BAY VIEW CAPITAL CORP
AGREE. BETWEEN BAY VIEW & COMPTROLLER
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>AGREE. BETWEEN BAY VIEW & COMPTROLLER
<TEXT>

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                           AGREEMENT BY AND BETWEEN
                              Bay View Bank, N.A.
                             San Mateo, California
                                      and
                 The Office of the Comptroller of the Currency

     Bay View Bank, N.A., San Mateo, California (Bank) and the Comptroller of
the Currency of the United States of America (Comptroller) wish to protect the
interests of the depositors, other customers, and shareholders of the Bank, and,
toward that end, wish the Bank to operate safely and soundly and in accordance
with all applicable laws, rules, and regulations.

     The Comptroller, through his National Bank Examiner, has examined the Bank,
and his findings are contained in a Letter to the Board of Directors, dated
August 11, 2000 (Letter).

     In consideration of the above premises, it is agreed, between the Bank, by
and through its duly elected and acting Board of Directors (Board), and the
Comptroller, through his authorized representative, that the Bank shall operate
at all times in compliance with the articles of this Agreement.



                                   ARTICLE I

                                  JURISDICTION
                                  ------------

     (1)  This Agreement shall be construed to be a "written agreement entered
into with the agency" within the meaning of 12 U.S.C. (S) 1818(b)(1).

     (2)  This Agreement shall be construed to be a "written agreement between
such depository institution and such agency" within the meaning of 12 U.S.C. (S)
1818(e)(1) and 12 U.S.C. (S) 1818(i)(2).

     (3)  This Agreement shall be construed to be a "formal written agreement"
within the meaning of 12 C.F.R. (S) 5.51(c)(6)(ii). See 12 U.S.C. (S) 1831i.
                                                    ---
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     (4)  This Agreement shall be construed to be a "written agreement" within
the meaning of 12 U.S.C. (S) 1818(u)(1)(A).

     (5)  All reports or plans which the Bank or Board has agreed to submit to
the Assistant Deputy Comptroller pursuant to this Agreement shall be forwarded
to the:

          Assistant Deputy Comptroller, Mid-Size Banks
          Southwestern District Office
          500 N. Akard Street, Suite 1600
          Dallas, Texas  75201-3342




                                  ARTICLE II

                                STRATEGIC PLAN
                                --------------

     (1)  Within ninety (90) days, the Board shall adopt, implement, and
thereafter ensure Bank adherence to a new written strategic plan for the Bank
covering at least a three-year period. The strategic plan shall establish
objectives for the Bank's overall risk profile, earnings performance, growth,
balance sheet mix, off-balance sheet activities, liability structure, capital
adequacy, reduction in the volume of nonperforming assets, product line
development, and market segments that the Bank intends to promote or develop,
together with strategies to achieve those objectives, and adequate contingency
plans should the stated objectives not be achieved. At a minimum, the strategic
plan shall include:

          (a)  a mission statement that forms the framework for the
               establishment of strategic goals and objectives;

          (b)  an assessment of the Bank's present and future operating
               environment;

          (c)  the development of strategic goals and objectives to be
               accomplished over the short and long term;

                                       2
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          (d)  an identification of the Bank's present and future product lines
               (assets and liabilities) that will be utilized to accomplish the
               strategic goals and objectives established in (1)(c) of this
               Article;

          (e)  an evaluation of the Bank's internal operations, staffing
               requirements, board and management information systems, and
               policies and procedures for their adequacy and contribution to
               the accomplishment of the goals and objectives developed under
               (1)(c) of this Article;

          (f)  systems to monitor the Bank's progress in meeting the plan's
               goals and objectives; and

          (g)  adequate contingency plans should the Bank not achieve the plan's
               goals and objectives.

     (2)  Upon adoption, a copy of the plan shall be forwarded to the Assistant
Deputy Comptroller for review and approval.

     (3)  The Board shall ensure that the Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the plan developed
pursuant to this Article.




                                  ARTICLE III

                    MANAGEMENT AND BOARD SUPERVISION STUDY
                    --------------------------------------

     (1)  Within sixty (60) days, the Board shall complete a study of current
management and Board supervision, the Bank's management structure, and its
staffing requirements in light of the Bank's present condition and its stated
strategic planning goals and objectives in Article II. The findings and
recommendations of the Board shall be set forth in a written report. At a
minimum, the report shall contain:

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          (a)  the identification of present and future management and staffing
               requirements of each area of the Bank;

          (b)  recommendations as to whether management or staffing changes
               should be made, including the need for additions to or deletions
               from the current management team;

          (c)  an assessment of whether Board members are receiving adequate
               information on the operation of the Bank to enable them to
               fulfill their fiduciary responsibilities and other
               responsibilities under law;

          (d)  recommendations to expand the scope, frequency, and sufficiency
               of information provided to the Board by management; and

          (e)  recommendations to correct or eliminate any other deficiencies in
               the supervision or organizational structure of the Bank.

     (2)  Within thirty (30) days of completion of this study, the Board shall
develop, implement, and thereafter ensure Bank adherence to a written plan, with
specific time frames, that will correct any deficiencies which are noted in the
study.

     (3)  The Board shall ensure that the Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the plan developed
pursuant to this Article.

     (4)  A written summary of the Board's plan and the Board's study shall be
forwarded to the Assistant Deputy Comptroller. The Assistant Deputy Comptroller
shall retain the right to determine the adequacy of the report and its
compliance with the terms of this Agreement. In the event the written plan, or
any portion thereof, is not implemented, the Board shall immediately advise the
Assistant Deputy Comptroller, in writing, of specific reasons for deviating from
the plan.

                                       4
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                                  ARTICLE IV

                        CAPITAL PLAN AND EARNINGS PLAN
                        ------------------------------

     (1)  Effective immediately, until approval of the Bank's new capital and
earnings programs by the Assistant Deputy Comptroller, the Bank shall not
declare or distribute any dividends without the prior written approval of the
Assistant Deputy Comptroller.

     (2)  Within ninety (90) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to a three-year capital program. The program
shall include:

          (a)  specific plans for the maintenance of adequate capital;

          (b)  projections for growth and capital requirements based upon a
               detailed analysis of the Bank's assets, liabilities, earnings,
               fixed assets, and off-balance sheet activities;

          (c)  projections of the sources and timing of additional capital to
               meet the Bank's current and future needs;

          (d)  the primary source(s) from which the Bank will strengthen its
               capital structure to meet the Bank's needs;

          (e)  contingency plans that identify alternative methods should the
               primary source(s) under (d) above not be available; and

          (f)  a dividend policy that permits the declaration of a dividend
               only:

               (i)    when the Bank is in compliance with its approved capital
                      program;

               (ii)   when the Bank is in compliance with 12 U.S.C. (S)(S) 56
                      and 60; and

               (iii)  with the prior written approval of the Assistant Deputy
                      Comptroller.

                                       5
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     (3)  Within ninety (90) days, the Board shall develop, implement, and
thereafter ensure Bank adherence to a new written earnings plan to improve and
sustain the earnings of the Bank. This plan shall include, at a minimum, the
following elements:

          (a)  identification of the major areas in and means by which the Board
               will seek to improve the Bank's operating performance;

          (b)  realistic and comprehensive budgets, including projected balance
               sheets and year-end income statements;

          (c)  a budget review process to monitor both the Bank's income and
               expenses, and to compare actual figures with budgetary
               projections; and

          (d)  a description of the operating assumptions that form the basis
               for major projected income and expense components.

     (4)  Upon completion, the Bank's capital and earnings programs shall be
submitted to the Assistant Deputy Comptroller for approval. Upon approval by the
Assistant Deputy Comptroller, the Bank shall implement and adhere to the capital
and earnings programs. The Board shall review and update the Bank's capital
program on an annual basis, or more frequently if necessary. The Board shall
forward comparisons of its balance sheet and profit and loss statement to the
earnings plan projections to the Assistant Deputy Comptroller on a quarterly
basis. Copies of the reviews and updates pursuant to this Article shall be
submitted to the Assistant Deputy Comptroller.

     (5)  The Board shall ensure that the Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the programs
developed pursuant to this Article.

                                       6
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                                   ARTICLE V

                                RISK MANAGEMENT
                                ---------------

     (1)  Within thirty (30) days, the Board shall review the Bank's risk
management program, including the charter, composition, and activities of the
Bank's Risk Management Committee. At a minimum, the written risk management
program should include the following:

          (a)  identification of existing credit, interest rate, liquidity,
               transaction, compliance, strategic, reputation, price, and
               foreign currency translation risks, and a written analysis of
               those risks;

          (b)  action plans and time frames to reduce risks where exposure is
               high, particularly with regard to credit risk, which impacts
               directly on liquidity, compliance, strategic, and reputation
               risks, as more fully discussed in the Letter, and other
               correspondence from the Comptroller;

          (c)  policies, procedures, or standards which limit the degree of risk
               the Board is willing to incur, consistent with the strategic plan
               and the Bank's financial condition. This includes analyzing and
               limiting the risks associated with any new lines of business
               which the Board undertakes. The procedures shall ensure that
               strategic direction and risk tolerances are effectively
               communicated and followed throughout the Bank and should describe
               the actions to be taken where noncompliance with risk policies is
               identified;

          (d)  systems to measure and control risks within the Bank. Measurement
               systems should provide timely and accurate risk reports by
               customer, by department or division, and bankwide as appropriate;
               and

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          (e)  procedures to ensure that Bank employees have the necessary
               skills to supervise effectively the current and the new business
               risks within the Bank, and procedures to describe the actions to
               be taken to address deficiencies in staff levels and skills.

The risk management program shall be consistent with the Large Bank Supervision
booklet, EP-LB, of the Comptroller's Handbook.
                       ----------------------

     (2)  Within thirty (30) days, the Board shall identify and appoint a
qualified individual as Risk Manager to implement the Bank's risk management
program. The Board shall ensure that the individual possesses the necessary risk
management experience and skills to adequately perform the required
responsibilities. This individual shall report to the Board of Directors of the
Bank and shall be independent of other Bank operations. Prior to the appointment
of an individual to this position, the Assistant Deputy Comptroller shall have
the power of veto over the appointment of this person. However, the failure to
exercise such veto power shall not constitute an approval or endorsement of the
proposed individual.

     (3)  Within thirty (30) days, the Board shall review management's adherence
to a program to reduce the high level of credit risk in the Bank. The program
shall include, but not be limited to:

          (a)  procedures to strengthen credit underwriting, particularly in the
               Bay View Franchise Mortgage Acceptance Corporation (BVFMAC) loan
               portfolio;

          (b)  procedures to strengthen management of BVFMAC operations and to
               maintain an adequate, qualified staff in all BVFMAC functional
               areas;

          (c)  procedures for strengthening collections; and

          (d)  an action plan to control loan growth in BVFMAC.

                                       8
<PAGE>

     (4)  The Board shall ensure that the Bank has processes, personnel, and
control systems to ensure implementation of and adherence to the program
developed pursuant to this Article.

     (5)  The requirement to submit information and the prior veto provisions of
this Article are based on the authority of 12 U.S.C. (S) 1818(b) and do not
require the Comptroller to complete his review and act on any such information
or authority within ninety (90) days.

     (6)  The Board shall submit a copy of the program to the Assistant Deputy
Comptroller.




                                  ARTICLE VI

                                INTERNAL AUDIT
                                --------------

     (1)  Within thirty (30) days, the Board shall adopt, implement, and
thereafter ensure Bank adherence to a new independent, internal audit program
sufficient to adequately monitor and evaluate the internal audit services
provided by its outsourced internal audit service provider, and shall assess the
impact on the Bank of any audit deficiencies cited in such reports. The Bank's
internal audit program shall be consistent with the requirements contained in
OCC Bulletin 98-1, Interagency Policy Statement on Internal Audit and Internal
                   -----------------------------------------------------------
Audit Outsourcing and the Internal and External Audits booklet (June 2000) of
-----------------
the Comptroller's Handbook.
    ----------------------

     (2)  The Board shall ensure that the Bank has processes, personnel, and
control systems, including a qualified and accountable Bank officer responsible
for oversight of the program, to ensure implementation of and adherence to the
program developed pursuant to this Article.

     (3)  The Board shall ensure that the audit program is independent. The
persons responsible for implementing the internal audit program described above
shall report directly to

                                       9
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the Board, or a committee thereof, that shall have the sole power to direct
their activities. All reports prepared by the audit staff shall be filed
directly with the Board and not through any intervening party.

     (4)  All audit reports shall be in writing. The Board shall ensure that
immediate actions are undertaken to remedy deficiencies cited in audit reports,
and that auditors maintain a written record describing those actions.

     (5)  The audit staff shall have access to any records necessary for the
proper conduct of its activities. National bank examiners shall have access to
all reports and work papers of the audit staff and any other parties working on
its behalf.

     (6)  Upon adoption, a copy of the internal audit program shall be promptly
submitted to the Assistant Deputy Comptroller.



                                  ARTICLE VII

                             INTERNAL LOAN REVIEW
                             --------------------

     (1)  Within thirty (30) days, the Board shall establish a new effective,
independent and ongoing loan review system to review, at least quarterly, the
Bank's loan and lease portfolios to assure the timely identification and
categorization of problem credits. The system shall provide for a written report
to be filed with the Board after each review and shall use a loan and lease
grading system consistent with the guidelines set forth in Section 215 of the
Comptroller's Handbook for National Bank Examiners. Such reports shall, at a
--------------------------------------------------
minimum, include conclusions regarding:

          (a)  the overall quality of the loan and lease portfolios;

          (b)  the identification, type, rating, and amount of problem loans and
               leases;

          (c)  the identification and amount of delinquent loans and leases;

                                       10
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          (d)  credit and collateral documentation exceptions;

          (e)  the identification and status of credit related violations of
               law, rule, or regulation;

          (f)  the identity of the loan officer who originated each loan
               reported in accordance with subparagraphs (b) through (e) of the
               Article;

          (g)  concentrations of credit;

          (h)  loans and leases to executive officers, directors, principal
               shareholders, and their related interests of the Bank; and

          (i)  loans and leases not in conformance with the Bank's lending and
               leasing policies, and exceptions to the Bank's lending and
               leasing policies.

     (2)  A written description of the program called for in this Article shall
be forwarded to the Assistant Deputy Comptroller upon implementation.

     (3)  The Board shall ensure that the Bank has processes, personnel, and
control systems, including a qualified and accountable Bank officer responsible
for oversight of the system, to ensure implementation of and adherence to the
program developed pursuant to this Article.

     (4)  The Board shall evaluate the internal loan and lease review report(s)
and shall ensure that immediate, adequate, and continuing remedial action, if
appropriate, is taken upon all findings noted in the report(s).

     (5)  A copy of the reports submitted to the Board, as well as documentation
of the action taken by the Bank to collect or strengthen assets identified as
problem credits, shall be preserved in the Bank.

                                       11
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                                 ARTICLE VIII

                         TRANSACTIONS WITH AFFILIATES
                         ----------------------------

     (1)  The Bank shall comply with applicable laws and regulations pertaining
to transactions with affiliates, including Sections 23A and 23B of the Federal
Reserve Act ("FRA") (12 U.S.C. (S)(S) 371c and 371c-1).

     (2)  The Bank shall, consistent with safe and sound banking practices,
immediately take action to correct any violations of Sections 23A and 23B of the
FRA.

     (3)  Within thirty (30) days, the Board shall establish, implement, and
thereafter ensure Bank adherence to a written policy and procedures to prevent
future violations of Sections 23A and 23B of the FRA.

     (4)  The Board shall ensure that the Bank has policies, processes,
personnel, and control systems to ensure implementation of and adherence to the
procedures developed pursuant to this Article.



                                  ARTICLE IX

                                    CLOSING
                                    -------

     (1)  Although the Board has agreed to submit certain programs and reports
to the Assistant Deputy Comptroller for review or approval, the Board has the
ultimate responsibility for proper and sound management of the Bank.

     (2)  In each instance in this Order in which the Board is required to
ensure adherence to, and undertake to perform certain obligations of the Bank,
it is intended to mean that the Board will:

                                       12
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          (i)    authorize and adopt such actions on behalf of the Bank as may
be necessary for the Bank to perform its obligations and undertakings under the
terms of this Agreement;

          (ii)   require the timely reporting by Bank management of such actions
directed by the Board to be taken under the terms of this Agreement;

          (iii)  follow-up on any non-compliance with such actions in a timely
and appropriate manner; and

          (iv)   require corrective action be taken in a timely manner of any
non-compliance with such actions.

     (3)  It is expressly and clearly understood that if, at any time, the
Comptroller deems it appropriate in fulfilling the responsibilities placed upon
him by the several laws of the United States of America to undertake any action
affecting the Bank, nothing in this Agreement shall in any way inhibit, estop,
bar, or otherwise prevent the Comptroller from so doing.

     (4)  Any time limitations imposed by this Agreement shall begin to run from
the effective date of this Agreement. Such time requirements may be extended in
writing by the Assistant Deputy Comptroller for good cause upon written
application by the Board.

     (5)  The provisions of this Agreement shall be effective upon execution by
the parties hereto and its provisions shall continue in full force and effect
unless or until such provisions are amended in writing by mutual consent of the
parties to the Agreement or excepted, waived, or terminated in writing by the
Comptroller.

     IN TESTIMONY WHEREOF, the undersigned, authorized by the Comptroller, has
hereunto set his/her hand on behalf of the Comptroller.

                                       13
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/s/ John Robinson                                                 9/6/00
--------------------------                              ------------------------
John Robinson                                           Date
Deputy Comptroller
Western District Office


     IN TESTIMONY WHEREOF, the undersigned, as the duly elected and acting Board
of Directors of the Bank, have hereunto set their hands on behalf of the Bank.


/s/ Paula R. Collins                                              9/6/00
--------------------------                              ------------------------
Paula R. Collins                                        Date


--------------------------                              ------------------------
Roger K. Easley                                         Date


/s/ Thomas M. Foster                                              9/6/00
--------------------------                              ------------------------
Thomas M. Foster                                        Date


/s/ John R. McKean                                                9/6/00
--------------------------                              ------------------------
John R. McKean                                          Date


/s/ Angelo J. Siracusa                                            9/6/00
--------------------------                              ------------------------
Angelo J. Siracusa                                      Date


/s/ Edward H. Sonker                                              9/6/00
--------------------------                              ------------------------
Edward H. Sonker                                        Date



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