her own purposes or purposes of any others, during the term of this Agreement or at any time thereafter, any of the FRSB or FRSB's Related Entities' trade secrets, including without limitation, confidential information, customer lists, computer programs or computer software of FRSB or FRSB's Related Entities. Consultant agrees that these restrictions shall also apply to (i) trade secrets belonging to third parties in the FRSB or FRSB's Related Entities' possession and (ii) trade secrets conceived, originated, discovered or developed by Consultant during the term of this Agreement. 8. Resolution of Disputes. Any disputes regarding the rights or obligations of the parties under this Agreement shall be conclusively determined by binding arbitration, The arbitration shall be conducted as follows: 8.1 Binding Arbitration. Any dispute between the parties shall be submitted to, and conclusively determined by, binding arbitration in accordance with this paragraph. The provisions of this paragraph shall not preclude any party from seeking injunctive or other provisional or equitable relief in order to preserve the status quo of the parties pending resolution of the dispute, and the filing of an action seeking injunctive or other provisional relief shall not be construed as a waiver of that party's arbitration rights. The arbitration of any dispute between the parties to this Agreement shall be governed by the provisions of the California Arbitration Act (California Code of Civil Procedure section 1280 et seq., including the provisions contained in section 1283.05). 8.2 Initiation of Arbitration. In the case of any dispute between the parties to this Agreement, either party shall have the right to initiate the binding arbitration process provided for in this paragraph by serving upon the other party a demand for arbitration. Notwithstanding any other provision of law, in order to be enforceable a demand for arbitration must be served within sixty (60) days of the date on which a party discovers or reasonably should have discovered, facts giving rise to a dispute as defined above. 8.3 Selection of Arbitrators. Within thirty (30) days of service of a demand for arbitration by either party to this Agreement, the parties shall endeavor in good faith to select a single arbitrator. If they fail to do so within that time period, each party shall have an additional period of fifteen (15) days in which to appoint an arbitrator and those arbitrators within fifteen (15) days shall select an additional arbitrator. If any party fails to appoint an arbitrator or if the arbitrators initially selected by the parties fail to appoint an additional arbitrator within the time specified herein, any party may apply to have an arbitrator appointed for the party who has failed to appoint, or to have the additional arbitrator appointed, by the presiding judge for the Superior Court, Sutter County, California. If the presiding judge, acting in his or her personal capacity, is unable or unwilling to appoint the additional arbitrator, that arbitrator shall be selected in accordance with California Code of Civil Procedure section 1281.6. 8.4 Location of Arbitration. Any arbitration hearing shall be conducted in Sutter County, California. 67 8.5 Applicable Law. The law applicable to the arbitration of any dispute shall be the law of the State of California, excluding its conflicts of law rules. 8.6 Arbitration Procedures. Except as otherwise provided in this paragraph, the arbitration shall be governed by the California Arbitration Act (Code Civ. Proc. ss. ss. 1280 et seq.). In addition, either party may choose, at that party's discretion, to request that the arbitrators resolve any dispositive motions prior to the taking of evidence on the merits of the dispute. By way of example, such dispositive motions would include, but not be limited to, those which would entitle a party to summary judgement or summary adjudication of issues pursuant to Code of Civil Procedure section 437c or resolution of a special defense as provided for at Code of Civil Procedure section 597. In the event a party to the arbitration requests that the arbitrators resolve a dispositive motion, the arbitrators shall receive and consider any written or oral arguments regarding the dispositive motion, and shall receive and consider any evidence specifically relating thereto, and shall render a decision thereon, before hearing any evidence on the merits of the dispute. The arbitration shall proceed with due dispatch and a decision shall be rendered within sixty (60) days after the appointment of the final arbitrator. Such decision shall be in such written form that a judgment may be entered on it in any court of competent jurisdiction in the State of California. 8.7 Limitation on Scope of Arbitrators' Award or Decision. Employer and Employee agree that if the arbitrators find any disputed claim to be meritorious, the arbitrators shall have the authority to order legal and/or equitable relief appropriate to the claim. 8.8 Costs of Arbitration; Attorneys' Fees. While the arbitration is pending, each party shall bear equally the costs of the arbitration and shall bear its own attorneys' fees. However, at the conclusion of the arbitration, Employer and Employee agree that the arbitrators shall award to the prevailing party the costs, including the costs of the arbitration, and attorneys' fees incurred by that party in participating in the arbitration process. 8.9 Acknowledgment of Consent to Arbitration. NOTICE: BY EXECUTING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "RESOLUTION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY EXECUTING THIS AGREEMENT, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS T0 APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "RESOLUTION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR EXECUTION OF THIS AGREEMENT INDICATING YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. BY EXECUTING THIS AGREEMENT, YOU ARE INDICATING THAT YOU HAVE READ AND UNDERSTOOD THE FOREGOING AND UNDERSTAND THAT BY EXECUTING THIS AGREEMENT YOU AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION. 9. No Rehire. Employee shall not be subject to rehire as an employee of Employer, or any of them. 10. Confidentiality of Terms of Agreement. In further consideration for the rights and benefits provided by this Agreement, Employee agrees that all terms and conditions of this Agreement shall forever remain confidential and shall not be disclosed to third parties. Notwithstanding this confidentiality provision, the Employee may disclose the terms and conditions of this Agreement to her attorneys or accountants for tax reporting purposes or as she may be compelled pursuant to legal process issued by a court of competent jurisdiction. Notwithstanding this confidentiality provision, Employer may disclose the terms and conditions of this Agreement as it deems necessary in its own discretion. 68 11. Entire Agreement. This document constitutes the entire agreement between the parties, all oral agreements being merged herein, and supersedes all prior representations and agreements. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein, 12. Waiver. Any of the terms or conditions of this Agreement may be waived at any time by the party entitled to the benefit thereof, but no such waiver shall affect or impair the right of the waiving party to require observance, performance or satisfaction either of that term or condition as it applies on a subsequent occasion or of any other term or condition hereof. 13. Amendment, The provisions of this Agreement may be modified or amended at any time by agreement of the parties. Any such amendment or modification as hereinafter may be made, shall be ineffective to modify this Agreement in any respect unless in writing and signed by the party or parties against whom enforcement of the modification or amendment is sought. 14. Representation by Counsel. This Agreement has been carefully read by the parties and the contents hereof are known and understood by all parties. The parties have each received independent legal advice from attorneys of their choice with respect to the preparation, review and advisability of executing this Agreement. Prior to the execution of this Agreement by each party, the parties' attorneys reviewed the Agreement, and the parties acknowledge that they have executed this Agreement after independent investigation and without fraud, duress or undue influence. 15. No Admissions. The purpose of this Agreement is to settle claims which are denied and are contested. The parties enter into this Agreement with the costs and risks of litigating and appealing the Action in mind. Nothing contained in this Agreement shall be deemed as an admission of any kind by Employer. 16. Severability. If any provision of this Agreement is adjudicated by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement which can be given full force and effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated. 17. Attorneys' Fees; Prejudgment Interest. If the services of an attorney are required by any party to secure the performance of this Agreement or otherwise upon the breach or default of another party to this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any Person in relation thereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law. 18. Succession. Subject to the provisions otherwise contained in this Agreement, this Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the respective parties hereto. 19. Governing Law and Consent to Jurisdiction. The rights and obligations of the parties, and the interpretation and performance of this Agreement, shall be governed by the laws of the State of California, excluding its conflict of law rules. To the maximum extent permitted by law, the parties agree that all actions or proceedings arising in connection with this Agreement shall be tried and determined in the Superior court of the State of California in and for the County of Sutter. 69 20. Notices. Any notice under this Agreement shall be in writing, and any written notice or other document shall be deemed to have been duly given (i) on the date of personal service on the parties, (ii) on the third business day after mailing, if the document is mailed by registered or certified mail, (iii) one day after being sent by professional or overnight courier or messenger service guaranteeing one-day delivery, with receipt confirmed by the courier, or (iv) on the date of transmission if sent by telegram, telex, telecopy or other means of electronic transmission resulting in written copies, with receipt confirmed. Failure to give notice in accordance with any of the foregoing methods shall not defeat the effectiveness of notice actually received by the addressee. 21. Captions. All paragraph captions are for reference only and should not be considered in construing this Agreement. 22. Non-assignability. This Agreement shall not be assigned by any party without the prior written consent of the other parties. Any assignment contrary to the provisions of this Agreement shall be deemed a default under the Agreement, allowing the non-defaulting parties to exercise all remedies available under law, 23. Counterparts. The Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one-in-the-same document. 24. Banking Regulatory Agencies. The obligations and rights of the parties hereunder are expressly conditioned upon the approval or non-disapproval of (i) this Agreement and/or (ii) Employee, in the event such approvals are required, by those banking regulatory agencies which have jurisdiction over Employer. Dated: July 5, 2000 (Signature) Annette Bertolini California Independent Bancorp Dated: August 11, 2000 By: (Signature) L.D. Hartwig -------------------------- Its: President & CEO Feather River State Bank Dated: August 11, 2000 By: (Signature) L.D. Hartwig -------------------------- Its: President & CEO 70 EX-10.28 8 a2030130zex-10_28.txt EXHIBIT 10.28 CONSULTING AGREEMENT Feather River State Bank ('FRSB'), and Annette Bertolini ("Consultant") agree as of July 5, 2000, as follows: 1. Engagement. FRSB engages and contracts for the services of Consultant, and Consultant accepts the engagement and agrees to provide consulting services to FRSB, on the terms and conditions set forth below. 2. Scope of Services. Consultant shall provide consulting services as reasonably determined from time to time by FRSB's President or Chief Operating Officer (hereinafter "Services"). Such Services include, but are not limited to: general consultation concerning the operating policies and financial management of FRSB and the FRSB Related Entities; cooperate fully with and assist FRSB and/or the FRSB Related Entities in the event any litigation or other dispute resolution process is initiated by or against FRSB or the FRSB Related Entities. Said assistance includes, but is not limited to, making herself available to FRSB or the FRSB Related Entities and/or their attorneys to answer questions regarding any operations, financial management or other activities, making herself available to testify as a witness at any proceeding or deposition, and to cooperate fully in any investigation by FRSB and/or the FRSB Related Entities which may be necessary to conduct in either prosecuting or defending any litigation, investigation or other matter. 2.1 Time and Effort. Consultant shall devote whatever time, effort, and skill as Consultant reasonably deems appropriate to fulfill Consultant's obligations under this Agreement. Consultant shall meet with representatives of FRSB on the third Friday of the month subject to change by mutual agreement to receive assignments. 2.2 Best Efforts; Applicable Laws. Consultant shall devote Consultant's best efforts, attention, skill and experience in providing the consulting Services. All Services performed by Consultant shall be in accordance with all applicable federal, state and local laws and all applicable regulations regarding such Services. 3. Compensation and Expenses. 3.1 Compensation. As compensation for the entire two (2) year term of this Agreement, FRSB agrees to pay Consultant as follows: Seven thousand four hundred fifty three dollars and eighty-five cents ($7,453.85) per month for the twenty-four (24) months of the Agreement's term to be paid on or before the first business day of the month following receipt of the Consultant's invoice for services rendered; 3.2 Other Expenses. Upon written approval by FRSB, Consultant shall be eligible for reimbursement of all reasonable travel and other expenses incurred in the performance of her Services for FRSB. Consultant agrees to provide FRSB with an invoice, which describes with reasonable particularity, the nature of the expenses incurred and the amount. Additionally, Consultant will attach to the invoice copies of all receipts evidencing the incurrence of such expenditures. Reimbursement for all approved expenses shall be made to Consultant within twenty (20) days of FRSB's receipt of Consultant's invoice. 4. Independent Consultant. The parties agree that Consultant shall perform all Services required hereunder as an independent Consultant, and not as an employee, agent, joint venturer or partner of FRSB for any purpose whatsoever. Except as otherwise provided in this Agreement, FRSB shall have no right to, and shall not, control the manner or means by which the Services are performed by Consultant hereunder. Consultant shall be entirely and solely responsible for Consultant's acts while engaged in the performance of Services hereunder. Consultant is not authorized to bind FRSB except as expressly authorized by FRSB in writing. 71 5. Manner of Delivery of Services. Consultant shall establish Consultant's own hours of work. Unless necessary due to the particular assignment, Consultant shall not be required to perform the Services at any specific time or place. Consultant shall, however, be available for telephone conferences and meetings at reasonable times, upon request. All Services performed by Consultant shall be performed in a professional manner and in compliance with the reasonable quality standards set by FRSB. Consultant generally shall not be required to perform the Services on FRSB premises, although FRSB shall make a furnished office available for use by Consultant and Consultant may make reasonable use of FRSB's equipment and supplies in the rendering of the Services. By the tenth (10th) business day of each month, Consultant agrees to provide FRSB with an invoice of services rendered for the prior month. Should Consultant fail to provide an invoice, FRSB may withhold Consultant's compensation until the invoice has been provided. 6. No Payroll or Employment Taxes. As an independent contractor, Consultant is not an employee of FRSB for federal, state or local tax purposes or for any other purpose, FRSB shall not pay any income or employment taxes based on Consultant's Services to FRSB, and shall not withhold income or employment taxes from Consultant's compensation. Such income or employment taxes include, but are not limited to, social security, state or federal unemployment insurance contributions, state or federal income tax, or disability insurance contributions. Consultant shall be solely responsible for all such taxes, Consultant shall he personally liable for all federal, state, and local taxes resulting from Consultant's Services to FRSB. Consultant shall pay and discharge all taxes which may be due on the compensation received from FRSB and shall indemnify and hold FRSB harmless from such taxes. Consultant agrees to comply with all tax laws applicable to the operation of a business such as Consultant's, including, but not limited to, the reporting of all gross receipts therefrom as income from the operation of a business, the payment of all self-employment taxes, compliance with all employment tax requirements for withholding on any employees used by Consultant, and compliance with workers' compensation laws. 7. No Workers' Compensation. FRSB has not obtained disability benefits insurance mandated by state law for employees, including workers' compensation insurance, to cover Consultant, or any of Consultant's agents or employees, If Consultant desires such insurance, Consultant shall obtain it at Consultant's sole expense. 8. Assistants. Consultant may, at Consultant's sole expense, hire persons to assist Consultant in the delivery of the Services ("Assistants"). Such Assistants shall be subject solely to the direction and control of Consultant and Consultant shall be solely responsible for compensating any such Assistants. 9. Indemnification. Consultant shall defend, indemnify and hold harmless FRSB, and its officers, directors, agents, employees, and affiliates, from any and all claims, demands, costs, expenses, obligations, damages, or causes of action of any nature, including reasonable attorneys' fees and costs, arising directly or indirectly from (i) the alleged existence of any agency relationship between Consultant and FRSB based upon the acts or omissions of Consultant; (ii) the violation by Consultant of any federal, state or local law; and/or (iii) damages to third parties or FRSB and its agents and employees caused by Consultant's negligent acts or omissions ill the performance of the Services, or any other breach of any of Consultant's obligations hereunder. 10. Non-Solicitation. To the fullest extent permissible under applicable law, Consultant agrees that both during the term of this Agreement and following termination of this Agreement, Consultant shall not take any action to induce employees, customers or independent contractors of FRSB or FRSB's Related Entities to sever their relationship with FRSB or FRSB's Related Entities or to accept an employment or an independent Consultant relationship with any other business. 72 11. Confidential Data of the FRSB or FRSB's Related Entities and Their Customers. During the course of providing Services, Consultant may have access to business strategies, financial results, contractual agreements, strategies, ideas, compilations of information, records, in addition to financial, accounting, statistical, marketing and personnel data of FRSB, FRSB's Related Entities' and their respective customers. All such data is the FRSB or FRSB's Related Entities' property, is confidential and shall not be disclosed, directly or indirectly, or used by Consultant in any way, either during the term of this Agreement, or at any time thereafter, except as required in the course of Consultant's performance of her Services, or with FRSB's permission. 12. Trade Secrets. Consultant agrees not to disclose to any others, or take or use for her own purposes or purposes of any others, during the term of this Agreement or at any time thereafter, any of the FRSB or FRSB's Related Entities' trade secrets, including without limitation, confidential information, customer lists, computer programs or computer software of FRSB or FRSB's Related Entities. Consultant agrees that these restrictions shall also apply to (i) trade secrets belonging to third parties in the FRSB or FRSB's Related Entities' possession and (ii) trade secrets conceived, originated, discovered or developed by Consultant during the term of this Agreement. 13. Inventions: Ownership Rights. Consultant agrees that all ideas, techniques, inventions, systems, formulas, discoveries, technical information, programs, prototypes and similar developments ("Developments") developed, created, discovered, made, written or obtained by Consultant in the course of or as a direct or indirect result of performance of her Services hereunder, and all related industrial property, copyrights, patent rights, trade secrets and other forms of protection thereof, shall be and remain the property of FRSB or FRSB's Related Entities. Consultant agrees to execute or cause to be executed such assignments and applications, registrations and other documents and to take such other action as may be requested by the FRSB or FRSB's Related Entities to enable them to protect their rights to any such Developments. If FRSB requires Consultant's assistance under this paragraph after termination of this Agreement, Consultant shall be compensated for Consultant's time actually spent in providing such assistance at an hourly rate equivalent to the prevailing rate for such services and as agreed upon by the parties. 14. Injunctive Relief. FRSB and Consultant acknowledge and agree that the services to be performed and the obligations under this Agreement are of a special, unique, unusual, extraordinary and intellectual character which give them a peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law. FRSB and Consultant therefore expressly agree that either party, in. addition to any other rights or remedies which they may possess, shall be entitled to injunctive and other equitable relief to prevent a breach of this Agreement. 15. Resolution of Disputes. Any disputes regarding the rights or obligations of the parties under this Agreement shall be conclusively determined by binding arbitration. The arbitration shall be conducted as follows: 15.1 Binding Arbitration. Any dispute between the parties shall be submitted to, and conclusively determined by, binding arbitration in accordance with this paragraph. The provisions of this paragraph shall not preclude any party from seeking injunctive or other provisional or equitable relief in order to preserve the status quo of the parties pending resolution of the dispute, and the filing of an action seeking injunctive or other provisional relief shall not be construed as a waiver of that party's arbitration rights. The arbitration of any dispute between the parties to this Agreement shall be governed by the provisions of the California Arbitration Act (California Code of Civil Procedure section 1280, et seq., including the provisions contained in section 1283.05). 15.2 Initiation of Arbitration. In the case of any dispute between the parties to this Agreement, either party shall have the right to initiate the binding arbitration process provided for in this paragraph by serving upon the other party a demand for arbitration. Notwithstanding any other provision of law, in order to be enforceable a demand for arbitration must be served within sixty (60) days of the date on which a party discovers, or reasonably should have discovered, facts giving rise to a dispute as defined above. 73 15.3 Selection of Arbitrators. Within thirty (30) days of service of a demand for arbitration by either party to this Agreement, the parties shall endeavor in good faith to select a single arbitrator. If they fail to do so within that time period, each party shall have an additional period of fifteen (15) days in which to appoint an arbitrator and those arbitrators within fifteen (15) days shall select an additional arbitrator. If any party fails to appoint an arbitrator or if the arbitrators initially selected by the parties fail to appoint an additional arbitrator within the time specified herein, any party may apply to have an arbitrator appointed for the, party who has failed to appoint, or to have the additional arbitrator appointed, by the presiding judge for the Superior Court, Sutter County, California. If the presiding judge, acting in his or her personal capacity, is unable or unwilling to appoint the additional arbitrator, that arbitrator shall be selected in accordance with California Code of Civil Procedure section 1281.6. 15.4 Location of Arbitration. Any arbitration hearing shall be conducted in Sutter County, California. 15.5 Applicable Law. The law applicable to the arbitration of any dispute shall be the law of the State of California, excluding its conflicts of law rules. 15.6 Arbitration Procedures. Except as otherwise provided in this paragraph, the arbitration shall be governed by the California Arbitration Act (Code Civ. Proc. ss.ss. 1280 et seq.). In addition, either party may choose, at that party's discretion, to request that the arbitrators resolve any dispositive motions prior to the taking of evidence on the merits of the dispute. By way of example, such dispositive motions would include, but not he limited to, those which would entitle a party to summary judgement or summary adjudication of issues pursuant to Code of Civil Procedure section 437c or resolution of a special defense as provided for at Code of Civil Procedure section 597. In the event a party to the arbitration requests that the arbitrators resolve a dispositive motion, the arbitrators shall receive and consider any written or oral arguments regarding the dispositive motion, and shall receive and consider any evidence specifically relating thereto, and shall render a decision thereon, before hearing any evidence on the merits of the dispute. The arbitration shall proceed with due dispatch and a decision shall be rendered within sixty (60) days after the appointment of the final arbitrator. Such decision shall be in such written form that a judgment may be entered on it in any court of competent jurisdiction in the State of California. 15.7 Limitation on Scope of Arbitrators' Award or Decision. FRSB and Consultant agree that if the arbitrators find any disputed claim to be meritorious, the arbitrators shall have the authority to order legal and/or equitable relief appropriate to the claim. 15.8 Costs of Arbitration; Attorneys' Fees. While the arbitration is pending, each party shall bear equally the costs of the arbitration and shall bear its own attorneys' fees. However, at the conclusion of the arbitration, the parties agree that the arbitrators shall award to the prevailing party the costs, including the costs of the arbitration, and attorneys' fees incurred by that party in participating in the arbitration process. 15.9 Acknowledgment of Consent to Arbitration. NOTICE: BY EXECUTING THIS AGREEMENT YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "RE SOLUTION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY EXECUTING THIS AGREEMENT, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "RESOLUTION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR EXECUTION OF THIS AGREEMENT INDICATING YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. BY EXECUTING THIS AGREEMENT, YOU ARE INDICATING THAT YOU HAVE READ AND UNDERSTOOD THE FOREGOING AND UNDERSTAND THAT BY EXECUTING THIS AGREEMENT YOU AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THIS ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION. 74 16. Miscellaneous. 16.1 Amendment. The provisions of this Agreement may be modified at any time by agreement of the parties. Any such agreement hereafter made shall be ineffective to modify this Agreement in any respect unless in writing and signed by the parties against who enforcement of the modification or discharge is sought. 16.2 Waive. Any of the terms or conditions of this Agreement may be waived at any time by the party entitled to the benefit thereof, but no such waiver shall affect or impair the right of the waiving party to require observance, performance or satisfaction either of that term or condition as it applies on a subsequent occasion or of any other term or condition. 16.3 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of the Agreement which can be given effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated. 16.4 Governing Law. The rights and obligations of the parties and the interpretation and performance of this Agreement shall be governed by the law of California, excluding its conflict of laws rules. 16.5 Notices. Any notice under this Agreement shall be in writing, and any written notice or other document shall be deemed to have been duly given (i) on the date of personal service on the parties, (ii) on the third business day after mailing, if the document is mailed by registered or certified mail, (iii) one day after being sent by professional or overnight courier or messenger service guaranteeing one-day delivery, with receipt confirmed by the courier, or (iv) on the date of transmission if sent by telegram, telex, telecopy, or other means of electronic transmission resulting in written copies, with receipt confirmed. Any such notice shall be delivered or addressed to the parties at the addresses set forth below or at the most recent address specified by the, addressee through written notice under this provision. Failure to conform to the requirement that mailings be done by registered or certified mail shall not defeat the effectiveness of notice actually received by the addressee. 16.6 Attorneys' Fees: Prejudgment Interest. If the services of an attorney are required by a party to secure the performance hereof or otherwise upon the breach or default of the other party to this agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation thereto, the prevailing party shall be entitled to reasonable attorneys' fees, costs and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law. 16.7 Nonassignabilily. This Agreement shall not be assigned by any party without the prior written consent of the other parties. Any assignment contrary to the provisions of this Agreement shall be deemed a default under the Agreement, allowing the nondefaulting parties to exercise all remedies available under law. 16.8 Entire Agreement. This document constitutes the entire agreement between the parties, all oral agreements being merged herein, and supersedes all prior representations and written agreements between the parties concerning the subject matter of this Agreement. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed herein. 16.9 Succession. Subject to the provisions otherwise contained in this Agreement, this Agreement shall inure to the benefit of and be binding on the successors and assigns of the respective parties. 16.10 Captions. All paragraph captions are for reference only and shall not be considered in construing this Agreement. 75 16.11 Advice of Legal Counsel. Each party to this Agreement has consulted with, or had the opportunity to consult with, legal counsel concerning all paragraphs of this Agreement, Each party has read this Agreement, and has been fully advised by legal counsel with respect to the rights and obligations under the Agreement, or has had the opportunity to obtain such advice. Each party is fully aware of the intent and legal effect of the Agreement, and has not been influenced to any extent whatsoever by any representation or consideration other than as stated herein. After consultation with and advice from, or the opportunity for consultation with and advice from, legal counsel, each and every party voluntarily enters into this Agreement. 16.12 Banking Regulatory Agencies. The obligations and rights of the parties hereunder are expressly conditioned upon the approval or non-disapproval of (1) this Agreement. and/or (ii) Consultant, in the event such approvals are required, by those banking regulatory agencies which have jurisdiction over FRSB. Feather River State Bank By: (Signature) L.D. Hartwig ------------------------ Its: President & CEO ------------------------ Address: P.O. Box 929002 Consultant: (Signature) Annette Bertolini Address: 9625 Schroeder Rd. Live Oak, CA 95953 76 EX-10.29 9 a2030130zex-10_29.txt EXHIBIT 10.29 Tri Commercial STANDARD OFFICE LEASE - FULL SERVICE THIS LEASE is made and entered into this 26th day of July, 2000, by and between Eureka Corporate Plaza., Ltd., L.P (hereinafter "Lessor") and Feather River State Bank, a California corporation (hereinafter "Lessee"). For and in consideration of the rental and of the covenants and agreements hereinafter set forth to be kept and performed by the Lessee, Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the Premises herein described for the term, at the rental and subject to and upon all of the terms, covenants and agreements hereinafter set forth. 1. PREMISES 1.1 Description. Lessor hereby leases to Lessee and Lessee hereby rents from Lessor those certain Premises (hereinafter "Premises") crosshatched on Exhibit A containing approximately 3,816 rentable square feet on the first floor of that certain office building (hereinafter "Building") located in the City of Roseville, County of Placer, California, commonly known as, 1552 Eureka Rd., and more particularly described as Suite 101. The above square footage contains a twelve percent (12%) load factor. 1.2 Work of Improvement. The obligations of' Lessor and Lessee to perform the work and supply the necessary materials and labor to prepare the Premises for occupancy are set forth in detail in Exhibit "D". Lessor and Lessee shall expend all funds and do all acts required of them in Exhibit "D" and shall have the work performed promptly and diligently in a first class workmanlike manner. Upon mutual approval of a space plan for the Premises, said space plan shall be attached hereto as Exhibit "B". 2. TERM 2.1 Term. The term of this Lease shall be for sixty two (62) months commencing October 1, 2000 and ending on November 30, 2005 unless sooner terminated pursuant to this Lease. 2.2 Delay in Commencement. Lessee agrees that in the event of the inability of Lessor for any reason to deliver possession of the Premises to Lessee on the commencement date set forth in Section 2.1, Lessor shall not be liable for any damage thereby nor shall such inability affect the validity of this Lease or the obligations of Lessee hereunder, but in such case Lessee shall not be obligated to pay rent or other monetary sums until possession of the Premises is tendered to Lessee. In the event of a delay in commencement, the lease expiration shall be adjusted to reflect a five (5) year term from the date possession of the lease space is tendered to Lessee. In the event Lessor shall not have delivered possession of the Premises within three (3) months from the scheduled commencement date, then Lessee may terminate this Lease and upon Lessor's return of any monies previously deposited by Lessee, the parties shall have no further rights or liabilities toward each other. 2.3 Acknowledgement of Commencement Date. In the event the commencement date of the term of the Lease is other than as provided in Section 2.1, then Lessor shall provide Lessee with written notice establishing the date of Tender of Possession as defined below. Tender of Possession, or actual taking of possession by Lessee, whichever first occurs, shall be conclusive as the establishment of the Commencement Date for Section 2.1. 77 "Tender of Possession"-defined. See Exhibit "D". 2.4 Early Possession. In the event that Lessor shall permit Lessee to occupy the Premises prior to the commencement date of the term, such occupancy shall be subject to all the provisions of this Lease. Said early possession shall not advance the termination date hereinabove provided. 3. BASE RENT. Lessee shall pay to Lessor as base rent for the Premises in advance on the first day of each calendar month of the term of this Lease without deduction, offset, prior notice or demand, in lawful money of the United States, the sum of (See Addendum Paragraph 20) (subject to additional rental as provided in paragraph 5). If the commencement date is not the first day of a month, or if the Lease termination date is not the last day of a month, a prorated monthly installment shall be paid at the then current rate for the fractional month during which the Lease commences and/or terminates. Concurrently with Lessee's execution of this Lease, Lessee shall pay to Lessor the sum of' Six Thousand Two Hundred Ninety Six and 40/100ths Dollars ($6,296.40) as rent for the third month of the Lease term. Lessee acknowledges that the above Base Rent amount is based on the square footage of the lease space and is therefore subject to adjustment based on a final, mutually approved space plan. 4. SECURITY DEPOSIT. Concurrently with Lessee's execution of this Lease, Lessee shall deposit with Lessor the sum of Six Thousand Two Hundred Ninety Six and 40/100ths Dollars ($6,296.40). Said sum shall be held by Lessor as a Security Deposit for the faithful performance by Lessee of all of the terms, covenants, and conditions of this Lease to be kept and performed by Lessee during the term hereof. If Lessee defaults with respect to any provision of this Lease, including but not limited to the provisions relating to the payment of rent and any of the monetary sums due herewith, Lessor may (but shall not be required to) use, apply or retain all or any part of this Security Deposit for the payment of any other amount which Lessor may spend by reason of Lessee's default or to compensate Lessor for any other loss or damage which Lessor may suffer by reason of Lessee's default. If any portion of said Deposit is so used or applied, Lessee shall, within ten (10) days after written demand therefor, deposit cash with Lessor in an amount sufficient to restore the Security Deposit to its original amount; Lessee's failure to do so shall be material breach of this Lease. Lessor shall not be required to keep this Security Deposit separate from its general funds, and Lessee shall not be entitled to interest on such deposit. If Lessee shall fully and faithfully perform every provision of this Lease to be performed by it, the Security Deposit or any balance thereof' shall be returned to Lessee (or, at Lessor's option, to the last assignee of Lessee's interests hereunder) at the expiration of the Lease term and after Lessee has vacated the Premises. In the event of termination of Lessor's interest in this lease, Lessor shall transfer said Deposit to Lessor's successor in interest whereupon Lessee agrees to release Lessor from liability for the return of' such Deposit or the accounting therefor. Lessee agrees that the amount of the Security Deposit is based on the square footage of the lease space and is therefore subject to adjustment based on a final, mutually approved space plan. 5. TAX AND BUILDING OPERATING COST INCREASES 5.1 Definitions. For purposes of this Section, the following terms are herein defined: 78 (a) Base Year: 2000. (b) Project: Eureka Corporate Plaza, Phase 1, Phase II and Phase III, consisting of approximately 90,350 gross square feet of building area along with landscaping and parking areas ("Common Area"). Said square footage is subject to change as additional phases of the project are completed. (c) Building Operating Costs: All reasonable costs and expenses of ownership, operation maintenance, of the Building (excluding depreciation on the Building, all amounts paid on loans of Lessor and expenses capitalized for federal income tax purposes) including by way of illustration but not limited to; real and personal property taxes and assessments, and any tax in addition to or in lieu thereof, other than taxes covered by Section 5.4, whether assessed against Lessor or Lessee or collected by Lessor or both; repairs, replacements and general maintenance of and for the Building and public common areas and facilities of and comprising the Building, the roof and roof membrane, windows, elevators, restrooms, lobbies, mezzanines, balconies, mechanical rooms, building exteriors, alarm systems, pest extermination, landscaped areas, parking and service areas, driveways, sidewalks, loading areas, fire sprinklers systems, sanitary and storm sewer lines, utility services, heating/ventilation/air conditioning systems, electrical, mechanical or other systems, Building telephone equipment, and wiring servicing, plumbing, lighting, and any other items or areas which affect the operation or appearance of the Building, (but excluding persons performing services not uniformly available or performed for substantially all Building Tenants), and rental expense or a reasonable allowance for depreciation of personal property used in the maintenance, operation and repair of the Building. In addition, the Building Operating Costs shall include the Building's proportionate share of the Owner's Association dues connected with day-to-day operating, maintenance and repair of the common area of the Project, its equipment the adjacent walks, malls and landscaped areas, including by way of illustration but not limited to scavenger, gardening, security, striping, sealing, asphalt repair or replacement, and the cost of compensation (including employment taxes and fringe benefits) of all persons who perform regular and recurring duties connected with the above duties. The Building's proportionate share of the Owner's Association dues shall be computed on the basis of the ratio between the Gross Building square footage and the total Project square footage, as may be adjusted from time to time as other phases of the project are completed. (d) Gross-Up. If the rentable area of the Building is less than ninety-five percent (95%) occupied during any calendar year of the term as determined by Lessor, Lessor shall make an appropriate adjustment to the variable components of Building Operating Costs (e.g., utilities, janitorial services and other component expenses that are affected by variations in occupancy levels) for such year so that Tenant pays an equitable portion of the increases in all variable items of Building Operating Costs, as reasonably determined by Lessor; provided, however, that in no event shall Lessor be entitled to collect in excess of one hundred percent (100%) of the total Building Operating Cost increases from all of the tenants in the Building. (e) Net Rentable Area: The net rentable area is computed by measuring to the window glass of outer building walls, to the middle of' the Premises side of' public corridors and/or other permanent partitions and to the center of partitions which separate the adjoining rentable areas with no deduction for columns and projections necessary to the Building structure. On multi-tenant floors, common corridors and toilets, air conditioning rooms, fan rooms, janitorial closets, electrical and telephone closets and any other areas within and 79 exclusively serving that floor are considered common area and for purposes of this Section shall be allocated prorata to the Tenants on the floor. 5.2 Lessee's Share. In the event the Building Operating Costs incurred by Lessor during any calendar year following the Base Year shall exceed Building Operating Costs incurred by Lessor during the Base Year, Lessee shall pay to Lessor an amount equal to twenty-five and 61/100ths percent (25.61%) of such increase, which share is computed on the basis of the ratio between Net Rentable Area in the Premises and Net Rentable Area in the Building. Lessee acknowledges that Lessee's proportionate share is based on the square footage of the lease space and is therefore subject to adjustment based on a final, mutually approved space plan. 5.3 Payment. Within ninety (90) days after the end of each calendar year following the Base Year, Lessor shall furnish Lessee a written statement showing in reasonable detail Lessor's Building Operating Costs for the preceding calendar year and the Base Year, and showing the amount, it' any, of any increase or decrease in the sums due from Lessee taking into account prior increases paid by Lessee (if any). However, the failure of Lessor to supply such statement within said ninety (90) day period shall not constitute a waiver of Lessor's right to collect for any current or past due Building Operating Cost overages during the term of this Lease. Lessor and Lessee intend that the obligations of the preceding sentence shall survive the expiration or earlier termination of this Lease. Concurrent with the monthly rent payment next due following Lessee's receipt of such statement, Lessee shall pay to Lessor (in the case of an increase), or Lessor shall credit against the next rent due from Lessee (in the case of a decrease), all amount equal to the sum of (1) the difference between Building Operating Costs for the preceding calendar year and the Base Year less increases paid by Lessee (if any); and (2) one-twelfth (1/12th) of said increases for the current calendar year multiplied by the number of rent payments (including the current one) then elapsed in such calendar year. Thereafter the one twelfth (1/12th) shall be paid monthly with the rent until the adjustment the following year pursuant hereto. In no event shall the adjustment entitled Lessee to receive the benefit of a reduction in Building Operating Costs below the level of the initial Base Year during the term hereof. 5.4 New Taxes. In addition to rent and other charges to be paid by Lessee hereunder, Lessee shall reimburse to Lessor, within thirty (30) days of receipt of a demand therefor, any and all taxes payable by Lessor (other than net income taxes) whether or not now customary or within the contemplation of the parties hereto; (a) upon, allocable to, or measured by the area of the Premises or on the rent payable hereunder, including without limitation any gross income tax or excise tax levied by the State, any political subdivision thereof, City or Federal Government with respect to the receipt of such rent; or (b) upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Lessee of the Premises or any portion thereof; or (c) upon or measured by the value of Lessee's personal property, equipment or fixtures located in the Premises; or (d) upon this transaction or any document to which Lessee is a party creating or transferring an interest or an estate in the Premises. Lessee agrees to pay, before delinquency, any and all taxes levied or assessed and which become payable during the term hereof upon Lessee's equipment, furniture, fixtures and other personal property located in the Premises. For the purpose of determining said amount, figures supplied by the County Assessor as to the amount so assessed shall be conclusive. Lessee shall comply with the provisions of any law, ordinance or rule of the taxing authorities which require Lessee to file a report of Lessee's property located in the Premises. 80 6. USE 6.1 Use. The Premises shall be used and occupied by Lessee for bank retail and loan office purpose and for no other purpose without the prior written consent of Lessor, 6.2 Suitability. Lessee acknowledges that neither Lessor nor any agent of Lessor has made any representation or warranty with respect to the Premises or the Building or with respect to the suitability of either for the conduct of Lessee's business, nor has Lessor agreed to undertake any modification, alteration or improvement to the Premises except as provided in this Lease. 6.3 Uses Prohibited. (a) Lessee shall not do or permit anything to be done in or about the Premises nor bring or keep anything therein which will in any way increase the existing rate or affect any fire or other insurance upon the Building or any of its contents (unless Lessee shall pay any increased premium as a result of such use or acts), or cause a cancellation of any insurance policy covering said Building or any part thereof or any of its contents, nor shall Lessee sell or permit to be kept, used or sold in or about said Premises any articles which may be prohibited by a standard form policy of fire insurance. (b) Lessee shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other Tenants or occupants of the Building or injure or annoy them or use or allow the Premises to be used for any unlawful or objectionable purpose, nor shall Lessee cause, maintain or permit any nuisance in or about the Premises. Lessee shall not commit or suffer to be committed any waste in or upon the Premises. (c) Lessee shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation or requirement of duly constituted public authorities now in force or which may hereafter be enacted or promulgated. Lessee shall at its sole cost and expense promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force and with the requirements of any board of fire underwriters or other similar body now or hereafter constituted relating to or affecting the condition, use or occupancy of the Premises, excluding structural changes not relating to or affecting the condition, use or occupancy of the premises, or not related or afforded by Lessee's improvements or acts. The judgment of any court of competent jurisdiction or the admission of Lessee in any action against Lessee, whether Lessor be a party thereto or not, that Lessee his violated any law, statute, or ordinance or governmental rule, regulation or requirement, shall be conclusive of the fact as between Lessor and Lessee. 7. SERVICE AND UTILITIES 7.1 Lessor's Obligations. Lessor agrees to furnish to the Premises twenty four (24) hours a day (Monday through Friday) and 9:00 a.m. to 1:00 p.m. (Saturday), and subject to the Rules and Regulations of the Building (which are attached hereto as Exhibit "C") water, gas and electricity suitable for the intended use of the Premises, heat and air conditioning required in Lessor's judgment for the comfortable use and occupancy of the Premises, scavenger, janitorial and window washing service and elevator service, and security customary in similar buildings in the competing geographical areas. Lessor shall also maintain and keep lighted the common stairs, entries and toilet rooms in the Building. Any extra HVAC beyond these hours to be at Lessee's cost. 81 7.2 Lessee's Obligation. Lessee shall pay for, prior to delinquency, all telephone and all other materials and services, not expressly required to be paid by Lessor, which may be furnished to or used in, on or about the Premises during the term of this Lease. 7.3 Lessee's Additional Requirements. (a) Lessee will not, without the written consent of Lessor, use any apparatus or device in the Premises, including but without limitation thereto, electronic data processing machines, punch card machines and machines using current in excess of I 10 volts, which will in any way increase the amount of electricity or water usually furnished or supplied for use of the Premises as general office space; nor connect with electric current, except through existing electrical outlets in the Premises, or water pipes, any apparatus or device, for the purposes of using electric current or water. (b) If Lessee shall require water or electric current in excess of that usually furnished or supplied for use of the Premises as general office space, Lessee shall first procure the consent of Lessor for the use thereof, which consent Lessor may refuse and Lessor may cause a water meter or electric current meter to be installed in the Premises, so as to measure he amount of water and electric current consumed for any such other use. The cost of such meters and of installation, maintenance and repair thereof shall be paid for by Lessee and Lessee agrees to pay Lessor promptly upon demand by Lessor for all such water and electric current consumed as shown by said meters, at the rates charged for such services by the City in which the Building is located or the local public utility, as the case may be, furnishing the same, plus any additional expense incurred in keeping account of the water and electric current so consumed. (c) Wherever heat generating machines or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Lessor reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation, operation, and maintenance thereof, shall be paid by Lessee to Lessor. 7.4 Non-Liability. Lessor shall not be liable for, and Lessee shall not be entitled to, any abatement or reduction of rent by reason or Lessor's failure to furnish any of the foregoing when such failure is caused by accidents, breakage, repairs, strikes, lockouts or other labor disturbances or labor disputes of any character, or by any other cause similar or dissimilar, beyond the reasonable control of Lessor. Lessor shall not be liable under any circumstances, except for instances of Lessor's negligence, for loss of or injury to property, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing. 8. MAINTENANCE AND REPAIRS; ALTERATIONS AND ADDITIONS 8.1 Maintenance and Repairs. (a) Lessor's Obligations. Lessor shall maintain in good order, condition and repair the Building and all other portions of the Premises not the obligation of Lessee or any other tenant in the Building. (b) Lessee's Obligations. (i) Lessee at Lessee's sole cost and expense, except for services furnished by Lessor pursuant to Section 7 hereof, shall maintain the Premises in good order, condition and repair including the interior surfaces of the ceilings, walls and floors, all doors, interior windows, exterior windows at or below street level, all plumbing pipes, electrical wiring, 82 switches, fixtures and special items in excess of building standard furnishings, and equipment installed by or at the expense of Lessee. (ii) Upon the expiration or earlier termination of this Lease, Lessee shall surrender the Premises in the same condition as received, ordinary wear and tear and damage by fire, earthquake, act of God or the elements alone excepted, and shall promptly remove or cause to be removed at Lessee's expense from the Premises and the Building any signs, notices and displays placed by Lessee. (iii) Lessee agrees to repair any damage to the Premises or the Building caused by or in connection with the removal of any articles of personal property, business or trade fixtures, machinery, equipment, cabinetwork, furniture, movable partition or permanent improvements or additions, including without limitation thereto, repairing the floor and patching and painting the walls where required by Lessor to Lessor's reasonable satisfaction, all at Lessee's sole cost and expense. Lessee shall indemnify the Lessor against any loss or liability resulting from decay by Lessee in so surrendering the Premises, including without limitation any claims made by any succeeding tenant founded on such delay. (iv) In the event Lessee fails to maintain the Premises in good order, condition and repair, Lessor shall give Lessee notice to do such acts as are reasonably required to so maintain the Premises. In the event Lessee fails to promptly commence such work and diligently prosecute it to completion, then Lessor shall have the right to do such acts and expend such funds at the expense of Lessee as are reasonably required to perform such work. Any amount so expended by Lessor shall be paid by Lessee promptly after demand with interest at ten percent (10%) per annum from the date of such work. Lessor shall have no liability to Lessee for any damage, inconvenience or interference with the use of the Premises by Lessee as a result of performing any such work. (c) Compliance with Law. Lessor and Lessee shall each do all acts required to comply with all applicable laws, ordinances, regulations and rules of any public authority relating to their respective maintenance obligations as set forth herein. 8.2 Alterations and Additions. (a) Lessee shall make no alterations, additions or improvements to the Premises or any part thereof without obtaining the prior written consent of Lessor. (b) Lessor may impose as a condition to the aforesaid consent such requirements as Lessor may deem necessary in its sole discretion, including without limitation thereto, the manner in which the work is done, a right of approval of the contractor by whom the work is to be performed, the times during which is to be accomplished, and the requirement that upon written request of Lessor prior to the expiration or earlier termination of the Lease, Lessee will remove any and all permanent improvements or additions to the Premises installed at Lessee's expense and all movable partitions, counters, personal property, equipment, fixtures and furniture. (c) All such alterations, additions or improvements shall at the expiration or earlier termination of the Lease become the property of Lessor and remain upon and surrendered with the Premises, unless specified pursuant to Section 8.2(b) above. 83 (d) All articles of personal property and all business and trade fixtures, machinery and equipment, cabinetwork, furniture and movable partitions owned by Lessee or installed by Lessee at its expense in the Premises shall be and remain the property of Lessee and may be removed by Lessee at any time during the Lease term when Lessee is not in default hereunder. 9. ENTRY BY LESSOR. Lessor reserves and shall at any and all times have the right to enter the Premises to inspect the same, to supply janitor service and any other service to be provided by Lessor to Lessee hereunder, to submit said Premises to prospective purchasers or Lessees, to post notices of non-responsibility and "for lease" signs, and to alter, improve or repair the Premises and any portion of the Building without abatement of rent, and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, always providing the entrance to the Premises shall not be blocked thereby, and further providing that the business of Lessee shall not be interfered with unreasonably. Lessee hereby waives any claim for damages for any injury or inconvenience to or interference with Lessee's business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the aforesaid purposes, Lessor shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Lessee's vaults and safes, and Lessor shall have the right to use any and all means which Lessor may deem proper to open said doors in an emergency, in order to obtain entry to the Premises and any entry to the Premises obtained by Lessor by any of said means, or otherwise, shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Lessee from the Premises or any portion thereof. Any entry of Premises by Lessor shall be without liability to Lessee except for any failure to exercise due care for Lessee's property. 10. LIENS. Lessee shall keep the Premises and any building of which the Premises are a part free from any liens arising out of work performed, materials furnished, or obligations incurred by Lessee and shall indemnify, hold harmless and defend Lessor from any liens and encumbrances arising out of any work performed or materials furnished by or at the direction of Lessee. In the event that Lessee shall not, within twenty (20) days following the imposition of any such lien, cause such lien to be released of record by payment or posting of a proper bond, Lessor shall have, in addition to all other remedies provided herein and by law, the right, but no obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All such sums paid by Lessor and all expenses incurred by it in connection therewith including attorney's fees and costs shall be payable to Lessor by Lessee on demand with interest at the rate of ten percent (10%) per annum. Lessor shall have the right at all times to post and keep posted on the Premises any notices permitted or required by law or which Lessor shall deem proper, for the protection of Lessor and the Premises, and any other party having an interest therein, from mechanics' and materialmen's liens, and Lessee shall give to Lessor at least ten (10) business days prior written notice of the expected date of commencement of any work relating to alterations or additions to the Premises. 84 11. INDEMNITY. 11.1 Indemnity. Lessee shall indemnity and hold Lessor harmless from and defend Lessor against any and all claims of liability for any injury or damage to any person or property whatsoever; (1) occurring in, on or about the Premises or any part thereof; and (2) occurring in, on or about any facilities (including, without prejudice to the generality of the term "facilities," elevators, stairways, passageways, hallways, and parking areas), the use of which Lessee may have in conjunction with other tenants of the Building, when such injury or damage is caused in part or in whole by the act, neglect, fault or omission of any duty with respect to the same by Lessee, its agents, contractors, employees or invitees. Lessee shall further indemnify and hold Lessor harmless from and against any and all claims arising from any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease, or arising from any act or negligence of Lessee, or any of its agents, contractors, employees and from and against all costs, attorney's fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon. In case any action or proceeding be brought against Lessor by reason of any such claim, Lessee, upon notice from Lessor, shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor, provided, however, that Lessee shall not be liable for damage or injury occasioned by the negligence or intentional acts of Lessor and its designated agents or employees unless covered by insurance Lessee is required to provide. Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property or injury to persons in, upon or about the Premises from any cause and Lessee's hereby waives all claims in respect thereof against Lessor, except in instances where such damage or injury is caused by Lessors negligence. Lessor shall indemnify and hold Lessee harmless of all losses due to Lessor's negligence. 11.2 Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage which may be sustained by the person, goods, wares, merchandise or property of Lessee, its employees, invitees or customers, or any other person in or about the Premises caused by or resulting from fire, steam, electricity, gas, water or rain, which may leak or flow from or into any part of the Premises, or from the breakage, leakage, obstruction or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures of the same, whether the damage or injury results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, or from other sources. Lessor shall not be liable for any damages arising from any act or neglect of any other tenant of the Building. 12. INSURANCE 12.1 Coverage. Lessee shall, at all times during the term of this Lease, and at its own cost and expense procure and continue in force the following insurance coverage: (a) Bodily Injury and Property Damage Liability insurance with a combined single limit for bodily injury and property damage of not less than $1,000,000. (b) Fire and Extended Coverage Insurance, including vandalism and malicious mischief coverage, in an amount equal to the full replacement value of all fixtures, furniture and improvements. 12.2 Insurance Policies. The aforementioned minimum limits of policies shall in no event limit the liability of Lessee hereunder. The aforesaid insurance shall name Lessor as an additional insured. Said insurance shall be with companies having a rating of not less 85 than AA in "Best's Insurance Guide." Lessee shall furnish from the insurance companies or cause the insurance companies to furnish certificates of coverage. No such policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after thirty (30) days prior written notice to Lessor by the insurer. All such policies shall be written as primary policies, not contributing with and not in excess of the coverage which Lessor may carry. Lessee shall, at least twenty (20) days prior to the expiration of such policies, furnish Lessor with renewals or binders. Lessee agrees that if Lessee does not take out and maintain such insurance, Lessor may (but shall not be required to) procure said insurance on Lessee's behalf and charge Lessee the premiums together with a twenty-five percent (25%) handling charge, payable upon demand. Lessee shall have the right to provide such insurance coverage pursuant to blanket policies obtained by Lessee provided such blanket policies expressly afford coverage to the Premises and to Lessee as required by this Lease. Lessee must provide certificate of insurance prior to initial occupancy of premises or Lessee shall be in default of Lease. 12.3 Waiver of Subrogation. Lessor and Lessee each hereby waive any and all rights of recovery against the other or against the officers, employees, agents and representatives of the other, on account of loss or damage occasioned to such waiving party or its property or the property of others under its control to the extent that such loss or damage is insured against under any fire and extended coverage insurance policy which either may have in force at the time of such loss or damage. Lessee shall, upon obtaining the policies of insurance required under this Lease, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 13. DAMAGE OR DESTRUCTION 13.1 Partial Damage - Insured. In the event the Premises or the Building are damaged by any casualty which is covered under fire and extended coverage insurance carried by Lessor, then Lessor shall restore such damage provided insurance proceeds are available to pay eighty percent (80%) or more of the cost of restoration and provided such restoration can be completed within sixty (60) days after the commencement of the work in the opinion of a registered architect or engineer appointed by Lessor. In such event this Lease shall continue in full force and effect, except that Lessee shall be entitled to proportionate reduction of rent while such restoration takes place, such proportionate reduction to be based upon the extent to which the restoration efforts interfere with Lessee's business in the Premises. 13.2 Partial Damage - Uninsured. In the event the Premises or the Building are damaged by a risk not covered by Lessor's insurance or the proceeds of available insurance are less than eighty percent (80%) of the cost of restoration, or if the restoration cannot be completed within sixty (60) days after the commencement of work in the opinion of the registered architect or engineer appointed by Lessor, then Lessor shall have the option either to (1) repair or restore such damage, this Lease continuing in full force and effect, but the rent to be proportionately abated as hereinabove provided, or (2) give notice to Lessee at any time within thirty (30) days after such damage terminating this Lease as of a date to be specified in such notice, which date shall be not less than thirty (30) nor more than sixty (60) days after giving such notice. In the event of the giving of such notice, this Lease shall expire and all interest of Lessee in the Premises shall terminate on such date so specified in such notice and the rent, reduced by any proportionate reduction based upon the extent, if any, to which said damage interfered with the use and occupancy of Lessee, shall be paid to the date of such termination; Lessor agrees to 86 refund to the Lessee any rent theretofore paid in advance for any period of time subsequent to such date. 13.3 Total Destruction. In the event the Premises are totally destroyed or the Premises cannot be restored as required herein under applicable laws and regulations, not withstanding the availability of insurance proceeds, this Lease shall be terminated effective the date of the damage. 13.4 Damage Near End of the Term. Notwithstanding anything to the contrary contained in Section 13, Lessor shall not have any obligation whatsoever to repair, reconstruct or restore the Premises when the damage resulting from any causality covered under this Section 13 occurs during the last twelve (12) months of the terms of this Lease or, any extension thereof. 13.5 Lessor's Obligations. The Lessor shall not be required to repair any injury or damage by fire or other cause, or to make any restoration or replacement of any paneling, decorations, partitions, railings, floor covering, office fixtures or any other improvements or property installed in the Premises by Lessee or at the direct or indirect expense of Lessee. Lessee shall be required to restore or replace same in the event of damage. Except for abatement of rent, if any, Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair or restoration. 14. CONDEMNATION. If all or any part of the Premises shall be taken or appropriated for public or quasi-public use by right of eminent domain with or without litigation or transferred by agreement in connection with such public or quasi-public use, either party hereto shall have the right at its option exercisable within thirty (30) days of receipt of notice of such taking to terminate this Lease as of the date possession is taken by the condemning authority, provided, however, that before Lessee may terminate this Lease by reason of taking or appropriation as provided hereinabove, such taking or appropriation shall be of such an extent and nature as to substantially handicap, impede or impair Lessee's use of the Premises. If any part of the Building other than the Premises shall be so taken or appropriated, Lessor shall have the right at its option to terminate this Lease. No award for any partial or entire taking shall be apportioned, and Lessee hereby assigns to Lessor any award which may be made in such taking or condemnation, together with any and all rights of Lessee now or hereafter arising in or to the same or any part thereof; provided, however, that nothing contained herein shall be deemed to give Lessor any interest in or to require Lessee to assign to Lessor any award made to Lessee for the taking of personal property and fixtures belonging to Lessee and/or for the interruption of or damage to Lessee's business and/or for Lessee's unamortized cost of leasehold improvements. In the event of a partial taking which does not result in a termination of this Lease, rent shall be abated in the proportion which the part of the premises so made unusable bears to the rented area of the Premises immediately prior to the taking. No temporary taking of the Premises and/or of Lessee's rights therein or under this Lease shall terminate this Lease or give Lessee any right to any abatement of rent thereunder; any award made to Lessee by reason of any such temporary taking shall belong entirely to Lessee and Lessor shall not be entitled to share therein. 87 15. ASSIGNMENT AND SUBLETTING 15.1 Lessor's Consent Required. Lessee shall not assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest therein, and shall not sublet the Premises or any part thereof, without the prior written consent of Lessor and any attempt to do so without such consent being first had and obtained shall be wholly void and shall constitute a breach of this Lease. 15.2 Reasonable Consent. If Lessee complies with the following conditions, Lessor shall not unreasonably withhold its consent to the subletting of the Premises or any portion thereof or the assignment of this Lease. Lessee shall submit in writing to Lessor (a) the name and legal composition of the proposed sublessee or assignee; (b) the nature of the business proposed to be carried on in the Premises; (c) the terms and provisions of the proposed sublease; (d) such reasonable financial information as Lessor may request concerning the proposed sublessee or assignee. 15.3 No Release of Lessee. No consent by Lessor to any assignment or subletting by Lessee shall relieve Lessee of any obligation to be performed by Lessee under this Lease, whether occurring before or after such consent, assignment or subletting. The consent by Lessor to any assignment or subletting shall not relieve Lessee from the obligation to obtain Lessor's express written consent to any other assignment or subletting. The acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision of this Lease or to be a consent to any assignment, subletting or other transfer. Consent to one assignment, subletting or other transfer shall not be deemed to constitute consent to any subsequent assignment, subletting or other transfer. 15.4 Attorney's Fees. In the event Lessor shall consent to a sublease or assignment under this Section 15, Lessee shall pay Lessor's reasonable attorney's fees not to exceed $500 incurred in connection with giving such consent. 15.5 Excess Rent. In the event Lessee sublets the entire Premises or any part thereof, Lessee shall deliver to Lessor any "excess rent" (as such term is herein defined) within thirty (30) days of Lessee's receipt thereof. As used herein, "excess rent" shall mean any sums or economic consideration received by Lessee pursuant to such subletting in excess of the amount of the rent payable by Tenant under this Lease applicable to the part or parts of the Premises so sublet. 16. SUBORDINATION 16.1 Subordination. This Lease at Lessor's option shall be subject and subordinate to all ground or underlying leases which now exist or may hereafter be executed affecting the Premises or the land upon which the Premises are situated or both, and to the lien of any mortgages or deeds of trust in any amount or amounts whatsoever now or hereafter placed on or against the land or improvements or either thereof, of which the Premises are a part, or on or against Lessor's interest or estate therein, or on or against any ground or underlying lease without the necessity of the execution and delivery of any further instruments on the part of Lessee to effectuate such subordination. Such subordination is subject to and any agreement executed evidencing such subordination shall reflect that the Lessee's possession of the premises shall not be diminished or interfered with provided Lessee complies with the terms of this agreement and is not in default in the payment of rent. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Lessee, this Lease shall be deemed prior to such 88 mortgage, deed of trust or ground lease, whether this Lease is dated prior or subsequent to the date of said mortgage, deed of trust, or ground lease or the date of the recording thereof. 16.2 Subordination Agreements. Lessee covenants and agrees to execute and deliver upon demand without charge therefore, such further instruments evidencing such subordination of this Lease to such ground or underlying leases and to the lien of any such mortgages or deeds of trust as may be required by Lessor. Lessee hereby appoints Lessor as Lessee's attorney-in-fact, irrevocably, to execute and deliver any such agreements, instruments, releases or other documents. 16.3 Quiet Enjoyment. Lessor covenants and agrees with Lessee that upon Lessee paying rent and other monetary sums due under the Lease, performing its covenants and conditions under the Lease and upon recognizing purchaser as Lessor pursuant hereto, Lessee shall and may peaceably and quietly have, hold and enjoy the premises for the term subject, however, to the terms of the Lease and of any of the aforesaid ground leases, mortgages or deeds of trust described above. 16.4 Attornment. In the event any proceedings are brought for default under ground or any underlying lease or in the event of foreclosure or the exercise of the power of sale under any mortgage or deed of trust made by the Lessor covering the Premises, the Lessee shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as the Lessor under this Lease, provided said purchaser expressly agrees in writing to be bound by the terms of the Lease. 17. DEFAULTS; REMEDIES 17.1 Default. The occurrence of any of the following shall constitute a material default and breach of this Lease by Lessee: (a) Any failure by Lessee to pay the rent or any other monetary sums required to be paid hereunder; (b) The abandonment or vacation of the Premises by Lessee, (c) A failure by Lessee to observe and perform any other provision of this Lease to be observed or performed by Lessee; (d) The making by Lessee of any general assignment or general arrangement for the benefit of creditors; the filing by or against Lessee of a petition to have Lessee adjudged a bankrupt or of a petition for reorganization or arrangement under any law relating to bankruptcy unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days, the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease, where such seizure is not discharged within thirty (30) days. 17.2 Remedies. In the event of any such material default or breach by Lessee, Lessor may, at any time thereafter without limiting Lessor in the exercise of any right or remedy at law or in equity which Lessor may have by reasons of such default or breach: (a) Maintain this Lease in full force and effect and recover the rent and other monetary charges as they become due, without terminating Lessee's right to possession irrespective of whether Lessee shall have abandoned the Premises. In the event Lessor elects not to terminate the Lease, Lessor shall have the right to attempt to re-let the Premises at such rent and upon such conditions and for such a term, and to do all acts necessary to 89 maintain or preserve the Premises as Lessor deems reasonable and necessary without being deemed to have elected to terminate the lease, including removal of all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Lessee. In the event any such re-letting occurs, this Lease shall terminate automatically upon the new Lessee taking possession of the Premises. Notwithstanding that Lessor fails to elect to terminate the Lease initially, Lessor at any time during the term of this Lease, may elect to terminate this Lease by virtue of such previous default of Lessee. (b) Terminate Lessee's right to possession by any lawful means, in which case this Lease shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default, including without limitation thereto, the following: (i) the worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that is could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the rent for the balance of the term after the time of award exceeds the amount of such rental loss that is could be reasonably avoided; plus (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee's failure to perform his obligations under this Lease or which in the ordinary course of events would be likely to result therefrom; plus (v) at Lessor's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable State law. Upon any such re-entry Lessor shall have the right to make any reasonable repairs, alterations or modifications to the Premises, which Lessor in its sole discretion deems reasonable and necessary. As used in (i) above, the "worth at the time of award" is computed by allowing interest at the rate of ten percent (10%) per annum from the date of default. As used in (ii) and (iii) the "worth at the time of award" is computed by discounting such amount at the discount rate of the U.S. Federal Reserve Bank at the time of award plus one percent (1%). The term "rent," as used in this Section 17, shall be deemed to be and to mean the rent to be paid pursuant to Section 3 and all other monetary sums required to be paid by Lessee pursuant to the terms of this Lease. 17.3 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Lessor by the terms of any mortgage or trust deed covering the Premises. Accordingly, it' any installment of rent or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, Lessee shall pay to Lessor a late charge equal to ten percent (10%) of such overdue amount. Failure of Lessee to pay said late fee within five (5) days of its becoming due shall be deemed a breach of this Lease. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. 17.4 Default by Lessor. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, but in no event later than thirty (30) 90 days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligations, provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are required for performance, then Lessor shall not be in default if Lessor commences performance within such thirty-day period and thereafter diligently prosecutes the same to completion. 18. MISCELLANEOUS 18.1 Estoppel Certificate. (a) Lessee shall at any time upon not less than five (5) day's prior written notice from Lessor execute, acknowledge and deliver to Lessor a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. (b) Lessee's failure to deliver such statement within such time shall be conclusive upon Lessee (i) that this Lease is in full force and effect, without modification except as may be represented by Lessor, (ii) that there are no uncured defaults in Lessor's performance, and (iii) that not more than one month's rent has been paid in advance. (c) If Lessor desires to finance or refinance the Building, or any part thereof, Lessee hereby agrees to deliver to any lender designated by Lessor such financial statements of Lessee as may be reasonably required by such lender. Such statements shall include the past three years' financial statements of Lessee. All such financial statements shall be received by Lessor in confidence and shall be used only for the purposes herein set forth. 18.2 Transfer of Lessor's Interest. In the event of a sale or conveyance by Lessor of Lessor's interest in the Premises or the Building other than a transfer for security purposes only, Lessor shall be relieved from and after the date specified in any such notice of transfer of all obligations and liabilities accruing thereafter on the part of Lessor, provided that any funds in the hands of Lessor at the time of transfer in which Lessee has an interest, shall be delivered to the successor of Lessor. This Lease shall not be affected by any such sale and Lessee agrees to attorn to the purchaser or assignee provided all Lessor's obligations hereunder are assumed in writing by the transferee. 18.3 Captions; Attachments; Defined Terms. (a) The captions of the paragraphs of this Lease are for convenience only and shall not be deemed to be relevant in resolving any question of interpretation or construction of any section of this Lease. (b) Exhibits attached hereto, and addendums and schedules initiated by the parties, are deemed by attachment to constitute part of this Lease and are incorporated herein. (c) The words "Lessor" and "Lessee," as used herein, shall include the plural as well as the singular. Words used in neuter gender include the masculine and feminine and words in the masculine or feminine gender include the neuter. If there be more than one Lessor or Lessee, the obligations hereunder imposed upon Lessor or Lessee shall be joint and several; 91 as to a Lessee which consists of husband and wife, the obligations shall extend individually to their sole and separate property as well as community property. The term "Lessor" shall mean only the owner or owners at the time in question of the fee title or a tenant's interest in a ground lease of the land underlying the Building. The obligations contained in this Lease to be performed by Lessor shall be binding on Lessor's successor's and assigns only during their respective periods of ownership. 18.4 Entire Agreement. This instrument along with any exhibits and attachments hereto constitutes the entire agreement between Lessor and Lessee relative to the Premises and this Agreement and the exhibits and attachments may be altered, amended or revoked only by an instrument in writing signed by both Lessor and Lessee. Lessor and Lessee agree hereby that all prior or contemporaneous oral agreements between and among themselves and their agents or representatives relative to the leasing of the Premises are written in or revoked by this Agreement. 18.5 Severability. If any term or provision of this Lease shall, to any extent, be determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforceable to the fullest extent permitted by law. 18.6 Costs of Suit. (a) If Lessee or Lessor shall bring any action for any relief against the other, declaratory or otherwise, arising out of this Lease, including any suit by Lessor for the recovery of rent or possession of the Premises, the losing party shall pay the successful party a reasonable sum for attorney's fees which shall be deemed to have accrued on the commencement of such action and shall be paid whether or not such action is prosecuted to judgment. (b) Should Lessor, without fault on Lessor's part, be made a party to any litigation instituted by Lessee or by any third party against Lessee, or by or against any person holding under or using the Premises by license of Lessee, or for the foreclosure of any lien for labor or material furnished to or for Lessee or any such other person or otherwise arising out of or resulting from any act or transaction of Lessee or of any such other person, Lessee covenants to save and hold Lessor harmless from any judgment rendered against Lessor or the Premises, or any part thereof, and all costs and expenses, including reasonable attorneys' fees, incurred by Lessor in or in connection with such litigation. (c) If Lessee or Lessor or their successors as assigns shall bring an action against Broker or make Broker a party to litigation arising out of this Lease, Broker shall be entitled to recover reasonable attorney's fees and court costs from either Lessor or Lessee if Broker is adjudged by a court of competent jurisdiction to be without fault in such matter. 18.7 Time; Joint and Several Liability. Time is of the essence of this Lease and each and every provision hereof, except as to the conditions relating to the delivery of possession of the Premises to Lessee. All the terms, covenants and conditions contained in this Lease to be performed by either party, if such party shall consist of more than one person or organization, shall be deemed to be joint and several, and all rights and remedies of the parties shall be cumulative and nonexclusive of any other remedy at law or in equity. 18.8 Binding Effect; Choice of Law. The parties hereto agree that all provisions hereof are to be construed as both covenants and conditions as though the words importing such covenants and conditions were used in each separate paragraph hereof. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to Section 18.2, 92 all of the provisions hereof shall bind and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. This lease shall be governed by the laws of the State of California. 18.9 Waiver. No covenant, term or condition or the breach thereof shall be deemed waived, except by written consent of the party against whom the waiver is claimed, and any waiver or the breach of any covenant, term or condition shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other covenant, term or condition. Acceptance by Lessor of any performance by Lessee after the time the same shall have become due shall not constitute a waiver by Lessor of the breach or default of any covenant, term or condition unless otherwise expressly agreed to by Lessor in writing. 18.10 Surrender of Premises. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of the Lessor, terminate all or any existing subleases or subtenancies, or may, at the option of Lessor, operate as an assignment to it of any or all such subleases or subtenancies. 18.11 Holding Over. If Lessee remains in possession of all or any part of the Premises after the expiration of the term hereof, with or without the express or implied consent of Lessor, such tenancy shall be from month to month only, and not a renewal hereof or an extension for any further term, and in such case, rent and other monetary still due hereunder shall be payable in the amount of 150% of the then current rent being paid and at the time specified in this Lease and such month to month tenancy shall be subject to every other term, covenant and agreement contained herein. 18.12 Signs. (a) Lessee shall not place or permit to be placed in or upon the Premises, where visible from outside the Premises, or outside the Premises or any part of the Building any signs, notices, drapes, shutters, blinds or displays of any type without the prior written consent of Lessor. (b) Lessor reserves the right in Lessor's sole discretion to place and locate on the roof, exterior of the Building, and in any area of the Building not leased to Lessee such signs, notices, displays and similar items as Lessor deems appropriate in the proper operation of the Building. 18.13 Reasonable Consent. Except as limited elsewhere in this Lease, wherever in this Lease Lessor or Lessee is required to give its consent or approval to any action on the part of the other, such consent or approval shall not be unreasonably withheld. In the event of failure to give any such consent, the other party shall be entitled to specific performance at law and shall have such other remedies as are reserved to it under this Lease, but in no event shall Lessor or Lessee be responsible in monetary damages for failure to give consent unless said consent is withheld maliciously or in bad faith. 18.14 Interest on Past Due Obligations. Except as expressly provided, any amount due to Lessor not paid when due shall bear interest at eighteen percent (18%) per annum from the due date. Payment of such interest shall not excuse or cure any default by Lessee under this Lease. 18.15 Rules and Regulations; Parking. Lessee shall have the right to park in the Project's parking facilities in common with other tenants of the Project upon terms and conditions as may from time to time be established by Lessor or the Project's Ownership Association. Parking for the Project is available at no cost and is on a nonexclusive, first-come, first served basis. The Project provides parking at the ratio of four spaces per thousand usable square feet of building area. Lessee agrees not to overburden the parking facilities and 93 agrees to cooperate with Lessor and other Lessees in the use of the parking facilities. The term "overburden" shall mean any parking facility use in excess of the ratio provided above. In the event Lessee consistently overburdens the parking facilities, and is notified of such by Lessor, and Lessee does not comply with measures to alleviate said overburdening, Lessee shall be deemed in default of this Lease and shall be subject to any Lessor remedies provided for in this Lease. 18.16 Notices. All Notices or demands of any kind required or desired to be given by Lessor or Lessee hereunder shall be in writing and shall be deemed delivered forty-eight (48) hours after depositing the notice or demand in the United States mail, certified or registered, postage prepaid, addressed to the Lessor or Lessee respectively at the addresses set forth after their signatures at the end of this Lease. 18.17 Corporate Authority. If Lessee is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with the duly adopted resolution of the Board of Directors of said corporation or in accordance with the By-laws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms. If Lessee is a corporation Lessee shall, within thirty (30) days after execution of this Lease, deliver to Lessor a certified copy of a resolution of the Board of Directors of said corporation authorizing or ratifying the execution of this Lease. 18.18 Recordation. Neither Lessor nor Lessee shall record this Lease or a short form memorandum hereof without the prior written consent of the other party. 18.19 Inability to Perform. This Lease and the obligations of the Lessee hereunder shall not be affected or impaired because the Lessor is unable to fulfill any of its obligations hereunder or is delayed in doing so, if such inability or delay is caused by reason of strike, labor troubles, acts of God, or any other cause beyond the reasonable control of the Lessor. 18.20 Americans with Disabilities Act. Any other provision of this Lease notwithstanding, the parties hereby agree that the demised premises may be subject to the terms and conditions of the Americans with Disabilities Act of 1990 (hereinafter the "ADA"). The parties further agree and acknowledge that it shall be the sole responsibility of the Lessee to comply with any and all provisions of the ADA, as such compliance may be required to operate the demised premises. The Lessee further agrees to indemnify and hold the Lessor harmless against any claims which may arise out of Lessee's failure to comply with the ADA. Such indemnification shall include, but not necessarily be limited to reasonable attorney's fees, court costs and judgments as a result of said claims. 19. Additional Paragraphs 20 through 24 are attached hereto and made a part of the Lease. In Witness Whereof, Lessor and Lessee have executed this Lease the date and year first above written. LESSOR: LESSEE: Eureka Corporate Plaza Ltd., P.P. Feather River State 1613 Eureka Road, Suite 100 1227 Bridge Street, Suite C Roseville, CA 95661 Yuba City, CA 95992 By: Rodney A. Mitchell, General Partner By: Larry Hartwig Dated: 7/31/00 Dated: 7/28/00 94 ADDENDUM TO THAT CERTAIN LEASE DATED JULY 26,2000 BY AND BETWEEN EUREKA CORPORATE PLAZA, LTD., LP., "LESSOR" AND FEATHER RIVER STATE BANK, A CALIFORNIA CORPORATION, "LESSEE" 20. RENT SCHEDULE.
Months: Rate/SF: Base Monthly Rent on a Fully Serviced Basis: 01-02 $0.00 $0.00 03-14 $1.65 Six Thousand Two Hundred Ninety Six and 40/100ths Dollars ($6,296 40) 15-26 $1.65 Six Thousand Two Hundred Ninety Six and 40/100ths Dollars ($6,296.40). 27-38 $1.75 Six Thousand Six Hundred Seventy Eight and no/ 100ths Dollars ($6,678.00). 39-50 $1.75 Six Thousand Six Hundred Seventy Eight and no/ 100ths Dollars ($6,678.00). 51-62 $1.85 Seven Thousand Fifty Nine and 60/100ths Dollars ($7,059.60).
Lessee acknowledges that the above Base Rent amount is based on the square footage of the lease space and is therefore subject to adjustment based on a final, mutually approved space plan. 21. OPTION TO RENEW: Lessor hereby grants to Lessee the option to renew this Lease for an additional term of five (5) years upon the same terms and conditions as herein contained, except as modified by this paragraph provided that Lessee not be in material default under this lease at the time the option is exercised. This option must be exercised by written notice to Lessor no later than ninety (90) days prior to the expiration of the existing lease. The total rent for the Premises in the event this lease is so extended shall be negotiated by the parties at the then current Fair Market Value, provided however, that the negotiated rent shall in no event be less than the then current rent being paid by Lessee. In the event that the parties hereto are not able to mutually agree upon a rental figure within ten (10) days after Lessee notifies Lessor of its election to extend the terms of this Lease, then Lessor and Lessee shall individually appoint in writing one real estate broker each with at least five (5) years experience in the Commercial Real Estate market. The two brokers so appointed shall select and appoint a third similarly qualified broker. The brokers shall, within (15) days of appointment, submit their opinions of Fair Market Value. Fair Market Value shall be the average of the two appraisal figures, which are the closest together. Each of the parties hereto shall pay for the services of its respective appointee and shall equally split the cost of the third. The fair market value opinions of the brokers shall be conclusive and binding on the parties. The maximum lease rate at the start of the initial renewal period shall be "capped" at $ 1.90 per square foot with $.05 per square foot per month annual increases. 22. SIGNAGE: Landlord shall grant Lessee the right to place two (2) signs on the building. The locations of the signs are to be discussed. The signage shall conform to all City of Roseville signage criteria and shall be subject to Landlord's review and approval. The cost of the signs, installation, maintenance and removal shall be at Tenant's sole cost. The interior directory signage shall be paid for and installed by Landlord. Upon expiration of Lease or vacation of premises, Lessee shall return building back to its original condition that it was prior to the installment of the sign. Additionally, Lessee shall have the right to install a monument with Lessee's signage in accordance with the City of Roseville's signage criteria and subject to Landlord's review and approval. 23. KEYS: Lessor shall provide Lessee with one key per lock. Lessee shall be entitled to have additional keys made with Lessor's approval. 24. BROKERAGE FEE: Landlord shall pay a brokerage fee equal to five percent (5%) of the total rental consideration over the initial Lease term to be paid to TRI Commercial (Steve Lefler-Listing and Boyd Cahill-Procuring). The first half of the commission shall be paid upon the execution of the Lease, and the second half upon commencement of rent. 95 This Agreement has been prepared for submission to your attorney for his approval. No representation or recommendation is made by the real estate Broker(s) or their agents or employees as to the legal sufficiency, legal effect, or tax consequences of this Agreement or the transaction involved herein. AGREED TO AND ACCEPTED Eureka Corporate Plaza Ltd., P.P. Feather River State 1613 Eureka Road, Suite 100 1227 Bridge Street, Suite C Roseville, CA 95661 Yuba City, CA 95992 By: Rodney A. Mitchell, General Partner By: Larry Hartwig Dated: 7/31/00 Dated: 7/28/00 EXHIBIT "A" (Site Plan - not include in this document) EXHIBIT "B" (Floor Plan - not include in this document) EXHIBIT "C" RULES AND REGULATIONS 1. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside or inside of the Building or the Premises without the written consent of Lessor first hand and obtained and Lessor shall have the right to remove any such sign, placard, picture, advertisement, name or notice without notice to and at the expense of Lessee. Lessee shall not place anything or allow anything to be placed near the glass of any window, door, partition or wall which may appear unsightly from outside "the Premises"; provided, however, the Lessor is to furnish and install a building standard window drapery at all exterior windows. 2. The bulletin board or directory of the Building will be provided exclusively for the display of the name and location of Lessee only and Lessor reserves the right to exclude any other names therefrom. 3. The sidewalks, halls, passages, exits, entrances and stairways shall not be obstructed by any of the tenants or used by them for any purpose other than for ingress to and egress from their respective Premises. The halls, passages, exits, entrances, stairways, balconies and roof are not for the use of the general public, and the Lessor shall in all cases retain the right to control and prevent access thereto by all persons whose presence in the judgment of the Lessor shall be prejudicial to the safety, character, reputation and interests of the Building and its tenants, provided that nothing herein contained shall be construed to prevent such access to persons with whom the Lessee normally deals in the ordinary course of Lessee's business unless such persons are engaged in illegal activities. No tenant and no employees or invitees of any tenant shall go upon the roof of the Building. 4. Lessee still not alter any lock or install any new or additional locks or any bolts on any door of the Premises without the written consent of Lessor. 5. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein and the expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Lessee who, or whose employees or invitees shall have caused it. 6. Lessee shall not overload the floor of the Premises or mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof. No boring, cutting or stringing of wires or laying of linoleum or other similar floor coverings shall he permitted except with the prior written consent of the Lessor and as the Lessor may direct. 7. No furniture, freight or equipment of any kind shall he brought into the Building without the consent of Lessor and all moving of the same into or out of the Building shall be done at such time and in such manner as Lessor shall designate. Lessor shall have the right to prescribe the weight, size and position of all safes and other heavy equipment brought into 96 the building and also the times and manner of moving the same in and out of the Building. Safes or other heavy objects shall, if considered necessary by Lessor, stand on wood strips of such thickness as is necessary to properly distribute the weight. Lessor will not be responsible for loss of or damage to any such sale or property from any cause and all damage done to the Building by moving or maintaining any such safe or other property shall be repaired at the expense of Lessee. There shall not be used in any space, or in the public halls of the Building, either by any tenant or others, any hand trucks except those equipped with rubber tires and side guards. 8. Except with the written consent of Lessor, no person or persons other than those approved by Lessor shall be permitted to enter the building for the purpose of cleaning the same. Lessee shall not cause an unnecessary labor by reason of Lessee's carelessness or indifference in the preservation of good order and cleanliness. Lessor shall in no way be responsible to any Lessee for any loss of property on the Premises, however occurring, or for any damage done to the effects of any Lessee by the janitor or any other employee or any other person. 9. Lessee shall not use, keep or permit to be used or kept any food or noxious gas or substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to the Lessor or other occupants of the Building by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business therein, nor shall any animals or birds be brought in or kept in or about the Premises or the Building. No Lessee shall make or permit to be made any unseemly or disturbing noises or disturb or interfere with occupants of this or neighboring Buildings or premises or those having business with them whether by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. No Lessee shall throw anything out of doors or down the passageways. 10. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the use of the Premises for general office purposes. No Lessee shall occupy or permit any portion of his treatises to be occupied as an office for a public stenographer or typist, or for the manufacture or sale of liquor, or tobacco in any form, or as a barber shop or manicure shop. No Lessee shall advertise for laborers giving an address at the Premises. The Premises shall not be used for lodging or sleeping or for any illegal purposes. 11. Lessee shall not use or keep in the Premises or the Building any kerosene, gasoline or inflammable or combustible fluid or material, or use any method of heating or air conditioning other than that supplied by Lessor. 12. Lessor will direct electricians as to where and how telephone and telegraph wires are to he introduced. No boring or cutting for wires will he allowed without the consent of Lessor. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Lessor. 13. All keys to offices, rooms and toilet rooms shall be obtained from Lessor's Office and Lessee shall not from any other source duplicate, obtain keys or have keys made without Lessor's approval. The Lessee, upon termination of the tenancy, shall deliver to the Lessor the keys of the offices, rooms and toilet rooms which shall have been furnished or shall pay the Lessor the cost of replacing same or changing the lock or locks opened by such lost key if Lessor deems it necessary to make such change. 14. No Lessee shall lay linoleum, tile, carpet or other similar floor covering so that the same shall be affixed to the floor of the Premises in any manner except as approved by the Lessor. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by the Lessee by whom, or by whose contractors, employees or invitees, the damage shall have been caused. 15. No furniture, packages, supplies, equipment or merchandise will be received in the Building, except between such hours as shall be designated by Lessor. 16. On Sundays, legal Holidays and on Saturday commencing at 12:00 noon, and on other days between the hours of 7:00 P.M. and 7:00 A.M. the following day, access to the building, or to the halls, corridors, or stairways in the Building, or to the Premises may be refused unless the person seeking access is known to the person or employee of the building in charge and has a pass or is properly identified. The Lessor shall in no case be liable for damages for any error with regard to the admission to or exclusion of Building of any person. The Lessor reserves the right to prevent access to the Building for the safety of the tenants and protection of property in the Building and the Building. Lessor reserves the right to close and keep locked all entrance and exit doors of the Building on Sundays, legal Holidays, and on Saturdays commencing at 12:00 noon, and on other days between the hours of 7:00 P.M. and 7:00 A.M., and during such further hours as Lessor may deem advisable for the adequate protection of said Building and the property of its tenants. 97 17. Lessee shall see that the doors of the Premises are closed and securely locked before leaving the Building and must observe strict care and caution that all water faucets or water apparatus are entirely shut off before Lessee or Lessee's employees leave the building, and that all electricity shall likewise be carefully shut off, so as to prevent waste or damage, and for any default or carelessness Lessee shall make good all injuries sustained by other tenants or occupants of the Building. 18. Lessor reserves the right to exclude or expel from the Building any person who, in the judgment of Lessor, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations, of the Building. 19. The requirements of Lessee will be attended to only upon application at the Office of the Building. Employees of Lessor shall not perform any work or do anything outside of their regular duties unless under special instructions from the Lessor, and no employee will admit any person (Lessee or otherwise) to any office without specific instructions from the Lessor. 20. No vending machine or machines of any description shall be installed, maintained, or operated upon the Premises without the written consent of the Lessor. 21. Lessor shall have the right, exercisable without notice and without liability to Lessee, to change the name and the street address of the Building of which the Premises are a part. 22. Lessee agrees that it shall comply with all fire and security regulations that may be issued from time to time by Lessor and Lessee also shall provide Lessor with the name of a designated responsible employee to represent Lessee in all matters pertaining to such fire or security regulations. 23. Lessor reserves the right by written notice to Lessee, to rescind, alter or waive any rule or regulation at any time prescribed for the Building when, in Lessor's judgement, it is necessary, desirable or proper for the best interest of the Building and its tenants. 24. Lessees shall not disturb, solicit, or canvass any occupant of the Building and shall cooperate to prevent same. 25. Without the written consent of Lessor, Lessee shall not use the name of the Building and shall cooperate to prevent same. 26. Lessor shall furnish heating and air conditioning during the hours of 7:00 A.M. to 7:00 P.M. Monday through Friday and 9:00 A.M. to 1:00 P.M. on Saturday, except for Holidays (or to common areas only if Lease is Modified Gross). 27. Lessee shall have the right to park in the Project's parking facilities in common with other tenants of the Project upon terms and conditions as may from time to time be established by Lessor or the Project's Ownership Association. Parking for the Project is available at no cost and is on a non-exclusive, first-come, first served basis. The Project provides parking at the ratio of four spaces per thousand usable square feet of building area. Lessee agrees not to overburden the parking facilities and agrees to cooperate with Lessor and other Lessees in the use of the parking facilities. The term "overburden" shall mean any parking facility use in excess of the ratio provided above. In the event Lessee consistently overburdens the parking facilities, and is notified of such by Lessor, and Lessee does not comply with measures to alleviate said overburdening, Lessee shall be deemed in default of this Lease and shall be subject to any Lessor remedies provided for in this Lease. 28. Keys shall not be changed without out the Lessor's knowledge and written approval. EXHIBIT D AGREEMENT FOR THE COMPLETION OF PREMISES TENANT IMPROVEMENTS: In consideration of Lessee's execution of this Lease, Lessor, at Lessor's sole cost and expense, shall provide Lessee with building standard improvements in a turn-key buildout per the office floor plan attached in "Exhibit B". Lessor and Lessee acknowledge that any change orders to Exhibit "B" shall be at Lessee's sole cost and expense. The improvements shall be in accordance with the following specifications: 98 BUILDING STANDARD SPECIFICATIONS WALLS: Knock down textured and painted with flat wall paint. Selected from standard colors. DOORS: Paint grade doors with metal jams (all painted one color), selected from standard colors. Size is 3080. HARDWARE. Falcon (B101D) commercial latch sets. All passage except entry is lock set. Brushed aluminum finish. CEILING: 2 x 2 5/8 grid white regular the. BLINDS: Standard color PVC vertical blinds. Selected from standard colors. FLOOR COVERING: A. Carpet is to be selected from building standard samples. Allowance is based on $1 5.00 per square yard installed, including base. B. Vinyl is to be selected from building standards. C. Base is rubber, standard color, selected from building standards. LIGHT FIXTURES: A. 2 x 4 "Lithonia" 2 PMGB340 ESB3-34W. B. Fluorescent down light "Halo" H-274-400 1-F13DTT. TELEPHONE & DATA: Lessee shall provide its own telephone and data cable and installation and Lessor shall provide the "ring and (pull) string" to each mutually agreed upon location. SECURITY: Should Lessee elect to have a security system, the cost to supply and install the system shall be borne by Lessee. Lessor and Lessee acknowledge that any change orders to the above specifications or to the attached Exhibit "B" shall be at Lessee's sole cost and expense. Tender of Possession: Possession of the Premises shall be deemed tendered to Lessee ("Tender of Possession") when (1) the improvements to be provided by Lessor under this Lease are substantially completed, and (2) full access to the Premises has been granted to Lessee and keys have been provided to Lessee's suite and common areas by Lessor, and (3) a punch list of items needing repair or replacement has been created by Lessor and Lessee. Upon Tender of Possession, Lessor and Lessee shall evaluate the Premises and create a punch list of items considered to be defective or not complete. Once items are agreed upon by Lessor and Lessee, no other items will be added to the list. Damages to the Premises after move in shall be the responsibility of Lessee. When all items noted therein are completed, the Premises shall be deemed complete. Items on the punch list DO NOT constitute the abatement of rent and it is agreed that rent shall commence on the date shown therein. With respect to matters not reasonably apparent upon visual inspection, Tenant shall have a period of fifteen (15) days following Tender of Possession to notify Lessor of any defects and Lessor shall correct same. This Agreement has been prepared for submission to your attorney for his approval. No representation or recommendation is made by the real estate Broker(s) or their agents or employees as to the legal sufficiency, legal effect, or tax consequences of this Agreement or the transaction involved herein. AGREED TO AND ACCEPTED Eureka Corporate Plaza Ltd., P.P. Feather River State 1613 Eureka Road, Suite 100 1227 Bridge Street, Suite C Roseville, CA 95661 Yuba City, CA 95992 By: Rodney A. Mitchell, General Partner By: Larry Hartwig Dated: 7/31/00 Dated: 7/28/00 99 EX-27 10 a2030130zex-27.txt EXHIBIT 27
9 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 13,392,673 100,000 1,100,000 0 85,438,796 5,381,349 5,346,321 182,386,504 6,147,648 302,889,277 260,500,602 15,087,417 2,531,632 200,000 0 0 19,899,306 4,670,320 302,889,277 12,526,952 5,017,335 0 17,544,287 6,734,305 7,022,425 10,521,862 200,000 0 8,780,273 3,502,064 2,183,739 3,870 0 2,187,609 1.14 1.06 8.65 6,510,926 662,059 0 7,999,723 6,770,523 1,244,486 421,611 6,147,648 6,147,648 0 1,359,700
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