Document:

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This Agreement is made and is effective as of June 1, 2003, by and
between Coast National Bank, a national banking association (“Coast”), and
Coast Bancorp, a California corporation (“Bancorp”) and Jack C. Wauchope (“Executive”).

 

WHEREAS, Executive is currently employed by Coast in the capacity as
Chairman of the Board, President and Chief Executive Officer, and Executive’s
background, expertise and efforts have contributed to the success and financial
strength of Coast; and

 

WHEREAS, Coast wishes to assure itself of the continued opportunity to
benefit from Executive’s services for the period provided in this Agreement,
and Executive wishes to serve in the employ of Coast on a full-time basis
solely in accordance with the terms hereof for such purposes; and

 

WHEREAS, the Board of Directors of Coast (“Board”) has determined that
the best interests of Coast would be served by Executive’s continued employment
with Coast under the terms of this Agreement;

 

NOW, THEREFORE, in order to effect the foregoing, the parties hereto
wish to enter into an employment agreement on the terms and conditions set
forth below.  Accordingly, in
consideration of the premises and the respective covenants and agreements of
the parties herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:

 

1.                                       Definitions.

 

(a) “Agreement” means this employment agreement and any
amendments hereto complying with Section 15(a) hereof.

 

(b) “Board” means the Board of Directors of Coast unless the
context otherwise requires.

 

(c) “Cause” means:

 

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(1)  Executive commits any act of embezzlement, fraud,
dishonesty or breach of fiduciary duty;

 

(2)  Executive commits any act of unauthorized disclosure of
any secrets or confidential information of the Bank or induces any client,
employee or customer of the Bank to break any contract with the Bank;

 

(3)  Executive engages in illegal activity which materially
adversely affects

Coast’s reputation in the community or which evidences the lack of
Executive’s fitness or ability to perform Executive’s duties as determined by
the Board of Directors in good faith;

 

(4)  Executive commits any act which would cause termination
of coverage under Coast’s Bankers’ Blanket Bond as to Executive (as
distinguished from termination of coverage as to Coast as a whole).

 

(d) “Change in Control” means a change of control of Coast or
Bancorp of a nature that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act,
whether or not Coast or Bancorp is then subject to such reporting requirement;
provided, however, that without limitation, a Change in Control shall be deemed
to have occurred if:

 

(1)                                  there is a transfer,
voluntarily or by hostile takeover, by proxy contest (or similar action),
operation of law, or otherwise, of control of Coast or Bancorp;

 

(2)                                  any Person is or
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act or any successor provisions thereof), directly or
indirectly, of securities of Bancorp representing 20% or more of the combined
voting power of Bancorp’s then outstanding securities;

 

(3)                                  the individuals who
were members of the Board of Directors of Bancorp  immediately prior to a meeting of the shareholders of Bancorp,
which meeting involves a contest for the election of directors, do not constitute
a majority of the Board of Directors of Bancorp following such meeting or
election;

 

(4)                                  a merger or
consolidation (in which Bancorp is not the surviving entity) or sale of all or
substantially all of the assets of Bancorp; or

 

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(5)                                  there is a change,
during any period of two consecutive years, of a majority of the Board of
Directors of Bancorp as constituted as of the beginning of such period, unless
the election of each director who is not a director at the beginning of such
period was approved by a vote of at least two-thirds of the directors then in
office who were directors at the beginning of such period.

 

(e)  “Code”  shall mean the Internal Revenue Code of 1986,
as amended.

 

(f) “Control” means the possession, direct or indirect, by any
Person or “group” (as defined in Section 13(d) of the Securities Exchange Act)
of the power to direct or cause the direction of the management policies of
Coast or Bancorp, whether through ownership of voting securities, by contract
or otherwise, and in any case means the ability to determine the election of a
majority of the directors of Bancorp.

 

(g) “Disability” means physical or mental illness defined as
Executive being unable to fully perform the duties required under this
Agreement for a continuous period of ninety (90) days or a cumulative period of
one hundred twenty (120) days in any one calendar year.  If there should be  a dispute between Coast and Executive as to Executive’s physical
or mental disability for purposes of this Agreement, the question shall be
settled by the opinion of an impartial reputable physician or psychiatrist
agreed upon by the parties or their representatives, or if the parties cannot
agree within ten (10) days after a request for designation of such party, then
by a physician or psychiatrist designated by the Los Angeles County Medical
Association.  The certification of such
physician or psychiatrist as to the question in dispute shall be final and
binding upon the parties hereto.

 

(h) “Expiration” means the termination of this Agreement
(including Executive’s employment hereunder) and of any further obligations of
the parties (except as specified in this Agreement) upon completion of the
Term.

 

(i) “Failure to Perform Duties” means Executive fails to perform
or habitually neglects the duties which he is required to perform hereunder.

 

(j) “Person” means an individual, a group acting in concert, a
corporation, a partnership, an association, a joint stock company, a trust, any
unincorporated organization, a government or political subdivision thereof, or
any other entity whatsoever.

 

(k) “Resign for Good Reason” or “Resignation for Good Reason”
has the meaning found in Section 7(e).

 

(l) “Term” means the initial term of this Agreement and any
extensions hereof, as provided in Section 4, whether prior to or following a
Change in Control.

 

(m) “Termination” or “Terminate(d)” means the termination of
Executive’s employment hereunder for any of the following reasons unless the
context indicates otherwise:

 

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(1)                                  Retirement
by Executive;

 

(2)                                  Death
of Executive;

 

(3)                                  Disability;

 

(4)                                  Expiration;

 

(5)                                  Resignation
for Good Reason;

 

(6)                                  Resignation
other than Resignation for Good Reason;

 

(7)                                  Termination
Without Cause; and

 

(8)      Termination for Cause.

 

(n) “Termination Without Cause” or “Terminate(d) Without Cause”
means the cessation of Executive’s employment hereunder for any reason except:

 

(1)                                  A
resignation by Executive;

 

(2)                                  Termination
for Cause;

 

(3)                                  Retirement;

 

(4)                                  Disability;

 

(5)                                  Death;
or

 

(6)                                  Expiration.

 

2.                                       At-Will
Employment.  Pursuant to the
provisions of 12 U.S.C. Section 24 (i.e., The National Bank Act) and
notwithstanding any other provision to the contrary contained herein, it is
agreed by the parties hereto that the Executive’s employment by Coast hereunder
shall be at-will, and that Coast may at any time elect to terminate this
Agreement and Executive’s employment by Coast for any reason by action of its
Board.

 

3.                                       Position
and Responsibilities.  The Executive
shall serve as Chairman of the Board, President and Chief Executive Officer of
Coast and, subject to the provisions of Section 5 below, shall have such
responsibilities, duties and authority as are generally associated with such
positions and as may from time to time be assigned to the Executive by the
Board that are consistent with such responsibilities, duties and authority.

 

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4.                                       Term
of Agreement. Subject to the terms and provisions of this Agreement, this
Agreement and the period of Executive’s employment, shall be deemed to have
commenced as of June 1, 2003 and shall continue for an initial term of five
years thereafter until 12:00 midnight May 31, 2008, unless sooner terminated.  In the event Coast retains Executive as an
employee following the expiration of the Term, such employment, absent a
written agreement to the contrary, will be on an at-will basis with such
compensation and upon such terms as the parties may then agree, subject to
termination at any time with or without cause, and without liability.  If Coast does not retain Executive as an
employee after the Expiration of the Term, Executive’s employment shall cease
without further liability of the parties to each other.  Executive’s employment shall also terminate,
and the Term of this Agreement will expire, upon Executive’s resignation
(unless resignation is for Good Reason after a Change in Control), retirement,
death or Disability, or upon Executive’s Termination for Cause.

 

5.                                       Full
Time, Exclusive Employment.  During
the Term hereof, Executive shall devote exclusively  all of his business time, attention, skill and efforts to the
faithful performance of the business of Coast to the fullest extent necessary to
properly discharge his duties and responsibilities hereunder and consistent
with the highest and best standards of the banking industry and in compliance
with all applicable laws, regulations and rules as well as Coast’s Articles of
Incorporation and Bylaws.  Further, with
the approval of the Board, from time to time, Executive may serve, or continue
to serve, on the boards of directors of, and hold any other offices or
positions in, companies or charitable, political or civic organizations, which,
in such Board’s judgment, will not present any material conflict of interest
with Coast and will not unfavorably affect the performance of Executive’s
duties pursuant to this Agreement.

 

6.   Compensation.

 

(a)   Salary.   For Executive’s services hereunder, Coast
shall pay or cause to be paid as annual base salary (gross) to Executive at
least the sums set forth in accordance with the following schedule during the
term of this Agreement:

 

	
  June 1, 2003 - May 31, 2004

  	
   

  	
  $

  	
  175,000.00

  	
  ;

  
	
  June 1, 2004 - May 31, 2005

  	
   

  	
  $

  	
  185,000.00

  	
  ;

  
	
  June 1, 2005 - May 31, 2006

  	
   

  	
  $

  	
  185,000.00

  	
  ;

  
	
  June 1, 2006 - May 31, 2007

  	
   

  	
  $

  	
  200,000.00

  	
  ; and

  
	
  June 1, 2007 - May 31, 2008

  	
   

  	
  $

  	
  200,000.00

  	
   

  

 

Said salary shall be payable in equal installments in conformity with
Coast’s normal payroll practice, and shall be paid less all applicable taxes,
with holdings, and deductions.

 

(b)   Bonuses.   Executive may receive an annual bonus in an
amount to be determined by the Board of Directors in its sole discretion.

 

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(c)  Vacation.  Executive shall be entitled to up to five
(5) weeks of vacation each year during the Term, which vacation shall be taken
at such times as are agreed upon by Executive and the Board of Directors;
provided, however, that during each year of the Term, Executive is required to
and shall take at least two (2) weeks of said vacation (the “Mandatory
Vacation”), which shall be taken consecutively.  Executive shall not be entitled to vacation pay in lieu of
vacation; provided, however, that any vacation days earned but not used in any
year may be carried over to future years, subject to any cap or limitation on
vacation benefit accrual that may be contained in Coast’s Employee Policy Guide
(which cap or limitation is hereby incorporated by reference).

 

(d) Automobile.  During
the Term of the Agreement, Coast shall make available to Executive a
Coast-owned automobile.  Said automobile
should be of the same or similar type and/or cost of the automobile currently
provided to Executive by Coast. 
Further, said automobile shall, at Executive’s option, be replaced by
another comparable vehicle not less often than every three years.  Any Coast-owned automobile provided shall be
primarily used for business purposes only, with the exception of commuting to
and from work, and Coast shall bear all expenses relating to such automobile,
including insurance, maintenance and repair, gas and oil.  Coast shall be entitled to withhold income
taxes on the personal-use value of such automobile or the automobile allowance
in accordance with applicable law or regulations.

 

(e)  Group Medical and Life
Insurance Benefits.  Coast, as its
expense, shall provide for Executive medical, dental, accident, disability and
death benefits equivalent to the normal and customary benefits available from
time to time under the California Banker’s Association Group Insurance Program
(or equivalent) for an employee of Executive’s salary level.  In addition, Coast, at its expense, will
provide Executive with permanent life insurance benefits of Four Hundred
Thousand Dollars ($400,000).  Said
coverage shall be in existence or shall take effect as of the Effective Date
hereof and shall continue throughout the Term. 
Executive shall be the individual owner of such life insurance policy with
all associated benefits.  Coast’s
liability to Executive for any breach of this Subsection D.3 shall be limited
to the amount of premiums payable by Coast to obtain the coverage contemplated
herein.

 

(f)   Stock Option.  In addition to those stock options that have
already been granted to the Executive prior to the commencement of this
Agreement, during the term of this Agreement, Bancorp  may grant to Executive stock options to purchase Bancorp’s common
stock in such amount as may be determined in the sole discretion of the Board
of Directors of Bancorp and pursuant to such terms as are contained in
Bancorp’s Stock Option Plan or Plans as may be in effect during the term of
this Agreement.

 

(g)  Club Membership.   During the Term of this Agreement, Coast
shall provide the Executive with a membership to the San Luis Obispo Golf and
Country Club (“SLOGCC”) in San Luis Obispo, California, at no cost to the
Executive.  Coast agrees to pay
Executive’s dues in SLOGCC, all further assessments by SLOGCC, and all other
expenses reasonably and

 

6

 

necessarily incurred by Executive in connection with the Executive’s
maintenance and use of the Membership for business-related purposes during the
Term of this Agreement.

 

The Parties acknowledge and agree that although the Membership shall be
held in the Executive’s name during the Term of this Agreement, the Membership
shall remain an asset of Coast during the term of this Agreement, and the
Executive may not sell, transfer, encumber or hypothecate in any manner the
Membership without Coast’s prior written authorization.  The Parties also agree that upon the
cessation of the Executive’s employment with Coast under this Agreement for any
reason, including voluntary resignation or retirement, the Executive shall
purchase the Membership from Coast.  The
purchase price to the Executive shall be $16,975.00, payable to Coast in cash
no later than ninety (90) days after the Executive’s last day of active
employment with Coast.  The Executive
hereby consents to Coast’s assignment of its rights hereunder in the event that
Coast is acquired by or is merged with another financial institution.

 

The provisions of this Subsection 6(g) shall be binding on and inure to
the benefit of each Parties’ successors and heirs, and shall survive the
expiration of this Agreement and the termination of the Executive’s employment
with Coast.

 

(h)  Employee Benefits and
Perks.  In addition to the
foregoing, during the period of the Executive’s employment hereunder, the
Executive shall be entitled to participate in all employee benefits plans or
arrangements of Coast not otherwise provided for in this Agreement on the same
basis as other employees of Coast including, without limitation, plans or
arrangements providing use of Coast provided credit card(s), car telephone(s),
pager(s) and such other perks (if such is (are) being so provided) upon the
terms and conditions previously in effect.

 

(i)  Expenses.   During the period of the Executive’s
employment hereunder, the Executive shall be entitled to receive prompt
reimbursement for all reasonable and customary expenses incurred by the
Executive in performing services hereunder in accordance with the general
policies and procedures established by Coast.

 

7.  Termination.

 

(a)  Resignation, Retirement,
Death or Disability.  Executive’s
employment hereunder shall cease at any time by Executive’s resignation (other
than a resignation for Good Reason as provided in Section 7(e)), or by
Executive’s retirement, death or Disability. 
Disability shall be deemed to have occurred only after following the
procedure contained in Section 1(g) above.

 

(b)  Termination for Cause.  Executive’s employment shall cease upon a
good faith finding of Cause by the Board; provided, however, that Executive
shall be given written notice of the Board’s finding of conduct by Executive
amounting to Cause for such termination. 
Said notice shall be accompanied by a copy of a resolution duly adopted
by the affirmative vote

 

7

 

of not less than a majority of a quorum of the Board at a duly-noticed
meeting of the Board, finding that in the good faith opinion of the Board,
Executive was guilty of conduct amounting to Cause and specifying the particulars
thereof; provided, however, that after a Change in Control, such resolution may
be adopted only by the affirmative vote of not less than a majority of a
committee composed of at least three (3) disinterested outside directors of
Coast.  In the absence of at least three
(3) disinterested outside directors, a determination of Cause shall be
submitted to and made by an arbitrator(s) pursuant to Section 13 hereof.

 

(c)  Termination for Failure
to Perform Duties.  Upon the good
faith determination by the Board that Executive’s conduct amounts to a Failure
to Perform Duties, the Board shall give Executive written notice of such
finding.  Executive shall then have
thirty (30) days in which to modify his job performance and cease the behaviors
leading to the Board’s determination of his Failure to Perform Duties.  Upon the expiration of said thirty (30) day
period, the Board shall review Executive’s job performance during that thirty
(30) day period, and determine whether Executive’s conduct still amounts to a Failure
to Perform Duties.  Executive’s
employment shall cease upon a good faith finding of a Failure to Perform Duties
by the Board at the end of the thirty (30) day period; provided, however, that
Executive shall be given written notice of the Board’s finding of conduct by
Executive amounting to a Failure to Perform Duties.  Said notice shall be accompanied by a copy of a resolution duly
adopted by the affirmative vote of not less than a majority of a quorum of the Board
at a duly-noticed meeting of the Board, finding that in the good faith opinion
of the Board, Executive was guilty of conduct amounting to a Failure to Perform
Duties and specifying the particulars thereof; provided, however, that after a
Change in Control, such resolution may be adopted only by the affirmative vote
of not less than a majority of a committee composed of at least three (3)
disinterested outside directors of Coast. 
In the absence of at least three (3) disinterested outside directors, a determination
of a Failure to Perform Duties shall be submitted to and made by an
arbitrator(s) pursuant to Section 13 hereof. 
A termination of Executive pursuant to this subparagraph 7(c) shall be
deemed to be a, “Termination for Cause.”

 

(d)  Termination Without
Cause.  Executive’s employment may
be terminated immediately Without Cause upon written notice for any reason,
subject to the payment of all amounts including severance benefits required by
Section 8 hereof.  Any termination shall
be effective immediately unless another time period is specified herein upon
Coast’s giving of notice to Executive, and all liability or obligation by Coast
hereunder to Executive (except for severance benefits, as may be provided
below) shall thereupon cease.  Such termination
shall not prejudice any remedy which Coast may have at law, in equity, or under
this Agreement.

 

(e)  Expiration.  Executive’s employment shall cease, or shall
continue on an at-will basis as provided in Section 4 hereof, upon the
expiration of the Term of this Agreement as provided in Section 4 hereof.

 

(f)  Resignation for Good
Reason.  Following a Change in
Control during the Term hereof, Executive may, under the following
circumstances, regard Executive’s employment

 

8

 

as being constructively terminated by Coast (and in such case
Executive’s employment shall terminate) and may, therefore, Resign for Good
Reason within 90 days of Executive’s discovery of the occurrence of one or more
of the following events, any of which shall constitute “Good Reason” for such
Resignation for Good Reason:

 

(1)                                  Without
Executive’s express written consent, the assignment to Executive of any duties
materially inconsistent with Executive’s position, duties, responsibilities and
status with Coast immediately prior to the Change in Control, or any subsequent
removal of Executive from or any failure to re-elect him to any such position;

 

(2)                                  Without
Executive’s express written consent, the termination and/or material reduction
in Executive’s facilities (including office space and general location) and
staff reporting and available to Executive immediately prior to the Change in
Control;

 

(3)                                  A
reduction by Coast of Executive’s base salary or of any bonus compensation
applicable to him as in effect immediately prior to the Change in Control;

 

(4)                                  A
failure by Coast to maintain any of the employee benefits and perks to which
Executive was entitled immediately prior to the Change in Control at a level
substantially equal to or greater than the value of those employee benefits and
perks in effect immediately prior to the Change in Control; or the taking of
any action by Coast which would materially affect Executive’s participation in
or reduce Executive’s benefits under any such benefits’ or perks’ plans,
programs or policies, or deprive Executive of any material fringe benefits
enjoyed by him immediately prior to the Change in Control;

 

(5)                                  Coast
requiring Executive to be based at an office that is greater than 25 miles from
where Executive’s office is located immediately prior to the Change in Control,
except for required travel on Coast’s behalf to an extent substantially
consistent with Executive’s present business travel obligations;

 

(6)                                  Any
purported Termination of Executive’s employment by Coast other than those effected
in good faith pursuant to Sections 7(a), 7(b) and 7(c) of this Agreement; or

 

(7)                                  The
failure of Coast to obtain the assumption of this Agreement by any successor.

 

(g)  Supervisory Suspension.  If the Executive is suspended and/or
temporarily prohibited from participating in the conduct of Coast’s affairs by
a notice served under

 

9

 

Sections 8(e) or (g) of the Federal Deposit Insurance Act or similar
statute, rule or regulation, Coast’s obligations under this Agreement shall be
suspended as of the date of service, unless stayed by appropriate
proceedings.  If the charges in the
notice are dismissed, Coast shall, (i) pay the Executive all or part of the
compensation withheld while its obligations under this Agreement were suspended
and (ii) reinstate (in whole or in part) any of its obligations which were
suspended.

 

(h)  Regulatory Removal.  If the Executive is removed and/or
permanently prohibited from participating in the conduct of Coast’s affairs by
an order issued under Sections 8(e) or (g) of the Federal Deposit Insurance Act
or similar statute, rule or regulation, all obligations of Coast under this
Agreement shall terminate as of the effective date of the order.

 

8.  Payments to Executive
Upon Termination.

 

(a)  Death, Disability or
Retirement.  In the event of
Termination of this Agreement due to Executive’s death, Disability or
retirement, Executive or Executive’s spouse and/or estate shall be entitled to
NO benefits from Coast and Coast shall have no further liability or obligation
to Executive, including any obligation to provide severance benefits pursuant
to this Section 8 below.

 

(b)  Resignation Without Good
Reason or Expiration.  In the event
of Executive’s resignation (other than a Resignation for Good Reason), or upon
Expiration, Coast shall have no further obligations to Executive under this
Agreement or otherwise, except as may be expressly required by law.

 

(c)  Termination for Cause.  In the event Executive is Terminated for
Cause, Coast shall have no further obligations to Executive under this
Agreement or otherwise, except as may be expressly required by law.

 

(d)  Termination Without
Cause Prior to a Change in Control. 
Upon the occurrence of a Termination Without Cause prior to a Change in
Control, as damages for breach of this Agreement, Coast shall as severance
benefits to Executive provide the following: (a) severance pay in a sum
equivalent to Executive’s then existing base salary for a period of twelve (12)
months next following Executive’s termination (in lieu of any payments
otherwise due for the balance of the 
Term), which payment shall be payable to Executive in one lump sum
payment on the effective date of termination of Executive’s employment
hereunder; and (b) continuation of insurance benefits provided to Executive
hereunder for a period not to exceed sixty (60) days after termination.  The parties agree that the provision of such
severance benefits shall constitute full and complete performance by Coast of
its obligations hereunder.

 

(e)  Termination Without
Cause or Resignation for Good Reason, After a Change in Control.  If in the twenty-four (24) month period
following a Change in Control, Executive (i) Resigns for Good Reason or (ii) is
otherwise Terminated Without Cause, Coast shall pay to

 

10

 

Executive a lump sum payment equal to twenty four (24) months base
salary then in effect.  Such lump sum
shall be paid not later than the tenth (10th) day following the date of
Termination Without Cause or a Resignation for Good Reason.

 

(f)  Source of Payments.  All payments provided in Section 8 shall be
paid in cash from the general funds of Coast, and no special or separate fund
need be established and no other segregation of assets need be made to assure
payment.

 

(g)  Consistent Returns.  Coast and Executive agree that the payments
being made under this Agreement represent reasonable compensation for services
and that neither Coast nor Executive will file any returns or reports which
take a contrary position.

 

(h)  Reduction of Payment.  Notwithstanding anything in the foregoing to
the contrary, if the payments made to Executive following a Termination Without
Cause or Resignation For Good Reason or any of the other payments provided for
in this Agreement, together with any other payments which Executive has the
right to receive from Coast would constitute a “parachute payment” (as defined
in Section 280G of the Code), the payments pursuant to this Agreement shall be
reduced to the largest amount as will result in no portion of such payments
being subject to the excise tax imposed by Section 4999 of the Code; provided,
however, that the determination as to whether any reduction in the payments
under this Agreement pursuant to this proviso is necessary shall be made in
good faith by Coast’s independent auditors or if such firm is no longer
providing tax services to Bank to such other tax advisor as shall be mutually
acceptable to Bank and Executive, and such determination shall be conclusive
and binding on Coast and Executive with respect to the treatment of the payment
for tax reporting purposes.

 

(i)  Sole Remedy.  The receipt of the amounts described in this
Section 8, and attorneys’ fees  as set
forth in Section 13 in the event of breach, if any, shall constitute
Executive’s sole remedy under this Agreement against Coast and its officers,
directors, employees and agents.

 

9.  Confidentiality and Trade
Secrets.

 

(a)  Trade Secrets.  During the Term, Executive will have access
to and become acquainted with what Executive and Bank acknowledge are trade
secrets, to wit, knowledge or data concerning Bank, including its operations
and business, and the identity of customers of Bank, including knowledge of
their financial condition, their financial needs, as well as their methods of
doing business.  Executive shall not
disclose any of the aforesaid trade secrets, directly or indirectly, or use
them in any way, either during the Term or for a period of twenty four (24)
months after the termination of the Term of this Agreement, except as required
in the course of Executive’s employment with Bank.

 

11

 

(b)  Return of Documents.  Executive expressly agrees that all manuals,
documents, files, reports, studies, instruments, software, computer programs or
similarly generated electronic materials or other materials used and/or
developed by Executive during the Term are solely the property of Bank, and
that Executive has no right, title or interest therein.  Upon termination of the Term of this
Agreement, Executive or Executive’s representative shall promptly deliver
possession of all of said property to Bank in good condition.

 

(c)  Unauthorized Disclosure.  During the period of his employment hereunder
and for a period of two years following the cessation of such employment
(irrespective of the reason therefor), Executive shall not, except as required
by any court, supervisory authority or administrative agency, without the
written consent of the Board or a person authorized thereby, disclose to any
person, other than an employee of Coast or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of his duties as an employee of Coast, any confidential information
obtained by him while in the employ of Coast; provided, however, that
confidential information shall not include any information known generally to
the public (other than as a result of an unauthorized disclosure by the Executive).

 

12

 

10. Business Protection Covenants.

 

(a)  Agreement Not to Compete.  Executive agrees that in the event he is
terminated without cause and receives the payment required by Section 8(d),
unless otherwise approved in writing by Coast, for a period of twelve (12)
months from the date of his cessation of employment by Coast, Executive shall
not directly or indirectly enter into or in any manner take part in any
business, profession or endeavor which shall be competitive with the business
of Coast in San Luis Obispo County as an employee, officer, agent, independent
contractor, 10% or more owner of an entity, director or other business
representative; in addition, Executive agrees that for the twelve (12) months
period described herein, Executive shall not solicit any customer with whom
Coast has done business during the preceding twelve (12) months.

 

(b)  Inducing Employees To Leave the Bank; Employment of
Employees.  Any attempt on the part
of the Executive to induce others to leave the Bank’s employ, or the employ of
any of its subsidiaries or affiliates, or any effort by the Executive to
interfere with the Bank’s relationship with its other employees would be
harmful and damaging to the Bank.  The
Executive agrees that during the Term of employment and for a period of twelve
(12) months thereafter, the Executive will not in any way, directly or
indirectly (i) induce or attempt to induce any employee of the Bank or any of
its subsidiaries of affiliates to quit employment with the Bank or the relevant
subsidiary or affiliate; (ii) otherwise interfere with or disrupt the
relationships between the Bank and its subsidiaries and affiliates and their
respective employees; (iii) solicit, entice, or hire away any employee of the
Bank or any of its subsidiaries or affiliates; or (iv) hire or engage any
employee of the Bank or any subsidiary or affiliate or any former employee of
the Bank or any subsidiary or affiliate whose employment ceased less than one
(1) year before the date of such hiring or engagement.

 

(c)  Nonsolicitation of Business.  The Executive agrees that, in the event he
is terminated without Cause and receives the payment required by Paragraph 8(d)
for a period of twelve (12) months form the date of termination of employment,
the Executive will not divert or attempt to divert from the Bank or any of its
subsidiaries or affiliates, any business the Bank or a subsidiary or affiliate
had enjoyed or solicited from its customers, borrowers, depositors or investors
during the twelve (12) months prior to termination of his employment.

 

(d)  Equitable Relief.  The Executive acknowledges and agrees that irreparable injury
will result to the Bank in the event of a breach of any of the provisions of
this Section 10 and that the Bank will have no adequate remedy at law with
respect thereto.  Accordingly, in the
event of a material breach of any part of this Section 10, and in addition to
any other legal or equitable remedy the Bank or its subsidiaries or affiliates
may have, the Bank and any relevant subsidiary or affiliate shall be entitled
to the entry of a preliminary and permanent injunction (including, without
limitation, specific performance) by a court of competent jurisdiction in San
Luis Obispo County, California, or elsewhere, to restrain the violation or
breach thereof by the Executive or any affiliates, agents, or any other persons
acting for or with the Executive in any capacity whatsoever, and the Executive
submits to the jurisdiction of such court in any such action.

 

(e)  Severability. 
It is the desire and intent of the parties that each of the provisions
of Section 10 shall be enforced to the fullest extent permissible under the
laws and public policies applied in each jurisdiction in which enforcement is
sought.  Accordingly, if any particular
provision in the provisions of Section 10 shall be adjudicated or found to be
invalid or

 

13

 

unenforceable, such provisions shall be deemed amended to delete therefrom
the portion thus adjudicated or found to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication or fining is made.  In addition, should any court or arbitrator
determine that any of the provisions of Section 10 shall be unenforceable with
respect to scope, duration, or geographic area, such court or arbitrator shall
be empowered to substitute, to the extent enforceable, provisions similar hereto
or other provisions so as to provide to the Bank, to the fullest extent
permitted by applicable law, the benefits intended by the particular paragraph
at issue.

 

(f)  Resignations. 
The Executive agrees that upon termination of employment, for whatever
reason, he will submit his resignations from all offices and directorships with
the Bank, Bancorp and all subsidiaries of it.

 

11.  Waivers.  Any waiver by a party of any breach of this
Agreement by the other party shall not be construed as a continuing waiver or
as a consent to any subsequent breach by the other party.

 

12.  Notices.  All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or registered mail, return
receipt requested, with postage prepaid, to the following addresses or to such
other address as either party may designate by like notice.

 

If to the Bancorp, to:

 

Coast Bancorp

500 Marsh Street

San Luis Obispo, California 93401

Attn: President

Facsimile: (805) 541-5758

 

If to Coast, to:

Coast National Bank

500 Marsh Street

San Luis Obispo, California 93401

Attn: President

Facsimile: (805) 541-5758

 

with a copy to:

 

Barnet Reitner, Esq.

REITNER & STUART

1319 Marsh Street

San Luis Obispo, California 93401

Facsimile: (805) 545-8599

 

14

 

If to Executive, to:

 

Jack C. Wauchope

c/o Coast National Bank

500 Marsh Street

San Luis Obispo, California 93401

 

and to such other or additional person or persons as either party shall
have designated to the other party in writing by like notice.

 

13.  Arbitration.  Any dispute or controversy arising or in
connection with this Agreement shall, upon written request of one party to the
other, be submitted to and settled exclusively by arbitration in the State of
California and be governed by the California Arbitration Act as set forth in
the California Code of Civil Procedure.  
Judgment may be entered on the arbitrator’s award in any court of
competent jurisdiction.  To the extent
allowable by law, the cost of such arbitration, including reasonable attorney’s
fees, shall be borne by the losing party or in such proportions as the
arbitrator(s) shall decide.  Arbitration
shall be the exclusive remedy of Executive and the Company and the award of the
arbitrator(s) shall be final and binding upon the parties.  All reasonable costs, including reasonable
attorney’s fees, incurred in enforcing an arbitration award in court, or of
seeking a court order to compel arbitration, shall be borne by the losing party
in such proceedings.

 

14.   Indemnification.   The Company will indemnify Executive to the
fullest extent permitted by the laws of the state of California and to the
extent not inconsistent with the foregoing, the Articles of Incorporation and
Bylaws of the Company as in effect on the date of the Change in Control of the
Company, in respect of all Executive’s services rendered to the Company and its
subsidiaries prior to the Date of Termination. 
Executive shall be entitled to the protection of any insurance policies
the Company now or hereafter maintains generally for the benefit of its
directors, officers and employees (but only to the extent of the coverage
afforded by the existing provisions of such policies) to protect against all
costs, charges and expenses whatsoever incurred or sustained by Executive in
connection with any action, suit or proceeding to which Executive may be made a
party by reason of his being or having been a director, officer or employee of
the Company or any of its subsidiaries during his employment therewith.

 

15.   General Provisions.

 

(a) Entire Agreement. 
This Agreement constitutes the entire agreement by the parties with
respect to the subject matter hereof, and supersedes and replaces all prior
agreements among or between the parties, unless otherwise provided herein.  No amendment, waiver or termination of any
of the provisions hereof shall be effective unless in writing and signed by the
party against whom it is sought to be enforced.  Any written amendment, waiver, or termination hereof executed by
Coast and Executive shall be binding upon them and upon all other Persons,
without the necessity of securing the consent of any other Person, and no
Person shall be deemed to be a third-party beneficiary under this Agreement.

 

15

 

(b) Counterparts.  This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and
the same Agreement.

 

(c) No Waiver.  Except as
otherwise expressly set forth herein, no failure on the part of any party
hereto to exercise and no delay in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.

 

(d) Headings.  The
headings of the Sections of this Agreement have been inserted for convenience
of reference only and shall in no way restrict or modify any of the terms or
provisions hereof.

 

(e) Severability.  If for
any reason any provision of this Agreement is held invalid or unenforceable,
such invalidity or unenforceability shall not affect the validity or
enforceability of any other provision of this Agreement.  If any provision of this Agreement shall be
held invalid or unenforceable in part, such invalidity or unenforceability shall
in no way effect the rest of such provision not held so invalid, and the rest
of such provision, together with all other provisions of this Agreement, shall
to the full extent consistent with law continue in full force and effect.

 

(f) Governing Law.  This
Agreement shall be governed and construed and the legal relationships of the
parties determined in accordance with the laws the United States and to the
extent not inconsistent therewith the laws of the State of California
applicable to contracts executed and to be performed solely in the State of
California.

 

(g) Assumption.  Coast
shall require any successor in interest (whether direct or indirect or as a
result of purchase, merger, consolidation, Change in Control or otherwise) to
all or substantially all of the business and/or assets of Coast to expressly
assume and agree to perform the obligations under this Agreement in the same
manner and to the same extent that Coast would be required to perform it if no
such succession had taken place.

 

(h) Advice of Counsel. 
Executive acknowledges that Coast has been represented by Reitner &
Stuart in connection with the preparation of the Agreement and that he has been
encouraged to consult with other legal counsel of his choosing concerning the
terms of this Agreement prior to executing this Agreement.  Any failure by Executive to consult with
competent counsel prior to executing this Agreement shall not be a basis for
rescinding or otherwise avoiding the binding effect of this Agreement.  The parties acknowledge that they are
entering into this Agreement freely and voluntarily, with full understanding of
the terms of this Agreement. 
Interpretation of the terms and provisions of this Agreement shall not
be construed for or against either party on the basis of the identity of the
party who drafted the terms or provisions in question.

 

16

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

 

 

	
  ATTEST:

  	
  COAST NATIONAL BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
  print name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
  COAST BANCORP

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
  print name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE EXECUTIVE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  
									

 

17Exhibit 10.43

 

AMENDMENT 2 TO EMPLOYMENT AGREEMENT

 

THIS AMENDMENT 2 (the “Amendment 2”),
dated as of December 11, 2003, is made by and between INTERLEUKIN
GENETICS, INC., a Delaware corporation (“Employer”),
and FENEL ELOI, an individual (“Employee”).  Employer and Employee are parties to an
Employment Agreement, dated June 18, 2000 (the “Employment Agreement”) and an Amendment to Employment
Agreement, dated March 5, 2003 (the “Amendment”).  Terms not otherwise defined in this
Amendment 2 shall have the meanings given to them in the Employment Agreement
and/or Amendment.

 

The parties agree as follows:

 

1.     This Amendment 2 shall be effective on this day,
December 11, 2003.

 

2.     In Section 2 of the Amendment, the Term is
extended to continue until three (3) years following the date of the Closing.

 

3.     In Section 3 of the Employment Agreement,
Employer shall pay to Employee beginning January 1, 2004 and continuing
through the remainder of the Term of this Amendment 2 a base salary (“Base
Salary”) of $250,000.00 per year, payable in equal monthly
installments.  The Base Salary may be
increased (but not decreased) annually at the Employer’s sole discretion
throughout the Term on each anniversary of the Effective Date in the discretion
of Employer’s Board.

 

4.     Except as amended, hereby, all of the terms and
conditions of the Employment Agreement and the Amendment to Employment
Agreement shall remain in full force and effect.  This Amendment shall be binding upon and inure to the benefit of
the parties hereto as of the date first above written.

 

 

	
  INTERLEUKIN GENETICS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Philip R. Reilly

  	
   

  	
  /s/ Fenel M. Eloi

  	
   

  
	
  By Philip R. Reilly

  	
  FENEL M. ELOI

  
	
  Its Chief Executive Officer

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