Executive Employment Agreement

EXECUTIVE EMPLOYMENT AGREEMENT


THIS EXECUTIVE EMPLOYMENT AGREEMENT (the "AGREEMENT") is made as of September 1, 1998 by and between the organizers (the "ORGANIZERS") of COASTAL BHC, INC., a to-be-formed Florida-incorporated bank holding company (the "COMPANY"), COASTAL COMMUNITY BANK, a commercial bank in organization under the laws of the State of Florida (the "BANK"), and HANS C. MUELLER, an individual residing in Miami, Florida (the "EXECUTIVE").


WHEREAS, the Executive has been offered the positions of President, Chief Executive Officer and Chairman of the Board of Directors of the Bank and the Company and will begin to serve in such capacities on the Effective Date (as herein defined);


WHEREAS, the Organizers of the Bank and the Company wish to assure the services of the Executive for the period provided for herein and the Executive is willing to serve as an executive officer of the Bank and the Company for said period upon the terms and conditions hereinafter provided; and


WHEREAS, the Organizers have determined that the best interests of the Bank, the Company and the Company's shareholders would be served by providing for the terms and conditions of the Executive's employment as set forth herein.


NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound hereby, the Organizers, on behalf of the Bank and the Company, and the Executive hereby agree as follows:


Section 1. DEFINITIONS. As used herein, the following terms shall have the meanings set forth below.


"BASE COMPENSATION" shall have the meaning set forth in Section 5(a).


"BOARD" means the incumbent Board of Directors of the Bank and the Company as of the point in time reference thereto is made in this Agreement.


"BUDGET" means an estimate of the Bank's revenues and expenditures for its first Fiscal Year of operation, and thereafter, as applicable.


"CAUSE" shall have the meaning set forth in Section 8(b).


"CHANGE OF CONTROL" shall have the meaning set forth in Section 8(e)(1)(B).


"COLA ADJUSTMENT" means the cost of living adjustment, which shall correspond to the percent rise in prices for the preceding year as measured by the Consumer Price Index For All Urban Consumers (CPI-U), U.S. City Average, All Items (base year 1982-1984 = 100) published by the United States Department of Labor, Bureau of Labor Statistics (the "Index"). The COLA


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Adjustment shall be determined by multiplying the amount or figure to be adjusted by a fraction, the numerator of which is the Index published for the month in which occurs the date of adjustment and the denominator of which is the Index published for the same month of the preceding year.


"COMMENCEMENT OF OPERATIONS" means the date on which the Bank and the Company commence operations, after receipt of all Regulatory Approvals.


"DISABILITY" of the Executive means that, as a result of the Executive's incapacity due to physical or mental illness, the Executive shall have been absent from his duties on a full-time basis for six consecutive months, or for an aggregate of nine months in any consecutive 12-month period, and a physician selected by the Executive is of the opinion that (a) he is suffering from "total disability" as defined in the Bank's disability insurance program or policy and (b) he will qualify for Social Security disability payments and (c) within 30 days after written notice thereof is given by the Bank to the Executive (which notice may be given at any time after the end of such six- or 12-month periods) the Executive shall not have returned to the performance of his duties on a full-time basis. (If the Executive is prevented from performing his duties because of Disability, upon request by the Bank, the Executive shall submit to an examination by a physician selected by the Bank, at the Bank's expense, and the Executive shall also authorize his personal physician to disclose to the selected physician such of the Executive's medical records that specifically pertain to the condition or illness causing the incapacity.)


"EMPLOYMENT PERIOD" shall have the meaning set forth in Section 2.


"EMPLOYMENT TERMINATION DATE" means the date the Employment Period terminates as provided in Section 8.


"FISCAL YEAR" means the fiscal year of the Bank, as applicable.


"INCENTIVE BONUS COMPENSATION" shall have the meaning set forth in Section 5(c).


"NOTICE OF TERMINATION" shall have the meaning set forth in Section 8(a)(1).


"ORGANIZATIONAL PERIOD" means the period beginning on the Effective Date and ending on the earlier of the Commencement of Operations or the date on which one or more of the Regulatory Approvals are denied or the efforts to secure such Regulatory Approvals are terminated or abandoned by the Board.


"PERSON" means any individual, sole proprietorship, general or limited partnership, joint venture, trust, unincorporated organization, association, corporation, institution, entity, party, limited liability company or government (whether territorial, national, federal, state, provincial, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof).


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"REGULATORY APPROVALS" means all required approvals of the state and federal banking regulators necessary for the Bank and the Company to operate their respective businesses, including, without limitation, the approvals of the Florida Department of Banking and Finance, the Federal Deposit Insurance Corporation, and the Board of Governors of the Federal Reserve System and the Securities and Exchange Commission.


"SCHEDULED EMPLOYMENT TERMINATION DATE" means the later of (a) the expiration of the Employment Period, as provided in Section 2, or (b) such date as is specified by either the Bank or the Executive in a Notice of Termination delivered for the purpose of fixing the Scheduled Employment Termination Date.


Section 2. EMPLOYMENT AND TERM. The Bank and the Company hereby employ the Executive, and the Executive hereby accepts such employment, for the purposes and upon the terms and conditions contained in this Agreement. Subject to the terms and conditions contained herein, the initial term of this Agreement shall be for an initial three-year period, commencing on September 1, 1998 (the "EFFECTIVE DATE") and ending on August 31, 2001. Thereafter, this Agreement shall be automatically renewed on its then-current terms and conditions for successive one-year extension terms unless either party hereto gives notice to the other party of its intent to terminate this Agreement at least 180 days prior to the expiration of the initial term or any extension term, as applicable. The initial term hereof and any extension term are referred to herein as the "EMPLOYMENT PERIOD."


Section 3. EMPLOYMENT CAPACITY AND DUTIES. The Executive shall be employed throughout the Employment Period as President, Chief Executive Officer and Chairman of the Board of the Bank and the Company. The Executive shall serve as Chairman of the Board upon his re-election to that position by the Board. The Executive shall have the duties and responsibilities incumbent with the positions of President, Chief Executive Officer and Chairman of the Board and shall render services to the Bank and the Company and in connection therewith shall perform such other duties, not inconsistent with the terms of this Agreement, as the Executive may reasonably be directed to perform by the Board. Accordingly, and not by way of limitation, the Executive shall coordinate and supervise the organization of the Bank and the Company, including developing the Bank's business plan, preparing all necessary regulatory applications, assisting in the subscription offering for the Company, and overseeing the commencement of the Bank's operations. Upon completion of the Bank's organization, the Executive shall attend all meetings of the shareholders of the Company and of the Board, supervise and manage the operations and business of the Bank and the Company and coordinate and supervise the work of its other officers and employees and perform all functions of a chief executive officer and a general manager of the Bank's and the Company's business. The Executive shall serve as a Board member upon his election as director by the shareholders and as a member of such committees as the Executive and the Baord may deem appropriate for the duration of the Employment Period. The Board may authorize any and all of the Executive's actions regarding the operation and/or business of the Bank and the Company for the duration of the Employment Period. The Bank and the Company agree that in the event that they relocate their principal executive offices to a location outside Miami, Florida without the Executive's


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written consent or require the Executive to be based anywhere other than such principal executive offices, except for required travel on the Bank's business, the Executive shall have the right, in his sole discretion, to terminate this agreement for good cause pursuant to Section 8(1)(c).


Section 4. EXECUTIVE PERFORMANCE COVENANTS. The Executive accepts the employment described in Section 3 and agrees to devote his full working time and efforts (except for absences due to illness and appropriate vacations) to the business and affairs of the Bank and the Company and the performance of the aforesaid duties and responsibilities. However, the Executive shall have the right to devote a reasonable amount of time and effort to civic, professional, community or charitable organizations, affairs and matters. The Executive may serve as a director of other companies during the Employment Period, subject to the terms and conditions of Section 8 herein and to applicable law and regulations.


Section 5. COMPENSATION. The Bank shall pay to the Executive for his services hereunder, the compensation provided for in this Section 5. The Executive shall not be entitled to any additional compensation from the Company. Such compensation shall be paid to the Executive at the time and in the manner as follows:


(a) BASE COMPENSATION. The Executive shall be paid "BASE COMPENSATION" for each Fiscal Year at an annual rate of One Hundred, Seventy Thousand Dollars ($170,000.00) (the "BASE COMPENSATION RATE"), payable in equal installments in accordance with the Bank's payroll policies, but in no event less frequently than two times per month; provided, however, during the Organizational Period, the Executive shall be paid at an annual rate of One Hundred, Twenty Thousand Dollars ($120,000). Upon the Commencement of Operations, the Executive shall receive a lump-sum payment of an amount equal to the difference between the salary actually received by the Executive during the Organizational Period and the salary that would have been payable during the Organizational Period if paid at the Base Compensation Rate.


(b) ANNUAL REVIEW OF COMPENSATION. During the Employment Period, the Executive's Base Compensation shall be reviewed on an annual basis. The first such review shall be made no later than the one-year anniversary of the date of Commencement of Operations and shall be conducted by the Bank's Board, or a committee designated by the Bank's Board, and such Board or committee, as applicable, may in its discretion, (i) increase (to reflect the Executive's performance and to maintain a compensation level comparable to that of similarly situated senior executives in the financial institutions industry), but not decrease, the Executive's Base Compensation then in effect to an amount greater than required subsequent to the COLA Adjustment; or (ii) shall be increased by the COLA Adjustment annually as of the beginning of each Fiscal Year, commencing with the first Fiscal Year beginning after the Commencement of Operations. The Base Compensation shall be pro-rated for any Fiscal Year hereunder that is less than a full Fiscal Year.


(c) INCENTIVE BONUS COMPENSATION. In addition to any and all compensation and benefits required or permitted to be made by the Bank to the Executive hereunder, the Executive


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(d) WARRANTS TO ACQUIRE COMPANY COMMON STOCK. Upon the Commencement of Operations, the Executive shall be granted 50,000 warrants (the "WARRANTS") to purchase shares of the Company's Common Stock. The Warrants shall be exercisable on any business day subsequent to the first anniversary of the Commencement of operations and for the 5-year period following the date that the Warrants first become exercisable at an exercise price per share equal to the lesser of (A) $10.00 per share or (B) the price per share offered to investors in the Company's initial subscription offering. The Warrant Agreement shall provide for typical anti-dilution adjustments.


(e) OPTIONS TO ACQUIRE COMPANY COMMON STOCK. Upon the Commencement of Operations, the Executive shall be granted 10,000 options to purchase shares of the Company's Common Stock (the "Options"). The Options shall be exercisable immediately. The Company shall grant to the Executive an additional 10,000 Options on the first, second, third and fourth anniversaries of the date of the Commencement of Operations, which Options shall be immediately exercisable. The Options shall be exercisable for a period of 10 years from the date of grant (notwithstanding any earlier termination of this Agreement or the Executive's employment hereunder) at an exercise price equal to the greater of $10.00 per share or fair market value of the Company's Common Stock on the date of grant. The Option Agreement shall provide for typical anti-dilution adjustments.


(f) INSURANCE PLAN. As of the Commencement of Operations, the Bank and the Company shall purchase for $147,000 the Executive's existing split-dollar life insurance policy, and shall thereafter assume all obligations and expenses related thereto for its maintenance. The Bank and the Company shall hold and maintain such policy, subject to the Executive's right to repurchase the policy in accordance with its terms. The Bank and the Company agree to reimburse the Executive for all costs and expenses (including, without limitation, all interest charges and expenses payable by the Executive related to the initial investment cost of the policy) and all other expenses associated with the maintenance of the policy during the Organizational Period and the purchase of the policy by the Bank and the Company as of the Commencement of Operations. The Executive shall cause the cash surrender value and the proceeds to be pledged to the Bank and the Company upon the purchase of the policy by the Bank and the Company. The Executive shall repurchase the policy from the Bank and the Company on __________ or within 90 days from the date on which the Executive's employment shall terminate for any reason.


Section 6. REIMBURSEMENT OF EXPENSES. The Bank shall reimburse the Executive for any and all expenses incurred in providing services to the Bank, including expenses for travel, entertainment and similar items, in accordance with the Bank's reimbursement policies as determined from time to time by th ...