COMPENSATION MODIFICATION AGREEMENT

THIS AGREEMENT (“Agreement”), made this ____ day of January, 2009, by and
between Pacific Coast National Bancorp, Pacific Coast National Bank, its wholly
owned subsidiary (together, the “Corporation”), and _______________________, a
senior executive officer of the Corporation (“Executive”).

WHEREAS, the Corporation has determined that it is in the best interests of the
Corporation and its shareholders to participate in the Troubled Asset Relief
Program Capital Purchase Program (“CPP”) of the United States Department of the
Treasury (“UST”), pursuant to which the Corporation will issue to UST preferred
stock (the “Preferred Stock”) in return for cash, along with a warrant to
acquire additional shares of preferred stock (the “Warrant”); and

WHEREAS, in order for the Corporation to participate in the CPP, the Corporation
and its senior executive officers who are subject to the Compensation Guidelines
(as defined below) must comply with Section 111(b) of the Emergency Economic
Stabilization Act of 2008 regarding executive compensation and corporate
governance and the related UST interim final regulations (31 CFR Part 30)
published in the Federal Register on October 20, 2008 (the “Compensation
Guidelines”); and

WHEREAS, the Corporation is required to deliver a certificate to UST at the
closing of the CPP transaction that it has complied with all the Compensation
Guidelines; and

WHEREAS, the board of directors of the Corporation has authorized and directed
the Compensation Committee to take any and all the actions required under the
Compensation Guidelines in order to enable the Corporation to deliver that
certificate and has authorized the execution of this Agreement on behalf of the
Corporation; and

WHEREAS, in order to comply with the Compensation Guidelines for so long as UST
holds securities of the Corporation acquired in the CPP, the Corporation,
through the Compensation Committee, is required to review the Corporation’s
compensation plans and policies with senior risk officers in order to identify
and unilaterally eliminate any bonus plans or other incentive compensation
arrangements for senior executive officers who are subject to the Compensation
Guidelines that encourage such officers to take unnecessary and excessive risks
that threaten the value of the financial institution; and

WHEREAS, in order to comply with the Compensation Guidelines for so long as UST
holds securities of the Corporation acquired in the CPP, the Corporation,
through the Compensation Committee, must adopt appropriate provisions for the
recovery by the Corporation of any bonus or incentive compensation paid to a
senior executive officer who is subject to the Compensation Guidelines based on
financial statements or performance metric criteria later determined to be
materially inaccurate; and

 
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WHEREAS, in order to comply with the Compensation Guidelines as long for so UST
holds securities of the Corporation acquired in the CPP, the Corporation is
prohibited from making any golden parachute payment (as defined under the
Compensation Guidelines) to any senior executive officer who is subject to the
Compensation Guidelines; and

WHEREAS, the Corporation is required to deliver to UST in connection with the
consummation of the CPP transaction a waiver from each of its senior executive
officers who are subject to the Compensation Guidelines with respect to the
changes in the Corporation’s compensation plans, polices and practices as
required by the Compensation Guidelines; and

WHEREAS, the Compensation Committee has asked Executive to execute the waiver in
the form attached; and

WHEREAS, Executive believes the requirements imposed under the Compensation
Guidelines in order for the Corporation to obtain government funds by
participating in the CPP are reasonable and in the best interests of the
Corporation and its shareholders and furthers the long-term best interests of
the Corporation and its senior executive officers, including Executive.

NOW, THEREFORE, to allow the Corporation to participate in the CPP for the
mutual benefit of the Corporation, its shareholders and Executive, and for other
good and valuable consideration, the Corporation and Executive hereby agree as
follows:

1.           GENERAL MODIFICATION OF EMPLOYMENT, COMPENSATION AND BENEFIT
AGREEMENTS, PLANS AND POLICIES:  Until such time as UST ceases to own any debt
or equity securities of the Corporation acquired pursuant to the CPP, the
Corporation and Executive agree that, notwithstanding any contract, plan, policy
or agreement to the contrary, all employment, compensation and benefit
agreements, plans and policies with respect to Executive shall be deemed
modified to comply in all respects with Section 111(b) of EESA as implemented by
any guidance or regulation thereunder that has been issued and is in effect as
of the date the Corporation issues the Preferred Stock and the Warrant to
UST.  The Corporation and Executive further agree that the Corporation shall not
adopt any new benefit plan with respect to Executive that does not comply with
Section 111(b) of EESA as implemented by any guidance or regulation thereunder
that has been issued and is in effect as of the date the Corporation issues the
Preferred Stock and the Warrant to UST.  Executive agrees that the Corporation,
through its Compensation Committee, has the sole discretion: (a) to determine
whether and to what extent any bonus or incentive compensation with respect to
Executive encourages Executive to take unnecessary and excessive risks that
threaten the value of the financial institution, and (b) to eliminate any such
compensation as long as UST holds securities of the Corporation acquired in the
CPP.

2.           RECOVERY OF INCENTIVE COMPENSATION:  Until such time as UST ceases
to own any debt or equity securities of the Corporation acquired pursuant to

 
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the CPP, in the event Executive receives a bonus or any other incentive
compensation from the Corporation based on financial statements or performance
metric criteria later determined by the Corporation’s Compensation Committee, in
its sole discretion, to be materially inaccurate, Executive agrees to repay the
Corporation, in cash and within 30 days of a written demand therefor, the amount
of the bonus or incentive compensation received by Executive in excess of the
amount that would have been paid to Executive had the inaccurate statements or
criteria been accurate.

3.           GOLDEN PARACHUTE PAYMENTS:  Until such time as UST ceases to own
any debt or equity securities of the Corporation acquired pursuant to the CPP,
Executive agrees that: (a) Executive shall not be entitled to receive any golden
parachute payment (as defined under the Compensation Guidelines) upon
Executive’s severance from employment (as defined under the Compensation
Guidelines) and (b) that all applicable contacts and agreements between
Executive and the Corporation are deemed to be amended in this regard.

4.           WAIVER:  Executive hereby voluntarily waives any claim against the
Corporation for any changes to my compensation, bonus, incentive and other
benefit plans, arrangements, policies and agreements (including golden parachute
agreements) that are required to comply with the Compensation Guidelines and
that are made pursuant to this Agreement.  This waiver includes all claims
Executive may have under the laws of the United States or any state related to
the requirements imposed by the Compensation Guidelines, including, without
limitation, a claim for any compensation or other payments Executive would
otherwise receive.  Executive agrees to execute the required waiver in the form
attached hereto and deliver said warrant to the Corporation no later than the
close of business on _______ __, 2009.

5.           COVERED EMPLOYMENT, COMPENSATION AND BENEFIT AGREEMENTS, PLANS AND
POLICIES:  Executive acknowledges that all employment, compensation and benefit
agreements, plans and policies applicable to Executive, including but not
limited to those listed in Annex A hereto,  are subject to the modifications and
amendments provided for in this Agreement, to the extent applicable.

6.           MODIFICATION - WAIVERS - APPLICABLE LAW: No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by Executive and on behalf of the
Corporation by such officer as may be specifically designated by the Board of
Directors of the Corporation. No waiver by either party hereto at any time of
any breach by the other party hereto of, or in compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement

 
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shall be governed by federal law, to the extent applicable, and otherwise by the
laws of the State of California.

7.           INVALIDITY - ENFORCEABILITY: The invalidity or unenforceability of
any provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective only to the
extent of such prohibition or unenforceability without invalidating or affecting
the remaining provisions of this Agreement, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

8.           HEADINGS: Descriptive headings contained in this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision in this Agreement.

 

 
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IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the
date first above written.

 

 
EXECUTIVE
                 
Signature
                 
Print Name
             
PACIFIC COAST NATIONAL BANCORP
             
By:
     
Chairman, Compensation Committee
       
PACIFIC COAST NATIONAL BANK
             
By:
     
Chairman, Compensation Committee

 
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ANNEX A

Employment Agreements:

Severance Agreements

Other Benefit Plans or Agreements

Other Employment Compensation and Benefit Plans and Policies

 
 
 
 

ANNEX C

SENIOR EXECUTIVE OFFCIER WAIVER

In consideration for the benefits I will receive as a result of my employer’s
participation in the United States Department of the Treasury’s TARP Capital
Purchase Program, I hereby voluntarily waive any claim against the United States
or my employer for any changes to my compensation or benefits that are required
to comply with the regulation issued by the Department of the Treasury as
published in the Federal Register on October 20, 2008.
 
I acknowledge that this regulation may require modification of the compensation,
bonus, incentive and other benefit plans, arrangements, policies and agreements
(including so-called “golden parachute” agreements) that I have with my employer
or in which I participate as they relate to the period the United States holds
any equity or debt securities of my employer acquired through the TARP Capital
Purchase Program.
 
This waiver includes all claims I may have under the laws of the United States
or any state related to the requirements imposed by the aforementioned
regulation, including without limitation a claim for any compensation or other
payments I would otherwise receive, any challenge to the process by which this
regulation was adopted and any tort or constitutional claim about the effect of
these regulations on my employment relationship.
 

 

 
Date:  ______________                                 ____________________________
 
Name
Title