Except as indicated, the address of each of the persons listed below is c/o Community West Bancshares, 445 Pine Avenue, Goleta, CA 93117.
The Company's Bylaws provide that the authorized number of Directors will be not less than six nor more than eleven, with the exact number of Directors to be fixed from time to time by resolution of a majority of the Board or by resolution of the shareholders. The Board of Directors last fixed at ten the authorized number of Directors and, on February 25, 2016, approved that the number will be fixedJuly 27, 2017 at eight as of May 26, 2016, the date of the Annual Meeting.ten.
Pursuant to NASDAQ Stock Market LLC (NASDAQ) Listing Rules, the Board has made an affirmative determination that the following members of the Board are “independent” within the meaning of such rules: Robert H. Bartlein, Jean W. Blois, Dana L. Boutain, Tom L. Dobyns, John D. Illgen, James W. Lokey, Shereef Moharram, William R. Peeples and Kirk B. Stovesand. As such, pursuant to NASDAQ Listing Rules and Rule 10A-3 of the Securities Exchange Act of 1934 (Exchange Act), a majority of the members of the Board and all the members of the Audit Committee are “independent” as so defined.
Jean W. Blois (Age 88)92)
Mrs. Blois has been a member of the Board of CWBC since its inception in 1997 and a founder and Director of CWB since 1989. She is ChairmanChairwoman of CWB’s Compensation Committee and a member of CWB’s Asset/Liability Committee. She co-founded Blois Construction, Inc. and served in a financial capacity before retirement. She formed her own consulting firm, Jean to the Rescue. Mrs. Blois graduated with a BSB.S. from the Haas School of Business at the University of California, Berkeley. She served as a Trustee of the Goleta Union School District for 13 years, a Director of the Goleta Water District for 10 years and a council member for the City of Goleta for 6 years, including terms in 2005 and 2007 as Goleta Mayor.
John D. Illgen (Age 71)75)
Mr. Illgen has been a member of the Board of CWBC since its inception in 1997 and a founder and Director of CWB since 1989. He is Secretary of the Board of CWBC and a member of CWBC’s Nominating and Corporate Governance, and Audit Committees, and Chairman of CWB’s Asset/Liability Committee, and a member of CWB’s Compensation Committee. Mr. Illgen iswas Sector Director and Vice President for Modeling and Simulation with Northrop Grumman Information Systems.Systems until January 2018. He was Founder (1988), President and Chairman of Illgen Simulation Technologies, Inc. until its merger with Northrop Grumman Corporation in December 2003. Mr. Illgen is Chairman Emeritus of the Board of Directors of the National Defense Industrial Association and appeared on television with the late General (Ret) Alexander Haig on “21st CenturyWorld Business and Health”Review” as an industry expert in information systems, modeling and simulation and other technologies. Mr. Illgen is on the Advisory Board of the Santa Barbara Scholarship Foundation and is a Past President of Goleta Rotary Club. In 2012, Mr. Illgen received the International award, “Modern Day Technology Leader” from the BEYA for his contributions to the Modeling and Simulation domain.
James W. Lokey (Age 68)72)
Mr. Lokey has been a member of the Board of CWBC and CWB since June 2015. He is a member of CWBC’s Audit Committee, Executive Committee and CWB’s LoanCredit Committee. Mr. Lokey has more than 42 years of bank management experience including as Chairman of the Board and Chief Executive Officer of Mission Community Bancorp (2010-2014); President of Rabobank, N.A. (2007-2009); President and Chief Executive Officer of Mid-State Bank & Trust (2000-2007); President and Chief Executive Officer of Downey Savings (1997-1998); Executive Vice President of First Interstate Bank/Wells Fargo Bank (1973-1996) and Past Chairman of the California Bankers Association. He has significant ties in the communities of the Central Coast, including serving as a member of the President’s Cabinet at Cal Poly State University in San Luis Obispo; a Director of Cal Poly Corporation and Chairman of its investment committee; and Director of French Hospital Medical Center. Since retiring in 2014, Mr. Lokey has been active as a consultant and featured speaker regarding director education, enterprise risk management, and mergers and acquisitions.
Mr. Moharram was named to the Boards of CWBC and CWB in December 2011, and is a member of CWB’s Asset/Liability Committee. Mr. Moharram is a partner with the law firm Price Postel & Parma LLP in Santa Barbara, where he specializes in real estate law. Mr. Moharram holds a BAB.A. in English Literature from the University of California, Santa Barbara, and a JD from the UCLA School of Law.
William R. Peeples (Age 73)77)
Mr. Peeples is Chairman of the Board of CWBC and a founder and Director of CWB since 1989. Mr. Peeples is Chairman of CWBC’s Nominating and Corporate Governance Committee and serves on CWB’s Executive, Compensation and Management Succession Committees and served on the Loan Committee until January 2014. Mr. Peeples served as Interim President and Chief Executive Officer of CWBC from July 29, 2011 until March 22, 2012.Committees. Mr. Peeples served in various financialexecutive capacities, including as President and Chief Financial Officer of Inamed Corporation from 1985 to 1987. He also was a founder and Chief Financial Officer of Nusil Corporation and Imulok Corporation from 1980 to 1985. Mr. Peeples has been active as a private investor and currently serves as Managing General Partner of two real estate partnerships. Mr. Peeples holds a BBA from the University of Wisconsin – Whitewater, and an MBA from Golden Gate University, Air Force on-base program.
Martin E. Plourd (Age 58)62)
Mr. Plourd has been President, Chief Executive Officer and a member of the Board of CWB since November 2, 2011 and President, Chief Executive Officer and member of the Board of CWBC since March 2012. He was Vice President of CWBC from November 2011 until March 2012. Mr. Plourd serves on CWB’s Loan,Credit, Asset/Liability and Management Succession Committees and is a member of the Management Disclosure Committee. He has been in banking for over 3038 years and has been a bank executive for over 20 years. From July 2009 to October 2011, he worked as a private consultant with banks on engagements concerning strategic planning, acquisitions and compliance issues. From July 2005 to July 2009, Mr. Plourd served first as Chief Operating Officer and then as President and Director of Temecula Valley Bank. Prior to that, he spent 18 years with RabobankRabobank/Valley Independent Bank in El Centro, including his last position as Executive Vice President and Community Banking Officer. Mr. Plourd is aan executive board member of the Western Bankers Association and Goleta Valley Cottage Hospital Foundation Board, member for the Goleta Chamber of Commerce, an Advisory Boardboard member for the College of Agriculture at California State Polytechnic University, Pomona (Cal Poly) and is a member of the Goleta Rotary Club. Mr. Plourd is a graduate of Stonier Graduate School of Banking and Cal Poly.
Kirk B. Stovesand (Age 53)57)
Mr. Stovesand has been a member of the Board of CWBC and CWB since May 2003. Mr. Stovesand is Chairman of CWBC’s Audit Committee and serves on CWB’s Asset/Liability, and LoanCredit Committees and is Secretary of CWB’s Board. He is a partner of Walpole & Co., founded in 1974, which is a Certified Public Accounting and Consulting firm. Mr. Stovesand has served on the boards of both for-profit and not-for-profit organizations. He is a graduate of the University of California Santa Barbara with a degree in Business Economics. Mr. Stovesand received a Masters Degree in Taxation from Golden Gate University and a Master Certificate in Global Business Management from George Washington University. He is a Certified Financial Planner, certified in mergers and acquisitions, and a member of the American Institute of Certified Public Accountants.
The following sets forth, as of the Record Date, the names and certain other information concerning current executive officers of the Company, in addition to the executive officerother than for Martin E. Plourd, who is nominated for election as a Directorcurrent director and whose biographical information is provided above.nominee.
Charles G. Baltuskonis (Age 65)- 9 -
Mr. Baltuskonis, Executive Vice President and Chief Financial Officer of CWBC and CWB, has been with the Company since November 17, 2002. He is a member of the Management Disclosure Committee. Mr. Baltuskonis served as Senior Vice President and Chief Accounting Officer of Mego Financial Corporation from 1997 to 2002, and Senior Vice President and Controller of TAC Bancshares from 1995 to 1997. Prior to that, he was Chief Financial Officer of F&C Bancshares and of First Coastal Corporation and a Senior Manager with the public accounting firm of EY, specializing in services to financial institutions. Mr. Baltuskonis is a certified public accountant; a member of the American Institute of Certified Public Accountants, Financial Managers Society, including a past member of the Financial Institutions Accounting Committee, and completed a 5-year term on the Board of Directors of Goleta Valley Chamber of Commerce. Mr. Baltuskonis holds a BS from Villanova University.
William F. Filippin (Age 52)56)
Mr. Filippin, Executive Vice President and Chief Banking Officer of CWB, has been with the Company since June 1, 2015. Prior to joining the Company, Mr. Filippin served with Heritage Oaks Bank (and Mission Community Bank until it was merged into Heritage Oaks Bank in February 2014) as Market Area President from March 2012 to May 2015; Executive Vice President and Chief Credit Officer from August 2010 to March 2012; and, Senior Vice President and Credit Administrator from April 2009 to August 2010. Mr. Filippin is a founding member of the Paso Robles Optimist Club, served as President of the Paso Robles Kiwanis Club, and Chairman of the Arroyo Grande Chamber of Commerce. He holds degrees in Agriculture Business Management from Cal Poly San Luis Obispo and from The Graduate School of Banking at the University of Wisconsin-Madison.
7Susan C. Thompson (Age 57)
Charles E. KohlMs. Thompson, Executive Vice President and Chief Financial Officer of CWBC and CWB, has been with the Company since June 2013. Ms. Thompson previously served as Senior Vice President and Controller/Principal Accounting Officer at Western Alliance Bancorporation and prior to that as Senior Vice President and Controller of Pacific Capital Bancorporation. Ms. Thompson is an alumni of the public accounting firm of Deloitte specializing in their financial services practice. Ms. Thompson is a certified public accountant and a member of the Financial Managers Society. Ms. Thompson is a graduate of Pacific Coast Banking School and holds a Bachelor of Science degree in accounting from the University of Utah.
Timothy J. Stronks (Age 69)51)
Mr. Kohl,Stronks, Executive Vice President and Chief Operating Officer of CWB, has been with the Company since December 1, 2014.July 2018. Mr. Kohl was with 1st Enterprise Bank in Los AngelesStronks previously served as Senior Vice President, Deputy Director of Operations where he was responsible for all bank operations, IT departmentwith Rabobank and the division’s product strategies and strategic planning. Priorprior to that as Executive Vice President for Pacific Premier Bank and Executive Vice President, Chief Information Officer of Heritage Oaks Bank (which was acquired by Pacific Premier Bank in March 2017). Mr. Kohl was Deputy Managing DirectorStronks also previously held various positions at Business First National Bank (acquired by Heritage Oaks Bank) in Santa Barbara, CA and Santa Barbara Bank and Trust. Mr. Stronks is a Certified Information Security Manager and serves on the board of the Science and Engineering Council of Santa Barbara. Mr. Stronks is a graduate of Pacific Coast Banking Services DivisionSchool, holds a Bachelor of Imperial Capital Bank/City National Bank for five years. Mr. Kohl attendedArts degree in International Political Science and Slavic Languages and Literatures from the University of Wisconsin’sCalifornia at Santa Barbara, and an MBA program and holds a Bachelor’s Degree in Business AdministrationIT Management from Milton College. He also earned a black belt and Masters certificate from Villanova University in Six Sigma, a data-driven, quality-control process management system. Western Governors University.
Paul S. Ulrich (Age 68)
Mr. Kohl has been an active participant in CUNA Operations and Sales and Service Council and is a member of the International Association of Financial Crimes Investigators.
Kristine D. Price (Age 65)
Ms. Price,Ulrich, Executive Vice President and Chief Credit Officer of CWB joinedhas been with the Company onsince July 31, 2014. Prior2018. Mr. Ulrich previously served as Senior Vice President and Chief Credit Officer at Evans Bank N.A. from 2015 to joining the Company, Ms. Price held various executive positions within Western Alliance Bancorporation, a multi-billion dollar bank holding company. From May 2006 through July 2014, Ms. Price served in the following capacities:2017, Executive Credit Officer, Senior Risk Advisor for Charter Strategies LLC from 2013 to 2015, Executive Vice President and Chief Credit Officer of Torrey Pines Bank; Executive Vice Presidentat Hudson Valley Bank N.A. (which merged with Sterling National Bank in 2014) from 2010 to 2013, and Chief Credit Officer for Western Alliance Bancorporation’s subsidiary, Bank of Nevada; Senior Vice President, and Senior Credit Officer, National Capital Markets and Commercial Real Estate with First Tennessee Bank N.A. from 2007 to 2010. Mr. Ulrich graduated from Hofstra University with a Bachelor of Western Alliance Bancorporation;Arts in Political Science/Economics and Executive Vice President and Senior Credit Administrator of Torrey Pines Bank. From 2010 through 2013, she was Director on the national Board for the Riskhas an MBA in Financial Management Association (RMA) and a member of the Board’s Community Bank Council. She received her undergraduate degree in Economics from San Diego State University and is a graduate of the Pacific Coast Banking School.Fairleigh Dickinson University.
Specific Experience, Qualifications, Attributes and Skills of Directors
The Nominating and Corporate Governance Committee (NCGC) has reviewed with the Board the specific experience, qualifications, attributes and skills of each Director, including each nominee for election as a Director at the Annual Meeting. The NCGC has concluded that each Director has the appropriate skills and characteristics required of Board membership, and each possesses an in-depth knowledge of the Company’s business and strategy. The NCGC further believes that our Board is composed of well-qualified and well-respected Directors who are prominent in business, finance and the local community. The experience and key competencies of each Director, as reviewed and considered by the NCGC, are set forth below.
Robert H. Bartlein. As President of Bartlein & Company, Inc., Mr. Bartlein has substantial real estate experience with broad business exposure. He is knowledgeable in real estate transactions, real estate law, credit analysis, accounting, income tax law and finance. Mr. Bartlein is particularly familiar with the Central Coast real estate market and is active in the community. He is a founder and has served on the Bank Board since its inception.
Jean W. Blois. Mrs. Blois has experience starting and operating her own business in Goleta. She has served for numerous years on the Goleta City Council, including two terms as that city’s Mayor, and has substantial community involvement. Mrs. Blois is a founder and has served on the Bank Board since its inception.
Dana L. Boutain. Mrs. Boutain has a broad financial background and serves as managing director of an accounting and consulting firm. Her expertise is in consulting, transaction structuring and financial statement compilations and reviews, including assisting clients in developing banking relationships and banking transactions. She primarily services clients in construction, manufacturing, government providers, oilfield services, transportation and real estate. Mrs. Boutain is active on boards of for-profit and not-for-profit organizations.
Tom L. Dobyns. Mr. Dobyns has extensive experience in bank management serving in various executive management capacities including as Chief Executive Officer. Mr. Dobyns consults banks in leadership and executive coaching. Mr. Dobyns is active on several community-based not-for-profit boards.
John D. Illgen. As founder and Chief Executive Officer of Illgen Simulation Technologies, Inc., until sold to Northrop Grumman, Mr. Illgen has a national reputation in technology, defense and model simulations, and broad business experience. He has strong expertise in cyber security modeling and simulation and has chaired sessions at symposiums on this subject. He continues to be published on technology and is a frequent symposium speaker. Mr. Illgen is a founder and has served on the Bank Board since its inception.
James W. Lokey. Mr. Lokey has spent virtually his entire career serving the banking industry, including many years as Chairman and Chief Executive Officer. He is extremely knowledgeable with the San Luis Obispo business community and banking market.
Shereef Moharram. Mr. Moharram is an attorney, specializing in real estate and is very active in the local community. The Company believes Mr. Moharram’s legal and real estate background will beis pertinent in addressing numerous Board issues.
William R. Peeples. Mr. Peeples has substantial experience in finance, including positions as a Chief Financial Officer, and has expertise in capital raising, venture capital, business combinations, real estate and broad business exposure. As previously noted, Mr. Peeples also served as interim President and Chief Executive Officer of CWBC. He is active in the local community. Mr. Peeples is a founder and has served on the Bank Board since its inception.
Martin E. Plourd. As President, Chief Executive Officer and a Director of the Bank and the Company, and through numerous executive positions Mr. Plourd has held in his banking career, he has a substantial financial services’ background, including management, lending, marketing and bank operations. This experience enables Mr. Plourd to provide the Company with effective leadership in the conduct of its business and strategic initiatives. He is active in the community and also has served in executive positions in the banking industry.
Kirk B. Stovesand. Mr. Stovesand has a broad financial background and serves as a partner of an accounting and consulting firm. He has a CPA, a CFP and a Masters in taxation. Mr. Stovesand is active on boards of for-profit and not-for-profit organizations.
Material Litigation Involving Directors and Executive Officers
As of the date of this Proxy Statement, none of the Company’s Directors and/or Executive Officers is involved in any material proceeding as a party that is adverse to the Company or CWB or has a material interest adverse to the Company or CWB. In addition, none of the Company’s Directors and/or Executive Officers have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) during the ten year period prior to the date of this Proxy Statement.
Significant Employees
Although the Company and CWB considers each of their employees to be integral to the success of their respective operations in light of their individual contributions to the enterprise, as of the date of this Proxy Statement, neither the Company nor CWB has any “significant employees” within the meaning of Item 401(c) of SEC Regulation SK.S-K.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
Meetings and Committees
The Company’s Board met 13 times (12 regular meetings and one special meeting) during the year ended December 31, 2015,2019, and had the following standing committees of the Company or the Bank that met during the year: Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. In addition, the Company’s Directors served on the Board of Directors of CWB, including the various committees established by CWB. During 2015,2019, none of the Company’s Directors attended less than 75% of the Company’s Board meetings and meetings of committees on which they served. All Board members with the exception of James R. Sims, Jr., attended the 20152019 Annual Meeting of Shareholders.
CWBC’s Audit Committee is currently composed of four independent Directors: Messrs. Stovesand, Illgen, Lokey, and Onnen. As previously noted, Mr. Onnen will not stand for re-election at the 2016 Annual Meeting.Mrs. Boutain. This Committee is responsible for review of all internal and external examination reports and selection of the Company’s independent auditors. The Audit Committee met 1213 times during 2015.2019.
CWBC’s Nominating and Corporate Governance Committee is composed of three independent Directors: Messrs. Peeples, Bartlein, and Illgen. The Committee is responsible for recommendations regarding the Board’s composition and structure and policies and processes regarding overall corporate governance. The Committee met two timesone time during 2015.2019.
CWB’s Compensation Committee is composed of fourfive independent Directors: Mrs. Blois and Messrs. Bartlein, Dobyns, Illgen and Peeples. The Committee is responsible for determining executive compensation. This Committee met threetwo times, including at least once in each six-month period, during 2015.2019.
Board Leadership Structure and Role in Risk Oversight
The position of Chairman of the Board is separate from the position of Chief Executive Officer for each of the Company and CWB. William R. Peeples, a non-employee independent Director, has been elected as the Chairman of the Company and Robert H. Bartlein, a non-employee independent Director, has been elected as the Chairman of CWB. Martin E. Plourd is serving as President and Chief Executive Officer of the Company and CWB. Separating these positions allows the Chief Executive Officer to focus on day-to-day business, while allowing the Chairman of the Boards of each of the Company and CWB to lead the respective Boards in their fundamental role of providing advice to and independent oversight of management. The Board recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required for those individuals to serve as the Company and Bank Chairman, particularly as the Board’s oversight responsibilities continue to grow. While the Company’s bylaws and corporate governance guidelines do not require that the Company’s Chairman and Chief Executive Officer positions be separate, the Board believes that having separate positions and having independent outside Directors serve as the Chairman of each of the Company and CWB is the appropriate leadership structure for the Company at this time and demonstrates the Company’s commitment to good corporate governance.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. The Company faces a number of risks, including economic risks, environmental, cybersecurity, and regulatory risks, and others, such as the impact of competition. Management is responsible for the day-to-day management of risks the Company faces, while the Board, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
The Board believes that establishing the right “tone at the top” and that full and open communication between management and the Board of Directors is essential for effective risk management and oversight. The Company’s Chairman and CWB’s Chairman meet regularly with the President and Chief Executive Officer and other senior officers to discuss strategy and risks facing the Company. Senior management is available to address any questions or concerns raised by the Board on risk management-relatedmanagement and any other matters. Periodically, the Board of Directors receives presentations from senior management on strategic matters involving the Company’s operations. The Board holds strategic planning sessions with senior management to discuss strategies, key challenges and risks and opportunities for the Company.
While the Board is ultimately responsible for risk oversight at the Company, the Board’s various standing committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and discusses policies with respect to risk assessment and risk management. Risk assessment reports are regularly provided by management to the Audit Committee. The Compensation Committee of the Board assists the Board in fulfilling its oversight responsibilities with respect to the management of risks arising from compensation policies and programs. The Nominating and Corporate Governance Committee of the Board assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our Directors and executive officers and corporate governance.
Shareholder Communication with Directors
Shareholders may communicate directly with the Board by writing to:
William R. Peeples, Chairman of the Board of Directors
Community West Bancshares
445 Pine Avenue
Goleta, CA 93117-3709
Audit Committee Report
The Report of the Audit Committee of the Board will not be deemed filed under the Securities Act of 1933, as amended (Securities Act) or under the Exchange Act.
The Board maintains ana separately designated standing Audit Committee currentlywithin the meaning of Section 3(a)(58) of the Exchange Act. The Audit Committee is comprised of four of the Company’s Directors, each of whom meet the independence and experience requirements of the NASDAQ Listing Rules.Rules and Rule 10A-3(b)(1) of the Exchange Act. The Audit Committee assists the Board in monitoring the accounting, auditing and financial reporting practices of the Company. The Audit Committee operates under a written Charter, which is assessed annually for adequacy. The Audit Committee Charter was last ratified on October 22, 2015.in February 27, 2020. There were no material changes. A copy of the Charter iswas included as Appendix A to thisthe 2018 Proxy Statement.Statement as filed with the SEC on April 8, 2019.
Based on the attributes, education and experience requirements under the NASDAQ Listing Rules, the requirements set forth in section 407 of the Sarbanes-Oxley Act of 2002 and associated regulations, the Board has identified Kirk B. Stovesand as an “Audit Committee Financial Expert” as defined under Item 407 (d) (5) of Regulation S-K, and has determined him to be independent.
Management is responsible for the preparation of the Company’s financial statements and financial reporting process, including its system of internal controls. In fulfilling its oversight responsibilities, the Audit Committee:
| · | Reviewed and discussed with management the audited financial statements contained in the Company’s Annual Report on Form 10-K for fiscal 2015; and |
Reviewed and discussed with management the audited financial statements contained in the Company’s Annual Report on Form 10-K for fiscal 2019; and
| · | Obtained from management their representation that the Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States. |
Obtained from management their representation that the Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States.
The Company’s 20152019 independent auditor, RSM US LLP (RSM), was responsible for performing an audit of the Company’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB) and expressing an opinion on whether the Company’s financial statements present fairly, in all material respects, the Company’s financial position and results of operations for the periods presented and conform with accounting principles generally accepted in the United States. In fulfilling its oversight responsibilities, the Audit Committee:
| · | Discussed with RSM the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the PCAOB in Rule 3200T; and |
Discussed with RSM the matters required to be discussed by Statement on Auditing Standards No. 1301, Communications with Audit Committees (AS 1301); and
| · | Received and discussed with RSM the written disclosures and the letter from RSM required by applicable requirements of PCAOB regarding RSM’s communications with the Audit Committee concerning independence, and reviewed and discussed with RSM whether the rendering of the non-audit services provided by them to the Company during fiscal 2015 was compatible with their independence. |
Received and discussed with RSM the written disclosures and the letter from RSM required by applicable requirements of PCAOB regarding RSM’s communications with the Audit Committee concerning independence, and reviewed and discussed with RSM whether the rendering of the non-audit services provided by them to the Company during fiscal 2019 was compatible with their independence.
In addition, the Company received a letter from RSM to the effect that RSM’s audit of the Company was subject to its quality control system for the United States accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards, that there was appropriate continuity of RSM personnel working on the audit and the availability of national office consultation.
In performing its functions, the Audit Committee acts only in an oversight capacity. It is not the responsibility of the Audit Committee to determine that the Company’s financial statements are complete and accurate, are presented in accordance with accounting principles generally accepted in the United States or present fairly the results of operations of the Company for the periods presented or that the Company maintains appropriate internal controls. Further, it is not the duty of the Audit Committee to determine that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards or that the Company’s auditors are independent.
Based upon the reviews and discussions described above, and the report of RSM, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20152019 for filing with the Securities and Exchange Commission.SEC.
| THE AUDIT COMMITTEE |
|
|
| Kirk B. Stovesand, Chairman |
| Dana L. Boutain |
| John D. Illgen |
| James W. Lokey |
| Eric Onnen |
Dated: February 25, 201627, 2020 |
|
Nominating and Corporate Governance Committee
The Company’s Nominating and Corporate Governance Committee (NCGC) was established in February 2004 and the committee charter (Charter) is annually assessed and was last ratified on October 22, 2015.February 27, 2020. A copy of the Charter, as amended is included as Appendix BA to this Proxy Statement. The NCGC, consisting of three independent Directors, makes recommendations to the Board regarding the Board’s composition and structure, nominations for elections of Directors, and policies and processes regarding principles of corporate governance to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders. The NCGC reviews the qualifications of, and recommends to the Board, candidates as additions, or to fill Board vacancies, if any were to occur during the year.
The NCGC will consider, as part of its nomination process, any Director candidate recommended by a shareholder of the Company who follows the procedures in this Proxy Statement shown under the heading “2017“2020 Shareholder Proposals” set forth below. The NCGC will follow the processes in the Charter when identifying and evaluating overall Board composition and individual nominees to the Board.
Additional information regarding (i) the NCGC’s policy with regard to the consideration of any Director candidates recommended by security holders and related procedures to be followed by security holders in submitting such recommendations, (ii) minimum qualifications of Director candidates, and (iii) the NCGC’s process for identifying and evaluating nominees for Directors, is incorporated herein by reference to the Charter.
The NCGC determines the required selection criteria and qualifications of Director nominees based upon the Company’s needs at the time nominees are considered. In general, Directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of the Company’s shareholders. In addition to the foregoing considerations, the NCGC will consider criteria such as strength of character and leadership skills; general business acumen and experience; broad knowledge of the industry; number of other board seats; and, willingness to commit the necessary time to ensure an active board whose members work well together and possess the collective knowledge and expertise required by the Board. The NCGC considers these same criteria for candidates regardless of whether the candidate was identified by the NCGC, by shareholders, or any other source.
The goal of the NCGC is to seek to achieve a balance of knowledge and experience on the Company’s Board. To this end, the NCGC seeks nominees with the highest professional and personal ethics and values, an understanding of the Company’s business and industry, diversity of business experience, expertise and backgrounds, a high level of education, broad-based business acumen and the ability to think strategically. The composition of the current Board reflects diversity in business and professional experience, skills, and gender. The NCGC reviews the effectiveness of the Charter in achieving the goals of the NCGC as stated therein annually.
Compensation Committee
The Compensation Committee (CC) assists the Board by reviewing and approving the Company’s overall compensation and benefit programs and administering the compensation of the Company’s executive and senior officers. The CC is comprised of fourfive of the Company’s Directors, each of whom meet the current independence and experience requirements of the applicable provision of the NASDAQ Listing Rules and requirements of the Securities and Exchange Commission (SEC). During 2015,SEC. At the February 2019 meeting, the CC utilized the services of an outside compensation consultantconsultants Equias Alliance and Blanchard Consulting Group to evaluateeducate the CC on best practices, equity incentive plans and assess compensation plans, plan structurestrends in executive and recommend possible alternatives.director compensation. The CC operates under a written charter that is assessed annually for adequacy. The CC’s charter was last ratifiedamended on October 22, 2015. A copy of the Charter is included as Appendix C to this Proxy Statement.February 27, 2020.
The CC’s overallpolicies and underlying philosophy governing the Bank’s executive compensation program, as endorsed by the Compensation Committee and the Board of Directors, are designed to accomplish the following: (i) maintain a compensation program that is as follows: (i) to attractequitable in a competitive marketplace; (ii) provide opportunities that integrate pay with the Bank's annual and retain quality talent which is critical to both short-term and long-term success; (ii) to reinforce strategic performance objectives through the use of incentive compensation programs;long‐term performance; (iii) to create a mutuality of interest between executive and senior officers and shareholders through compensation structures that share the rewards and risksencourage achievement of strategic decision-making;objectives and creation of shareholder value; (iv) to encourage executives to achieve substantial levels of ownership of stock in the Company.
The CC’s functionsrecognize and objectives are: (i) to reviewreward individual initiative and approve the Company’s overall compensation and benefit programs and for administering the compensation for the Company’s executive and senior officers; (ii) to determine the competitiveness of currentachievements; (v) maintain an appropriate balance between base salaries, annual and long-term incentives relative to specific competitive markets for the President and Chief Executive Officer and other senior management; (iii) to establish goals and objectives for senior officers and evaluate performance in light of the goals and objectives; (iv) to evaluate and approve the annual compensationsalary and incentive plans forcompensation; and, (vi) allow the President/CEO; (v) to develop a performance review mechanism that has written objectives and goals which are used to make salary increase determinations; (vi) to retain advisors and to be responsible for their appointment, payment and oversight as it deems necessary to carry out its duties; (vii) to review and reassess the adequacy of the CC’s Charter annually and recommend any proposed changes to the Board for approval, which will be included in or discussed in the annual Proxy Statement no less frequently than every three years.
PROPOSAL 2
SHAREHOLDER ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) and corresponding SEC rules enable the Company’s shareholders to vote to approve, on an advisory and non-binding basis, the compensation of the Company’s Named Executive Officers as disclosed in this Proxy Statement in accordance with SEC rules. Accordingly, the following resolution will be submitted for shareholder approval at the Annual Meeting:
"RESOLVED, that the compensation paid to the Named Executive Officers of Community West Bancshares as disclosed in this Proxy Statement pursuant to Item 402 of SEC Regulation S-K, is hereby approved on an advisory, non-binding basis.”
The Board believes that the Company’s compensation policies and procedures, which are reviewed and approved by the CC, are effective in aligning the compensation of the Company’s Named Executive Officers with the Company’s short-term goals and long-term success and that such compensation and incentives are designedBank to attract, retain, and motivate the Company’s key executives who are directly responsible for the Company’s continued success. The Board believes that the Company’s compensation policies and practices do not threaten the value of the Company or the investments of its shareholders or create incentives to engage in behaviors or business activities that are reasonably likely to have a material adverse impact on the Company. The Board further believes that the Company’s culture focuses executives on sound risk management and appropriately rewards executives for performance. The Board further believes that the Company’s compensation policies and procedures are reasonable in comparison both to the Company’s peer bank holding companies and to the Company’s performance during the 2015 fiscal year.
Shareholders are encouraged to carefully review the information provided in this Proxy Statement regarding the compensation of the Company’s Named Executive Officers in the section captioned “EXECUTIVE COMPENSATION.”
At the Company’s 2013 Annual Meeting of Shareholders held on May 23, 2013, it was approved by shareholder vote that this Proposal with respect to an advisory vote on Executive Officer compensation be submitted in the Proxy Statement for shareholder vote every three years.
Because your vote is advisory, the outcome of the vote will not: (i) be binding upon the Company’s Board or CC with respect to future executive compensation decisions, including those relating to the Company’s Named Executive Officers, or otherwise; (ii) overrule any decision made by the Board or the CC; or (iii) create or imply any additional fiduciary duty by the Company’s Board or the CC. However, the CC expects to take into account the outcome of the vote when considering future executive compensation arrangements.
Recommendation and Vote Required
THE BOARD RECOMMENDS THAT THE COMPANY’S SHAREHOLDERS VOTE “FOR” APPROVAL IN A NON-BINDING ADVISORY VOTE, OF THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED PURSUANT TO ITEM 402 OF SEC REGULATION S-K.talented executives.
The affirmative vote of a majority of the Common Stock represented at the Meeting, in person or by proxy,CC is responsible for and entitled to vote on the proposal is required to approve, in a non-binding advisory vote, the compensation paid to the Company’s Named Executive Officers as disclosed in this Proxy Statement. Proxies received by the Company and not revoked prior to or at the Meeting will be voted in favor of this non-binding, advisory proposal unless otherwise instructed by the shareholder. The effect of an abstention is the same as a vote “AGAINST” the proposal. Broker non-votes will not be counted in determining whether or not the proposal has been approved.authorized to:
| 1. | Annually review and determine (i) the compensation, including salary, bonus, incentive and other compensation of the Chief Executive Officer, (ii) approve corporate goals and objectives relevant to compensation of the Chief Executive Officer, and (iii) evaluate performance in light of these goals and objectives, approve compensation in accordance therewith and provide a report thereon to the Board. |
| 2. | Annually review the amounts and terms of base salary, incentive compensation and all other forms of compensation for the Company’s Executive Officers, and report the CC’s findings to the Board. |
| 3. | Assess bank compensation programs including bonus and incentive plans for risk that may materially affect the long‐term viability of the Bank. Risk management practices should include an assessment of the internal control environment surrounding the compensation programs, ensure the review and approval process is evident and the documentation is adequate to support the results and contains appropriate clawback provisions. |
| i. | This annual risk assessment will be conducted by the Chief Risk Officer who will then provide documentation supporting his/her recommendations to the CC. |
| 4. | Review Executive Officer compensation in reference to Section 162(m) of the Internal Revenue Code, as it may be amended from time to time, and any other applicable laws, rules and regulations. This review may be conducted by external compensation consultants as deemed appropriate by the CC. |
| 5. | Annually review and make recommendations to the Board with respect to incentive based compensation plans and equity based plans. Establish criteria for the terms of awards granted to participants under such plans. Grant awards in accordance with such criteria and exercise all authority granted to the CC under such plans, or by the Board in connection with such plans. |
| 6. | Recommend to the Board the compensation for Directors (including retainer, CC and CC chair fees, stock options and other similar items, as appropriate). |
| 7. | Evaluate the need for or any modifications to employment agreements, severance arrangements and change in control agreements and provisions, as well as any special supplemental benefits. |
| 8. | Conduct an annual review of the CC’s performance and periodically assess the adequacy of its charter and recommend changes to the Board as needed. |
| 9. | Retain, at the expense of the Bank, compensation consultants, outside counsel and other advisors as the CC may deem appropriate in its sole discretion. The CC shall have authority to approve related fees and retention terms. |
| 10. | Perform any other activities consistent with this Charter, the Company’s By‐laws and governing law as the CC or the Board deem appropriate. Delegate responsibility to subcommittees of the CC as necessary or appropriate. Regularly report to the Board on the CC’s activities. |
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth, for the years ended December 31, 20152019 and 2014,2018, the compensation information for Martin E. Plourd, President and Chief Executive Officer of CWBC and CWB, and for the two other most highly compensated executive officers who earned at least $100,000 in 20152019 (collectively, the Named Executive Officers).
Name and Principal Position | Year | | Salary | | | Bonus | | | Stock Awards | | | Option Awards (1) | | | Non-Equity Incentive Plan Compensation | | | Nonqualified Deferred Compensation Earnings | | | All Other Compensation (2) | | | Total | |
Martin E. Plourd, President and Chief Executive Officer, CWBC and CWB | 2015 | | $ | 350,000 | | | $ | 135,050 | | | | - | | | $ | 97,182 | | | | - | | | | - | | | $ | 57,650 | | | $ | 639,882 | |
2014 | | | 310,000 | | | | 124,950 | | | | - | | | | 95,514 | | | | - | | | | - | | | | 56,551 | | | | 587,015 | |
Charles G. Baltuskonis, Executive Vice President and Chief Financial Officer, CWBC and CWB | 2015 | | | 233,333 | | | | 80,000 | | | | - | | | | 7,775 | | | | - | | | | - | | | | 41,694 | | | | 362,802 | |
2014 | | | 225,000 | | | | 60,000 | | | | - | | | | 46,924 | | | | - | | | | - | | | | 36,177 | | | | 368,101 | |
Kristine D. Price, Executive Vice President and Chief Credit Officer, CWB (3) | 2015 | | | 224,583 | | | | 75,000 | | | | - | | | | 29,155 | | | | - | | | | - | | | | 37,943 | | | | 366,681 | |
2014 | | | 95,513 | | | | 25,000 | | | | - | | | | 80,556 | | | | - | | | | - | | | | 74,377 | | | | 275,446 | |
Name and Principal Position | Year | | Salary | | | Bonus | | | Stock Awards | | | Option Awards (1) | | | Non-Equity Incentive Plan Compensation | | | Nonqualified Deferred Compensation Earnings | | | All Other Compensation (2) | | | Total | |
Martin E. Plourd, President and Chief Executive Officer, CWBC and CWB | 2019 | | $ | 433,333 | | | $ | 200,000 | | | | - | | | | - | | | | - | | | | - | | | $ | 68,506 | | | $ | 701,839 | |
2018 | | $ | 391,667 | | | $ | 200,000 | | | | - | | | $ | 60,574 | | | | - | | | | - | | | $ | 63,422 | | | $ | 715,663 | |
William F. Filippin, Executive Vice President Chief Banking Officer, CWB | 2019 | | $ | 266,667 | | | $ | 55,000 | | | | - | | | $ | 20,180 | | | | - | | | | - | | | $ | 45,794 | | | $ | 387,641 | |
2018 | | $ | 238,209 | | | $ | 85,000 | | | | - | | | | - | | | | - | | | | - | | | $ | 42,213 | | | $ | 386,485 | |
Timothy J. Stronks, Executive Vice President and Chief Operating Officer, CWB | 2019 | | $ | 228,833 | | | $ | 60,000 | | | | - | | | $ | 13,454 | | | | - | | | | - | | | $ | 31,071 | | | $ | 333,358 | |
2018 | | $ | 99,824 | | | $ | 30,000 | | | | - | | | $ | 84,431 | | | | - | | | | - | | | $ | 27,168 | | | $ | 241,423 | |
(1)The dollar value of option awards represents the aggregate grant date fair value of option awards granted during the applicable fiscal year as computed in accordance with FASB ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The terms of the 1997, 2006 and 2014 Plans are described below in “Stock Option Plans.” Furthermore, the amount recognized for these awards was calculated based on the Black-Scholes option-pricing model. See the Company’s Annual Report on Form 10-K, at Note 11 to the Company’s Financial Statements for the year ended December 31, 2015.2019.
(2)The amounts set forth under the column entitled “All Other Compensation” includes 401(k) Company match for all executives, non-vested Company contributions to the participant’s Deferred Compensation account and life insurance. For the 401(k) match for 2015 and 2014, respectively: Mr. Plourd - $7,910 and $7,700; Mr. Baltuskonis - $9,174 and $7,800; and, Ms. Price - $4,223 and $0. For Company contributions to the participant’s Deferred Compensation account for 2015 and 2014, respectively: Mr. Plourd - $42,000 and $37,200; Mr. Baltuskonis - $28,000 and $26,100; and, Ms. Price - $26,950 and $61,000. For life insurance premiums for 2015 and 2014, respectively: Mr. Plourd - $2,419 and $2,051; Mr. Baltuskonis - $4,520 and $2,277; and, Ms. Price - $2,183 and $617. For 2015 and 2014, includes for Mr. Plourd an automobile allowance of $400 and $9,600, respectively. For 2015, it also includes $2,821 for partial year use of a company car, calculated in accordance with annual lease value rules in IRS fringe benefit publication and $2,100 (partial amount of total paid) for club membership. For 2015 and 2014, includes moving expense allowance payments for Ms. Price of $4,587 and $12,760, respectively. See “Potential Payments upon Retirement, Termination or Change-In-Control” below.following:
(3)Ms. Price assumed her position on July 31, 2014.
ALL OTHER COMPENSATION | |
Name | | Year | | | 401k Match | | | Deferred Compensation | | | Life Insurance Premium | | | Company Car/Car Allowance | | | Club Membership | | | Relocation | |
Martin E. Plourd | | 2019 | | | $
| 8,100 | | | $ | 52,000 | | | $ | 3,564 | | | $ | 1,392 | | | $ | 2,100 | | | |
| |
| | 2018 | | | $ | 8,100 | | | $ | 47,000 | | | $ | 3,564 | | | $ | 1,308 | | | $ | 2,100 | | | | - | |
William F. Filippin | | 2019
| | | $ | 8,100 | | | $ | 32,000 | | | $ | 1,804 | | | $ | 2,540 | | | | - | | | | | |
| | 2018 | | | $ | 8,100 | | | $ | 28,750 | | | $ | 1,303 | | | $ | 2,710 | | | | - | | | | - | |
Timothy J. Stronks | | 2019 | | | $ | 2,863 | | | $ | 27,400 | | | $ | 808 | | | | - | | | | -
| | | | - | |
| | 2018 | | |
| - | | | $ | 11,903 | | | $ | 265 | | | | - | | | | - | | | $ | 15,000 | |
Employment Arrangements and Other Factors Affecting 20152019 Compensation
During 2015,2019, the terms of each of Messrs. PlourdMr. Plourd’s, Mr. Filippin’s, and Baltuskonis and Ms. Price’sMr. Stronks’ employment arrangements werewas governed by a written employment agreementsagreement with the Company. For a description of the material terms of such employment agreements, please see “Potential Payments upon Retirement, Termination or Change-In-Control” herein.Company as described below:
Potential Payments upon Retirement, Termination or Change-In-Control
Employment Arrangements for Martin E. Plourd
Mr. Plourd has an employment contract, effective November 2, 2011, with an annual base salary of $350,000$440,000 as of JanuaryMarch 1, 2016,2019 and subsequently adjusted to $450,000 as of March 1, 2020, for his service as President and Chief Executive Officer of the Company and the Bank. The terms of this employment agreement willwas set to terminate on December 31, 2016, subject to early termination as discussed below,2019, but willwas automatically renewrenewed under its own terms for an additional 12 months. The employment agreement automatically renews for successive periods of 12 monthsmonth periods unless at least three months before the expiration of any preceding term or renewal term, either (a) the Board provides written notice of non-renewal to Mr. Plourd or (b) Mr. Plourd provides written notice of non-renewal to the Bank. During January of each year during the term of the employment agreement and any renewal term, the Board will review Mr. Plourd’s base salary and will determine, in its sole discretion, whether or not to adjust such salary. Any such salary adjustment will be effective as of the first day of such calendar year. Subject to the terms of the Company’s Compensation Policy (which is attached as Exhibit C to Mr. Plourd’s employment agreement), Mr. Plourd will be eligible to receive an annual bonus in an amount, if any, as determined by the Board of Directors in its sole discretion. Any bonus or incentive compensation that was paid to Mr. Plourd with respect to any period during which Treasury held any shares of Series A Preferred Stock is subject to recovery or clawback by the Company if the payments were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria. For 20152019 and 2014,2018, respectively, $135,050 and $124,950$200,000 bonus amounts were awarded. Mr. Plourd is eligible to receive stock option grants to purchase shares of Common Stock as may be determined by the Board of Directors in its sole discretion. See “Outstanding Equity Awards at Fiscal Year-End” table. Mr. Plourd received an automobile allowance for 2014 of $800 per month and was furnished a company car beginning in 2015. The Company also pays for a business club membership on behalf of Mr. Plourd of $350 per month.
In connection with Mr. Plourd’s employment agreement, the Company and Mr. Plourd have also entered into an Indemnification Agreement pursuant to which the Company has agreed to indemnify Mr. Plourd in the event he is made a party to or threatened to be made a party to, or otherwise involved in, any suit or proceeding, whether brought in the name of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, in which he may be or may have been involved as a party or otherwise (other than as plaintiff against the Company), by reason of the fact that he is or was a director or officer of the Company, or is or was serving as a director, officer, employee or agent of any other enterprise at the request of the Company or by reason of any action taken by him or of any inaction on his part while acting in such capacity. Any payments made to Mr. Plourd pursuant to the indemnification agreement are subject to and conditioned upon compliance with any and all applicable Federal and state laws and regulations and all benefits and privileges to which he is otherwise entitled by law or pursuant to the Bylaws of the Company.
In addition, Mr. Plourd has a deferred compensation account established and maintained at CWB for his benefit. To this account, the Company credited $100,000 on December 31, 2011. In addition, 1% per month of his annual salary will also be credited to this account during the term of Mr. Plourd’s employment. Monthly interest credits will be earned throughout the term of the agreement at the then-current CWB three-year certificate of deposit rate on an annualized basis. No funds in this account will vest prior to the date Mr. Plourd attains age 65, and normal payments will not commence until such time as Mr. Plourd attains age 66, whether or not he is employed by the Company. In the event of a change of control before Mr. Plourd attains age 65, the total amount credited to this account will become fully vested.
Mr. Plourd also has a Salary Continuation Agreement, signed January 28, 2014 and effective as of December 30, 2013. Upon separation from service after normal retirement age, he will receive $1,500,000 in $100,000 payments over a 15-year period commencing the month following his separation from service. No funds in this account will vest prior to the date Mr. Plourd attains age 65. If early involuntary termination occurs, he will be paid 100% of the accrued benefit in one lump sum. Also, in the event of disability prior to normal retirement age, he will be paid 100% of the accrued benefit in lieu of any other benefit hereunder, paid in 180 equal monthly installments. At December 31, 2019 his accrued unvested benefit was $611,385. If a change of control occurs, followed within 24 months by separation of service prior to normal retirement age, Mr. Plourd will receive within 30 days a lump-sum benefit of $1,130,357 and any gross-up required, in lieu of any other benefit thereunder. In the event of death prior to or subsequent to commencement of benefit payments, there are provisions relating to payments to designated beneficiaries.
Assuming a separation from service occurred on December 31, 2019 following a change of control, the Company estimates that aggregate compensation due to Mr. Plourd in such event, approximately $2.0 million, would result in an “excess parachute payment” of approximately $0.3 million under Internal Revenue Code Section 280G and that such “excess parachute payment” would be subject to a 20% excise tax. Under the terms of Mr. Plourd’s Salary Continuation Agreement, the Company has agreed to pay Mr. Plourd a “gross up payment” equal to the amount of this excise tax. As of December 31, 2019, the Company’s potential “gross-up payment” was estimated to be $69,000.
Mr. Plourd’s employment agreement specifies that, in the event of termination without cause or on non-renewal, he would continue to receive salary and benefits plus deferred compensation for a period of three months following the Bank’s written notice of Mr. Plourd’s termination or non-renewal, and one year’s base salary. The contract continues Mr. Plourd’s health insurance, dental insurance, short-term disability insurance and life insurance for 18 months. Also, the contract contains a change of control (as defined) clause whereby, if he is terminated within one year following such event, he would be entitled to base salary and benefits for a period of one year.
During 2015, the Company granted stock option awards to Mr. Plourd which are reported in the “Summary Compensation Table” above and in the “Outstanding Equity Awards at Fiscal Year-End Table” below.
Employment Arrangements for Charles G. BaltuskonisWilliam F. Filippin
Mr. BaltuskonisFilippin has an employment contract, effective JulyJune 1, 2007 and amended August 1, 2013. Beginning2015 with an annual base salary as of March 1, 2015,2019 of $268,000. Beginning of March 1, 2020, Mr. Baltuskonis’Filippin’s annual base salary was $235,000, adjusted to $240,000 as of March 1, 2016.$276,040. In addition, he has a deferred compensation account established and maintained at CWB for his benefit. To this account the Company credited $40,000 each on July 1, 2007 and on December 31, 2007. In addition,September 30, 2015. Also, the Company will credit 1% per month of his annual salary will be credited to this account during the term of his employment. Monthly interest credits will be earned throughout the term of the agreement at the then-current CWB three-year certificate of deposit rate. No funds in this account vestedwill vest prior to the date Mr. Baltuskonis attainedFilippin attains age 65, and normal payments will not commence until such time as Mr. BaltuskonisFilippin attains age 66, whether or not he is employed by the Company. In the event of a change of control, hethe total amount credited to this account will vest 100% of the account balance.become fully vested.
Mr. Baltuskonis’Filippin’s contract specifies that, in the event of termination without cause, he would continue to receive salary and benefits plus deferred compensation for a period of three months. Also, the contract contains a change of control (as defined) clause whereby, if he is terminated within one year following such event, he would be entitled to base salary and benefits for a period of one year. Mr. BaltuskonisFilippin is also eligible for an annual bonus which is determined by the Board in its sole discretion. For 20152019 and 2014,2018, respectively, $80,000$55,000 and $60,000$85,000 bonus amounts were awarded.
Mr. Filippin also has a Salary Continuation Agreement, effective as of September 28, 2018. Upon separation from service after normal retirement age, he will receive $750,000 in $50,000 payments over a 15-year period commencing the month following his separation from service. No funds in this account will vest prior to the date Mr. Filippin attains age 65. If early involuntary termination without cause occurs, he will be paid 100% of the accrued benefit in one lump sum. If early involuntary termination with cause occurs he receives no benefit. Also, in the event of disability prior to normal retirement age, he will be paid 100% of the accrued benefit in lieu of any other benefit hereunder, paid in 180 equal monthly installments. At December 31, 2019 his accrued unvested benefit was $51,319. If a change of control occurs, followed within 24 months by separation of service prior to normal retirement age, Mr. Filippin will receive within 30 days a lump-sum benefit of $538,585 and any gross-up required, in lieu of any other benefit thereunder. In the event of death prior to or subsequent to commencement of benefit payments, there are provisions relating to payments to designated beneficiaries.
Assuming a separation from service occurred on December 31, 2019 following a change of control, the Company estimates that aggregate compensation due to Mr. Filippin in such event, approximately $1 million, would result in an “excess parachute payment” of approximately $0.3 million under Internal Revenue Code Section 280G and that such “excess parachute payment” would be subject to a 20% excise tax. Under the terms of Mr. Filippin’s Salary Continuation Agreement, the Company has agreed to pay Mr. Filippin a “gross up payment” equal to the amount of this excise tax. As of December 31, 2019, the Company’s potential “gross-up payment” was estimated to be $68,000.
During 2015,2019, the Company granted stock option awards to Mr. BaltuskonisFilippin which are reported in the “Summary Compensation Table” above and in the “Outstanding Equity Awards at Fiscal Year-End Table” below.
Employment Arrangements for Kristine D. PriceTimothy J. Stronks
Ms. PriceMr. Stronks has an employment contract, effective July 31, 2014. Beginning March 1, 2015, Ms. Price’s23, 2018. Mr. Stronks’ annual base salary was $225,500, adjusted to $235,000$229,000 as of March 1, 2016.2019. Beginning March 1, 2020 Mr. Stronks’ annual base salary was adjusted to $242,740. In addition, shehe has a deferred compensation account established and maintained at CWB for herhis benefit. To this account, the Company credited $50,000 on September 1, 2014. In addition,will credit 1% per month of herhis annual salary will be credited during the term of herhis employment. Monthly interest credits will be earned throughout the term of the agreement at the then-current CWB three-year certificate of deposit rate. No funds in this account will vest prior to the date Ms. PriceMr. Stronks attains age 65, and normal payments will not commence until such time as Ms. PriceMr. Stronks attains age 66, whether or not shehe is employed by the Company. In the event of a change of control, before Ms. Price attains age 65, shethe total amount credited to this account will vest 100% of the account balance.become fully vested.
Ms. Price’sMr. Stronks’ contract specifies that, in the event of termination without cause, shehe would continue to receive salary and benefits plus deferred compensation for a period of three months. Also, the contract contains a change of control (as defined) clause whereby, if shehe is terminated within one year following such event, shehe would be entitled to base salary and benefits for a period of one year. Ms. PriceMr. Stronks is also eligible for an annual bonus which is determined by the Board in its sole discretion. For 20152019 and 2014,2018, respectively, $75,000$60,000 and $25,000$30,000 bonus amounts were awarded.
The Board on February 27, 2020, approved a Salary Continuation Agreement for Mr. Stronks. The completion and execution of that Salary Continuation Agreement is subject to certain conditions. Under the terms of the agreement, upon separation from service after normal retirement age, Mr. Stronks will receive $750,000 in $50,000 payments over a 15-year period commencing the month following his separation from service. No funds in this account will vest prior to the date Mr. Stronks attains age 66. If early involuntary termination without cause occurs, he will be paid 100% of the accrued benefit in one lump sum. If early involuntary termination with cause occurs he receives no benefit. Also, in the event of disability prior to normal retirement age, he will be paid 100% of the accrued benefit in lieu of any other benefit hereunder, paid in 180 equal monthly installments. At December 31, 2019 his accrued unvested benefit was zero. If a change of control occurs, followed within 24 months by separation of service prior to normal retirement age, Mr. Stronks will receive within 30 days a lump-sum benefit of $538,585 and any gross-up required, in lieu of any other benefit thereunder. In the event of death prior to or subsequent to commencement of benefit payments, there are provisions relating to payments to designated beneficiaries.
Assuming a separation from service occurred following a change of control, any “excess parachute payment” under Internal Revenue Code Section 280G then due to Mr. Stronks would be subject to a 20% excise tax. Under the terms of Mr. Stronks’ Salary Continuation Agreement, the Company would pay Mr. Stronks a “gross up payment” equal to the amount of this excise tax. As of December 31, 2019, the Company’s potential “gross-up payment” was estimated to be zero.
During 2015,2019, the Company granted stock option awards to Ms. PriceMr. Stronks which are reported in the “Summary Compensation Table” above and in the “Outstanding Equity Awards at Fiscal Year-End Table” below.
Stock Option Plans
The 1997 Stock Option Plan
In connection with the bank holding company reorganization, the Company adopted the Community West Bancshares 1997 Stock Option Plan (1997 Plan), which provided for the issuance of up to 1,292,014 option shares. This Plan expired on January 23, 2007. At December 31, 2015, the number of shares to be issued upon exercise of outstanding options granted pursuant to the 1997 Plan was 11,000 shares.
The 2006 Stock Option Plan
On March 23, 2006, the Company’s Board adopted the 2006 Stock Option Plan (2006 Plan) and it was subsequently approved by the shareholders at the 2006 Annual Meeting of Shareholders. The 2006 Plan expired on March 23, 2016. At December 31, 2015,2019, the number of shares to be issued upon exercise of outstanding options granted pursuant to the 2006 Plan was 433,525 shares, and the number of shares of Common Stock remaining available for future issuance under the 2006 Plan was 25,675136,900 shares. See tables entitled “Outstanding Equity Awards at Fiscal Year-End” and “Director Compensation Table” for more information regarding options outstanding as of December 31, 2015.
The 2014 Stock Option Plan
On March 27, 2014, the Company’s Board adopted the 2014 Stock Option Plan (2014 Plan) and it was subsequently approved by the shareholders at the 2014 Annual Meeting of Shareholders. The 2014 Plan provides for the issuance of up to 500,000750,000 shares of the Company’s Common Stock to Directors, officers and key employees of the Company and CWB. At December 31, 2015,2019, the number of shares to be issued upon exercise of outstanding options granted pursuant to the 2014 Plan was 220,750594,400 shares, and the number of shares of Common Stock remaining available for future issuance under the 2014 Plan was 279,25055,100 shares. See the tables below entitled “Outstanding Equity Awards at Fiscal Year-End” and “Director Compensation Table” for more information regarding options outstanding as of December 31, 2015.2019.
Eligibility. Full-time employees, officers and Board members of the Company and subsidiaries, including CWB, are eligible to receive awards under the 2014 Plan at the discretion of the Board.
Plan Term. The 2014 Plan’s term commenced on May 22, 2014 and will terminate on May 22, 2024 (subject to early termination is described herein).
Administration. The 2014 Plan is administered by the Board, serving as the “Stock Option Committee”, one or more of whom may also be executive officers and therefore may not be deemed to be “independent,” as that term is defined in the listing standards of the NASDAQ Stock Market, LLC. Members of the Board receive no additional compensation for their administration of the Plans. Each Director will abstain from approving the grant of any options to themselves. Options may be granted only to Directors, officers and key employees of the Company and any subsidiary, including CWB. Subject to the express provisions of the 2014 Plan, the Board is authorized to construe and interpret the 2014 Plan, and make all the determinations necessary or advisable for administration of the 2014 Plan. The full text of the 2014 Plan is available as Appendix A to the Company’s Amendment No. 1 to Schedule 14A filed with the SEC on May 5, 2014.
Incentive and Non-Qualified Stock Options. The 2014 Plan provides for the grant of both incentive stock options and non-qualified options. Incentive stock options are available only to persons who are employees of the Company, and are subject to limitations imposed by applicable sections of the Internal Revenue Code, as amended, including a $100,000 limit on the aggregate fair market value (determined on the date the options are granted) of shares of Common Stock with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year (under the 2014 Plan and all other “incentive stock option” plans of the Company). Any options granted under the 2014 Plan which do not meet the limitations for incentive stock options, or which are otherwise not deemed to be incentive stock options, are deemed “non-qualified.”
Amendment and Termination of the 2014 Plan. The 2014 Plan, and all stock options previously granted under the 2014 Plan, will terminate upon the dissolution or liquidation of the Company, upon a consolidation, reorganization, or merger as a result of which the Company is not the surviving corporation, or upon a sale of all or substantially all of the assets of the Company. However, all options theretofore granted will become immediately exercisable in their entirety upon the occurrence of any of the foregoing, and any options not exercised immediately upon the occurrence of any of the foregoing events will terminate, unless provision is made for the assumption or substitution thereof. As a result of these acceleration provisions, even if an outstanding option were not fully vested as to all increments at the time of the event, that option will become fully vested and exercisable. The Board may at any time suspend, amend or terminate the 2014 Plan, and may, with the consent of the respective optionee, make such modifications to the terms and conditions of outstanding options as it may deem advisable. Certain amendments to the 2014 Plan may also require shareholder approval if such amendment or modification would: (a) materially increase the number of shares of Common Stock which may be issued under the 2014 Plan; (b) materially increase the number of shares of Common Stock which may be issued at any time under the 2014 Plan to all Directors who are not also officers or key employees of the Company; (c) materially modify the requirements as to eligibility for participation in the 2014 Plan; (d) increase or decrease the exercise price of any option granted under the 2014 Plan; (e) increase the maximum term of options provided for in the 2014 Plan; (f) permit options to be granted to any person who is not an eligible participant; or (g) change any provision of the 2014 Plan which would affect the qualification as an incentive stock option under the 2014 Plan. The amendment, suspension or termination of the 2014 Plan will not, without the consent of the optionee, alter or impair any rights or obligations under any outstanding option under the 2014 Plan.
Adjustments Upon Changes in Capitalization. The total number of shares covered by the 2014 Plan and the price, kind and number of shares subject to outstanding options thereunder, will be appropriately and proportionately adjusted if the outstanding shares of Common Stock are increased, decreased, changed into or exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock split, stock dividend, stock consolidation or otherwise, without consideration to CWBC as provided in the 2014 Plan. Fractional share interests of such adjustments may be accumulated, although no fractional shares of stock will be issued under the 2014 Plan.
Holdings of Outstanding Equity Awards
The following table sets forth certain information, pursuant to SEC rules, regarding stock options outstanding at December 31, 20152019 for the Named Executive Officers.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END(1)
Option Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | Option Expiration Date |
William F. Filippin | | | 14,400 | | | | 5,600 | | | | - | | | $ | 6.59 | | 6/25/25 |
| | 3,600 | | | | 2,400 | | | | - | | | $ | 6.86 | | 3/24/26 |
| | 1,000 | | | | 4,000 | | | | - | | | $ | 11.20 | | 2/22/28 |
| | - | | | | 7,500 | | | | - | | | $ | 10.28 | | 2/28/29 |
Martin E. Plourd | | | 20,000 | | | | - | | | | - | | | $ | 3.25 | | 12/13/22 |
| | 20,000 | | | | - | | | | - | | | $ | 7.31 | | 1/30/24 |
| | 20,000 | | | | 5,000 | | | | - | | | $ | 6.6996 | | 3/26/25 |
| | 15,000 | | | | 10,000 | | | | - | | | $ | 6.86 | | 3/24/26 |
| | 8,000 | | | | 12,000 | | | | - | | | $ | 10.30 | | 2/22/27 |
| | 4,000 | | | | 6,000 | | | | - | | | | 10.99 | | 12/20/27 |
| | 4,000 | | | | 16,000 | | | | - | | | $ | 10.56 | | 11/15/28 |
Timothy J. Stronks | | | 4,000 | | | | 16,000 | | | | - | | | $ | 12.68 | | 7/26/28 |
| | - | | | | 5,000 | | | | - | | | $ | 10.28 | | 2/28/29 |
| | Option Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | Option Expiration Date |
Charles G. Baltuskonis | | | 3,750 | | | | - | | | | - | | | $ | 12.50 | | 7/26/17 |
| | 2,000 | | | | - | | | | - | | | $ | 8.65 | | 2/28/18 |
| | 3,750 | | | | - | | | | - | | | $ | 3.995 | | 7/29/18 |
| | 2,000 | | | | - | | | | - | | | $ | 3.45 | | 11/20/18 |
| | 5,000 | | | | - | | | | - | | | $ | 2.36 | | 4/29/19 |
| | 3,750 | | | | - | | | | - | | | $ | 2.35 | | 7/23/19 |
| | 5,000 | | | | - | | | | - | | | $ | 3.50 | | 12/16/20 |
| | 4,000 | | | | 1,000 | | | | - | | | $ | 2.57 | | 9/1/21 |
| | 6,000 | | | | 4,000 | | | | - | | | $ | 3.25 | | 12/13/22 |
| | 2,000 | | | | 8,000 | | | | - | | | $ | 7.19 | | 2/27/24 |
| | - | | | (2) | 2,000 | | | | - | | | $ | 6.6996 | | 3/26/25 |
Martin E. Plourd | | | 42,300 | | | | 12,000 | | | | - | | | $ | 1.95 | | 11/2/21 |
| | 12,000 | | | | 8,000 | | | | - | | | $ | 3.25 | | 12/13/22 |
| | 4,000 | | | | 16,000 | | | | - | | | $ | 7.31 | | 1/30/24 |
| | - | | | | 25,000 | | | | - | | | $ | 6.6996 | | 3/26/25 |
Kristine D. Price | | | 4,000 | | | | 16,000 | | | | - | | | $ | 6.59 | | 8/28/24 |
| | - | | | | 7,500 | | | | - | | | $ | 6.6996 | | 3/26/25 |
| (1) | As of December 31, 2019, the Company had not granted nor had outstanding any stock awards. |
| (1)(2) | Each option grant generally vests 20% on each anniversary of the grant date except for (2), which vests 100% on the one-year anniversary date. Each stock option expires 10 years after the date the stock option was granted. |
Option Exercises and Stock Vested
The following table sets forth information related to the value received by each Named Executive Officer during 2019 for stock awards that vested, as well as the value realized upon stock option exercises.
| | Option Awards | | | Stock Awards | |
Name | | Number of Shares Acquired on Exercise | | | Value Realized on Exercise | | | Number of Shares Acquired on Vesting | | | Value Realized on Vesting | |
William F. Filippin | | | - | | | | - | | | | - | | | | - | |
Martin E. Plourd | | | - | | | | - | | | | - | | | | - | |
Timothy J. Stronks | | | - | | | | - | | | | - | | | | - | |
Pension Benefits
Excluding any tax-qualified contribution plan and any nonqualified defined contribution plan, none of the Named Executive Officers or any other key officers participate in any plan that provides for payments or other benefits at, following, or in connection with, retirement.
Treatment of Outstanding Stock Options upon Retirement, Termination or Change of Control
Termination of Employment or Affiliation. Under the terms of the 1997, 2006 and 2014 Plans (Plans), in the event an optionee ceases to be affiliated with the Company or a subsidiary for any reason other than disability, death or termination for cause, the stock options granted to such optionee will expire at the earlier of the expiration dates specified for the options, or 90 days after the optionee ceases to be so affiliated. During such period after cessation of affiliation, the optionee may exercise the option to the extent it was exercisable as of the date of such termination, and thereafter the option expires in its entirety. If an optionee’s stock option agreement so provides, and if an optionee’s status as an eligible participant is terminated for cause, the options held by such person will expire 30 days after termination, although the Board may, in its sole discretion, within 30 days of such termination, reinstate the option. If the option is reinstated, the optionee will be permitted to exercise the option only to the extent, for such time, and upon such terms and conditions as if the optionee’s status as an eligible participant had been terminated for a reason other than cause, disability or death, as described above.
Liquidation or Change of Control. The Plans, and all stock options previously granted under the Plans, terminate upon the dissolution or liquidation of the Company, upon a consolidation, reorganization or merger as a result of which the Company is not the surviving corporation, or upon a sale of all or substantially all of the assets of the Company. However, all options heretofore granted become immediately exercisable in their entirety upon the occurrence of any of the foregoing, and any options not exercised immediately upon the occurrence of any of the foregoing events will terminate unless provision is made for the assumption or substitution thereof. As a result of the acceleration provisions, even if an outstanding option were not fully vested as to all increments at the time of the event, that option will become fully vested and exercisable. All options outstanding at the time of completion of the merger(s) will survive and not become immediately exercisable.
Profit Sharing and 401(k) Plan
The Company has established a 401(k) plan for the benefit of its employees. Employees are eligible to participate in the plan beginning the first of the month following the successful completion of 30 days of employment, subject to certain limitations. Each plan year, the Company will make a Safe Harbor non-elective employer contribution on behalf of eligible participants anwho have more than 12 months of service with nth Company.an amount equal to 3% of such eligible participant’s compensation for such plan year. The Company’s contributions were determined by the Board and amounted to $194,000$337,000 in 20152019 and $204,000$296,000 in 2014.2018.
Directors’ Compensation
CWB’s non-employee Directors are paid for attendance at CWB Board meetings at the rate of $1,400 ($1,700 for the Chairman) for each regular Board meeting, and $350$400 ($450500 for Audit Committee Chairman) each for credit and audit committee meetings, and $300 each committee meeting.for Compensation, Technology and Cybersecurity, and Nominating and Governance meetings. If a Director attends a meeting by videoconferencing, 100% of the fee is received for committee meetings and 50% of the fee is received for Board meetings. In 2015,2019, no additional discretionary compensation was awarded to the non-employee Directors. There were no CWBC Director fees paid during 2015.2019.
The following table sets forth the information concerning the compensation paid to each of the Company’s Directors during 2015.2019. Compensation paid to Martin E. Plourd, Director, President and Chief Executive Officer of CWBC and CWB, is not included in this table because he was an employee during 20152019 and, therefore, received no additional compensation for his service as a Director.
DIRECTOR COMPENSATION TABLE
| Name (1) | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Option Awards ($) (2) | | | Non-Equity Incentive Plan Compensation ($) | | | Nonqualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | |
| Robert H. Bartlein | | $ | 37,050 | | | | - | | | $ | 17,610 | | | | - | | | | - | | | | - | | | $ | 54,660 | |
| Jean W. Blois | | | 20,050 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 37,660 | |
| John D. Illgen | | | 23,000 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 40,610 | |
| James W. Lokey | | | 13,250 | | | | - | | | | 17,219 | | | | - | | | | - | | | | - | | | | 30,469 | |
| Shereef Moharram | | | 18,800 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 36,410 | |
| Eric Onnen | | | 21,650 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 39,260 | |
| William R. Peeples | | | 23,750 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 41,360 | |
| James R. Sims Jr. | | | 23,450 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 41,060 | |
| Kirk B. Stovesand | | | 35,050 | | | | - | | | | 17,610 | | | | - | | | | - | | | | - | | | | 52,660 | |
Name (1) | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Option Awards ($) (2) | | | Non-Equity Incentive Plan Compensation ($) | | | Nonqualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | |
Robert H. Bartlein | | | 37,800 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 37,800 | |
Jean W. Blois | | | 18,500 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 18,500 | |
Dana L. Boutain | | | 19,900 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 19,900 | |
Tom L. Dobyns | | | 23,600 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 23,600 | |
John D. Illgen | | | 27,800 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 27,800 | |
James W. Lokey | | | 32,400 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 32,400 | |
Shereef Moharram | | | 19,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 19,000 | |
William R. Peeples | | | 22,600 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 22,600 | |
Kirk B. Stovesand | | | 38,700 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 38,700 | |
(1) Outstanding stock options held by each non-employee Director at December 31, 20152019 are as follows: Robert H. Bartlein, 15,000;8,000; Jean W. Blois, 25,000;23,000; Dana L. Boutain, 8,000, Tom L. Dobyns, 8,000, John D. Illgen, 25,000;23,000; James W. Lokey, 5,000;8,000; Shereef Moharram, 15,000; Eric Onnen, 15,000;18,000; William R. Peeples, 15,000; James R. Sims, Jr., 25,000;8,000; Kirk B. Stovesand, 25,000.23,000. Stock options held at December 31, 20152019 by Mr. Plourd are included in the table for the Named Executive Officers under the heading entitled “Outstanding Equity Awards at Fiscal Year-End.”
(2) Column represents the aggregate grant date fair value of option awards granted during the applicable fiscal year as computed in accordance with FASB ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The terms of the 1997, 2006 and 2014 Plans are described above in the section entitled “Stock Option Plans.” Furthermore, the amount recognized for these awards was calculated based on the Black-Scholes option-pricing model. See the Company’s Annual Report on Form 10-K, at Note 11 to the Company’s Financial Statements for the year ended December 31, 2015.2019.
Certain Relationships and Related Transactions
Certain Directors and executive officers of the Company, as well as the companies with which such Directors are associated, are customers of and have had banking transactions with CWB in the ordinary course of business. CWB expects to have such ordinary banking transactions with such persons in the future. In the opinion of CWB management, all loans and commitments to lend included in such transactions were made in compliance with applicable laws on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other persons of similar creditworthiness and did not involve more than a normal risk of collectibilitycollectability or present other unfavorable features. Although CWB does not have any limits on the aggregate amount it would be willing to lend to Directors and officers as a group, loans to individual Directors and officers must comply with CWB’s internal lending policies and statutory lending limits.
PROPOSAL 2
APPROVAL OF THE COMMUNITY WEST BANCSHARES 2020 OMNIBUS EQUITY INCENTIVE PLAN
Introduction
On February 27, 2020, the Company’s Board of Directors adopted the Community West Bancshares 2020 Omnibus Equity Incentive Plan (the “2020 Plan”) pursuant to which: Company would be permitted to grant stock options and restricted stock awards (Awards) to eligible persons, as more fully described below. The 2020 Plan provides for the granting to eligible participants of such incentive awards as the Board, the Compensation Committee, or other committee established by the Board, in its sole discretion, to administer the Plan (the “Committee”) may from time to time approve.
As discussed elsewhere in this Proxy Statement (see “EXECUTIVE COMPENSATION-Stock Option Plans”, herein) the 2006 Plan has expired and no options may be granted under the 2006 Plan and 55,100 shares remain available for future grants under the 2014 Plan. The Board has determined that it is in the best interests of the Company and its shareholders to adopt the 2020 Plan to provide for the grant of additional options to purchase Company Common Stock and to award restricted stock as a means of providing incentives to retain and attract qualified management and directors to oversee, direct, and implement the Company’s and the Bank’s business plans in a successful manner. The 2020 Plan will contain 500,000 of shares of Company Common Stock for the issuance of stock options and restricted stock.
Holders of Company Common Stock, are being asked to approve the 2020 Plan. In accordance with Nasdaq Rule 5635(c), the majority of the shares represented and voting at the Meeting on this proposal is required. Such approval is also required in order to qualify stock options issuable under the 2020 Plan for incentive tax treatment pursuant to the Internal Revenue Code (the “Code”). The following description of the 2020 Plan is intended to highlight and summarize the principal terms of the 2020 Plan, and is qualified in its entirety by the text of the 2020 Plan, a copy of which is attached to this proxy statement as Appendix B.
Summary of the Plan
General
The 2020 Plan is administered by the Committee currently comprised of five non-employee directors each of whom meet current independence and experience requirements of the applicable provision of the NASDAQ Listing Rules and requirements of the SEC; provided, however that the Board may, in its sole discretion, resolve to administer the 2020 Plan. Awards under the Plan may be in the form of restricted stock and/or stock options, including incentive stock options to eligible grantees, and may be granted to directors, officers, and key employees of, and consultants to, the Company or any subsidiary. Consultants may receive such awards if they have rendered bona fide services not in connection with the offer and sale of securities of the Company in a capital raising transaction. Presently, that includes 9 directors, 5 executive officers (including one that is also a director), an approximately 133 additional officers and employees.
Shares Available for Awards
Subject to adjustment for stock dividends, recapitalizations, stock splits and similar changes in the Company’s capital structure, as provided in the 2020 Plan, the maximum number of shares of Company Common Stock that may be issued or paid out under the Plan is 500,000 shares. Under the 2020 Plan, a non-employee director of the Company may not be granted Awards (whether through grants of restricted stock or stock options) of more than 100,000 shares of Company Common Stock in any one calendar year.
Term of the Plan
The term of the 2020 Plan is ten (10) years from the date of the Board’s adoption of the 2020 Plan or February 27, 2030.
Transfer of Awards under the Plan
Except to the extent otherwise provided in the Plan and/or in the applicable award agreement, awards granted under the Plan are not assignable or transferable other than by will or by the laws of descent and distribution, and all such awards and rights will be exercisable during the life of the participant only by the participant or the participant’s legal representative.
Acceleration of Vesting/Exercisability of Awards
Under the 2020 Plan immediately prior to the occurrence of certain corporate events, the vesting of restricted stock will accelerate and stock options will become exercisable. Those corporate events include: (i) the consummation of a plan of dissolution or liquidation of Company; (ii) a plan of reorganization, merger or consolidation of Company with one or more corporations, as a result of which the voting securities of the Company immediately prior to the consummation of such transaction do not represent or constitute, immediately after the transaction, at least a majority of the total voting power of the surviving entity (or parent corporation thereof); or (iii) the sale of all or substantially all the assets of Company to another corporation. In the event the Company expressly approves and if provision is made in connection with such transaction for assumption of Awards granted under the 2020 Plan then, in such case such Awards will be converted into awards for a like number and kind for shares of the surviving entity, or substitution for such Awards with new awards covering stock of a successor employer corporation, or a parent or subsidiary thereof, solely at the discretion of such successor corporation, or parent or subsidiary, with appropriate adjustments as to number and kind of shares and prices, then the consummation of such transaction.
Assumption of Awards of Another Company
The Company may also substitute or assume outstanding awards granted by another entity in connection with an acquisition of that other entity by the Company, provided the recipient of the substitution or assumption would have been eligible to be granted an award under the 2020 Plan.
Restricted Stock
An award of restricted stock is a grant of shares of the Company Common Stock conditioned upon either the achievement of certain performance criteria or the lapse of time. Performance criteria may include results for net income, return on average assets, return on average equity, efficiency ratio, and various measure of credit quality such as the ratio of non-performing assets to total assets.
Subject to the terms of the 2020 Plan, the Committee will determine the number of restricted stock subject to an award to a participant. The Committee may provide or impose different terms and conditions on any particular award, including without limitation: (i) the participant’s right to the restricted stock will not vest for a period of time; (ii) restrictions on the sale, assignment, transfer, hypothecation or other disposition of any right or interest in the award; (iii) the requirement that the participant’s rights and interests in the award be forfeited upon termination of employment for specified reasons within a specified period of time; and (iv) the requirement that the participant’s rights and interests in the award be forfeited upon the failure to achieve previously designated performance-based criteria.
Until the restrictions have lapsed, participants may not assign, transfer, sell, exchange, encumber, pledge, or otherwise hypothecate or dispose of any right or interest in the award, including the underlying restricted stock, other than as permitted by the 2020 Plan. If participant is employed on the date certain corporate events occur as discussed in “Summary of the Plan – Acceleration of Vesting/Exercisability of Awards”, then all restrictions, terms and conditions applicable to such participant’s restricted stock then outstanding shall be deemed lapsed and satisfied and the participant will become fully vested as of such date.
Until vested and issued in accordance with the 2020 Plan and the restricted stock award agreement, restricted stock underlying an award will not be deemed to be issued and outstanding, and a participant will have no right to vote such shares or receive cash dividends on such shares.
Stock Options
Grant of Stock Options
Awards under the 2020 Plan may also be in the form of grants of stock options for a number of shares of Company common stock, at price(s) and time(s), and on the terms and conditions as the Committee or the Board deems advisable. Stock option grants typically vest over time and require the participant to pay Company the exercise price to purchase the stock and will be evidenced by a written stock option agreement containing the material terms of each particular grant, including whether the stock options are intended to qualify as incentive stock options or nonqualified stock options.
If stock options are granted to officers or key employees who own, directly or indirectly, 10% or more of the outstanding Company common stock, and the stock options are intended to qualify as incentive stock options, then the minimum option exercise price must be at least 110% of the fair market value of Company common stock on the date of grant.
Subject to the limitations and restrictions set forth in the Plan, a participant who has been granted a stock option may, if otherwise eligible, be granted additional stock options if the Committee shall so determine.
Incentive and Non-Qualified Stock Options
The 2020 Plan provides for the grant of both incentive stock options and non-qualified stock options. All shares are available to be granted as incentive stock options. Incentive stock options are available only to participants who are also employees of Company, the Bank or any subsidiary, and are subject to limitations imposed by applicable sections of the Code, including a $100,000 limit on the aggregate fair market value (determined on the date the stock options are granted) of shares of Company Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year. Any stock options granted under the 2020 Plan which do not meet the limitations for incentive stock options, or which are otherwise not deemed to be incentive stock options, shall be deemed ”non-qualified.” Subject to the foregoing and other limitations set forth in the 2020 Plan, the exercise price, permissible time or times of exercise, and the remaining terms pertaining to any stock options are determined by the Committee; however, the per share exercise price under any stock option may not be less than 100% of the fair market value of Company common stock on the date of grant of the stock options.
Exercise of Options
Subject to the limitation set forth in the 2020 Plan, stock options granted under the Plan may be exercised in such increments, which need not be equal, and upon such contingencies as the Committee may determine. If a participant does not exercise an increment of a stock option in any period during which such increment becomes exercisable, the unexercised increment may be exercised at any time prior to expiration of the stock option unless the respective stock option agreement provides otherwise. Stock options are exercisable only for whole shares of Company common stock and fractional share interest are disregarded except that they may be accumulated.
Subject to the restrictions set forth in the 2020 Plan, each stock option may be exercised in accordance with the terms of the individual stock option agreement. Full payment by the participant for all shares as to which the stock option is being exercised is due and payable at the time of exercise of the stock option. Payment must be in cash and/or, with the prior written approval of the Committee, and subject to any required regulatory approval, in shares of Company common stock, or pursuant to a “net exercise” (where the number of shares issuable is reduced by the number of shares needed to pay the exercise price), or pursuant to a formal “cashless” exercise program entailing the sale of shares pursuant to a brokered transaction, or other form of legal consideration acceptable to the Committee.
Certain Information Concerning All Awards
Company will be disallowed a deduction for compensation to its employees, officers, shareholders, and others that results in an “excess parachute payment” within the meaning of Section 280G(b) of the Code. If such a person is granted an award under the 2020 Plan and there is a change of control, some or all of the value attributable to the award granted under the 2020 Plan may be considered in the determination of whether an excess parachute payment has been made.
Awards under the 2020 Plan are intended to either be exempt from or in compliance with Section 409A of the Code and to the extent of any inconsistencies with the requirements of 409A, the 2020 Plan will be interpreted and amended so as to satisfy such requirements.
Vote Required
In accordance with Nasdaq Rule 5635(c), the approval of the 2020 Plan by a majority of the Company Common Stock represented and voting at the Meeting on this proposal is required. Such approval is also required for the shares covered by the 2020 Plan to qualify as incentive stock options pursuant to the requirements of Section 422 of the Code.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMMUNITY WEST BANCSHARES 2020 OMNIBUS EQUITY INCENTIVE PLAN.
PROPOSAL 3
RATIFICATION OF THE COMPANY’S INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has ratified the appointment of RSM US LLP (RSM) to serve as its independent auditors for the fiscal year ending December 31, 2016.2020. Representatives from RSM are expected to be present at the Meeting. The Company will afford the representatives an opportunity to make a statement, should they desire to do so, and expect that the representatives will be available to respond to appropriate questions.
The Board of Directors is requesting that the Company's shareholders ratify the appointment of RSM as the Company's independent auditors for 2016.2020. Although ratification is not required by the Company's Bylaws or otherwise, the Board of Directors is submitting the appointment of RSM to the shareholders for ratification because the Board of Directors values the shareholders' views on the Company's independent auditors and as a matter of good corporate practice. In the event that the shareholders fail to ratify the appointment, it will be considered as a direction to the Board of Directors and the Audit Committee to consider the selection of a different firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent auditor, subject to ratification by the Board of Directors, at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF RSM US LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.2020.
Audit Fees
During the yearyears ended December 31, 2015,2019 and 2018, respectively, the aggregate fees billed by RSM for the audit of the Company’s consolidated financial statements for such fiscal year and for the review of the Company’s interim financial statements was $199,000.$273,064 and $253,435. This amount includes fees related to the fiscal year audit and interim reviews, notwithstanding when the fees were billed or when the services were rendered. Expenses included were billed from January through December of the fiscal year, notwithstanding when the expenses were incurred.
Audit-Related Fees
During the year ended December 31, 2015, the aggregate fees2019, $5,867 was billed by the previous auditor, EYRSM for the audit of the Company’s consolidated financial statements for such fiscal year and for the review of the Company’s interim financial statements was $12,000. During the year ended December 31, 2014, the aggregate fees billed by EY for the audit of the Company’s consolidated financial statements for such fiscal year and for the review of the Company’s interim financial statements was $324,000. These amounts includeaudit-related services. The fees related to the fiscal yearCompany’s adoption of ASU 842. There were no audit and interim reviews, notwithstanding when therelated fees were billed or when the services were rendered. Expenses included were billed from January through December of the fiscal year, notwithstanding when the expenses were incurred.in 2018.
Audit-RelatedTax Fees
During the years ended December 31, 20152019 and 2014, $19,000 and $0, respectively, were billed by EY for audit-related services. The fees related to a Registration Statement on Form S-8 related to the Company’s Stock Option Plan filed with the Securities and Exchange Commission.
Tax Fees
During the year ended December 31, 2015,2018, the aggregate fees billed by RSM for professional services related to recurring state and federal tax preparation, compliance and consulting were $3,000.$28,820 and $26,000.
All Other Fees
During the years ended December 31, 2015 and 2014, the aggregate fees billed by EY for professional services related to recurring state and federal tax preparation, compliance and consulting were $49,000 and $47,000, respectively.
In addition, during the year ended December 31, 2014, $8,7002019 $6,720 was billed by EY related to professional tax services during the course of an IRS examination.
All Other Fees
RSM for a SOX assessment. During the yearsyear ended December 31, 2015 and 2014, there were no fees2018, $20,195 was billed by RSM or EY for any other products or services provided that are not otherwise disclosed above.a SOX assessment and ASC 606 Revenue Recognition discussion.
The Audit Committee of the Company reviewed and discussed with RSM whether the rendering of the non-audit services provided by them to the Company during fiscal 20152019 was compatible with their independence. The Audit Committee pre-approves all audit and permissible non-audit services to be provided by RSM and the estimated fees for these services.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditor
The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the Company’s independent auditor. These services may include audit, audit-related, tax and other services. Pre-approval is generally provided for up to one year and is detailed as to a particular service or category of service. The independent auditor and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with the pre-approval and the fees for services performed to date. All services performed by RSM or EY for which fees were billed to the Company during the years ended December 31, 20152019 and 20142018 as disclosed herein were approved by the Audit Committee pursuant to the procedures outlined herein. All of the services of RSM in auditing the Company’s Financial Statements for the year ended December 31, 20152019 were performed by RSM or its full-time, permanent employees.
20172021 SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in the Proxy Statement for the Company’s 20172021 Annual Meeting of Shareholders (2017(2021 Meeting) must be received by the Company at its offices at 445 Pine Avenue, Goleta, California 93117, no later than December 14, 2016.2020. The proposals must also satisfy the conditions and procedures prescribed by the Company’s Bylaws and by the SEC in Rule 14a-8 for such proposals to be included in the Company’s Proxy Statement for the 20172020 Meeting, and must be limited to 500 words. To be included in the Proxy Statement, the shareholder must be a holder of record or beneficial owner of at least $2,000 in market value or 1% of the Company’s securities entitled to be voted on the proposal, and have held the shares for at least one year and will continue to hold the shares through the date of the 20172021 Meeting. Either the proposer, or a representative qualified under California law to present the proposal on the proposer’s behalf, must attend the meeting to present the proposal. Shareholders may not submit more than one proposal.
The SEC has in effect a rule (Rule 14a-4) governing a company's ability to use discretionary proxy authority with respect to proposals that were not submitted in time to be included in the Proxy Statement (i.e., outside the processes of Rule 14a-8 as described in the preceding paragraph). As a result, in the event a proposal is not submitted to the Company prior to February 27, 2017,2021, and the proxy materials delivered in connection with the 20172021 Meeting contain a statement conferring discretionary authority to the Proxyholders of the Company (similar to the statement set forth in the third paragraph of this Proxy Statement), the proxies solicited by the Board for the 20172021 Annual Meeting will confer discretionary authority to the proxyholders to vote the shares in accordance with their best judgment and discretion if the proposal is received by the Company after February 27, 2017.2021.
Whether or not you intend to be present at the Meeting electronically through the Webcast, you are urged to return your Proxy promptly. If you are then present at the Meeting electronically and wish to vote your shares in person,by Webcast, your original Proxy may be revoked by voting at the Meeting. However, if you are a shareholder whose shares are not registered in your own name, you will need the Proxylegal proxy obtained from your recordholderrecord holder to vote personallyelectronically at the Meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company’s officers (as defined in regulations promulgated by the SEC thereunder), Directors and persons who own more than ten percent of the Common Stock to file reports of stock ownership and changes in stock ownership with the SEC. The officers, Directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of all reports of ownership furnished to the Company, or written representations that no forms were necessary, the Company believes that during the last year its officers, Directors and greater than ten percent beneficial owners complied with all filing requirements, except that Director Robert H. Bartlein filed 4 days late a Statement of Changes of Beneficial Ownership on SEC Form 4 related to his receipt by inheritance on October 1, 2015 of 4,114 shares of the Company’s Common Stock.requirements.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
OnlyFor shareholders requesting a printed paper copy of the proxy materials, only one Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 20152019 is being delivered to shareholders sharing an address unless the Company has received contrary instructions from one or more of the shareholders. Upon the written or oral request of a shareholder, the Company will deliver promptly a separate copy of the Proxy Statement and the Annual Report on Form 10-K to a shareholder at a shared address to which a single copy was delivered. Shareholders desiring to receive a separate copy in the future may contact Charles G. Baltuskonis,Susan C. Thompson, Executive Vice President and Chief Financial Officer, Community West Bancshares, 445 Pine Avenue, Goleta, CA 93117-3474, telephone (805) 692-5821.
PROXY MATERIALS AND ANNUAL REPORT ON FORM 10-K
Copies of the Company’s Proxy Materialsproxy materials described herein and the 20152019 Annual Report on Form 10-K, as filed with the SEC, are available free of charge upon request to: Charles G. Baltuskonis,Susan C. Thompson, Executive Vice President and Chief Financial Officer, Community West Bancshares, 445 Pine Avenue, Goleta, CA 93117-3474, telephone (800) 569-2100, e-mail: cbaltuskonis@communitywestbank.com.sthompson@communitywestbank.com.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 26, 201628, 2020
This Proxy Statement, the proxyProxy card, the Company’s Annual Report to Shareholders and the Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2019, and directions toregarding attending and participating in the location ofMeeting, via the Annual Meeting,Internet by the Webcast are available on the Internet at www.edocumentview.com/CWBC and on the Company's website at www.communitywest.com.
| By Order of the Board of Directors, |
| |
| COMMUNITY WEST BANCSHARES |
| |
| William R. Peeples, Chairman of the Board |
Dated: April 11, 2016 | |
Dated: April 13, 2020 Goleta, California | |
APPENDIX A
Community West Bancshares
Audit Committee Charter
(as ratified on October 22, 2015)
The Audit Committee (AC) is appointed by the Board of Directors (Board) to assist the Board in monitoring: (1) the integrity of the Company’s financial statements, (2) the compliance by the Company with legal and regulatory requirements, (3) the independence and performance of the Company’s registered public accounting firms performing audit, review or attest services and (4) the Company’s internal audit and control function.
The function of the AC is oversight. Management is responsible for the preparation and integrity of the Company’s financial statements. Management is responsible for maintaining appropriate accounting and financial reporting policies and an appropriate internal control environment. The independent auditor is responsible for planning and conducting a proper audit of the Company’s annual financial statements, reviewing the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q and other procedures.
The members of the AC will meet the independence requirements of NASDAQ and the rules and regulations of the SEC and no member will have participated at any time in the preparation of financial statements of the Company or any subsidiary during the prior three years. Each member will be financially literate and at least one member must have the additional financial sophistication required by the NASDAQ rules. The members of the AC will be appointed by the Board on the recommendation of the Chairman of the Board. The AC will have no fewer than three members.
The AC, in its capacity as a committee of the Board, will be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm (independent auditor) engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, and each such registered public accounting firm must report directly to the AC. The AC will be directly responsible for the resolution of disagreements between management and the independent auditor regarding financial reporting. The AC will have the authority to retain independent legal, accounting or other advisors, as it deems necessary to carry out its duties. The AC may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend an AC meeting. The Company will provide for appropriate funding, as determined by the AC, for payment of compensation to any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services; compensation to any advisors employed by the AC; and, ordinary administrative expenses that are necessary or appropriate in carrying out its duties.
The AC will pre-approve all auditing services and permitted non-audit services and fees to be paid for such services to be performed for the Company by its independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A of the Securities Exchange Act. The AC may delegate to one or more of its members the authority to grant pre-approvals of non-audit services and fees. Any such pre-approval will be presented to the full AC at its next scheduled meeting.
The AC will make regular reports to the Board.
The AC, to the extent that it deems necessary or appropriate, will be responsible for the following items:
Financial Statement and Disclosure Matters
1. | Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The revised charter will be included in the annual proxy statement no less frequently than every three years. |
2. | Review the annual audited financial statements with management and the independent auditor, including disclosures made in management’s discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K. |
3. | Review with management and the independent auditor any significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies. |
4. | Review with management and the independent auditor the company’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditors’ review of the quarterly financial statements. |
5. | Review and discuss quarterly reports from the independent auditors on: |
| a) | All critical accounting policies and practices to be used. |
| b) | All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative treatments, and the treatment preferred by the independent auditor. |
| c) | The matters required to be discussed by Statement on Auditing Standards Numbers 61 and 90, as they may be amended or supplemented, relating to the audit or the Company’s periodic reports. |
| d) | Other material written communications between the independent auditor and management, such as any management letters or schedule of unadjusted differences. |
6. | Meet periodically with management to review the Company’s major financial risk exposures and the policies and procedures that management utilizes to monitor and control such exposures. |
7. | Review with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company’s response to that letter. Such reviews should include: |
| a) | Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. |
| b) | Any changes required in the planned scope of the audit. |
| c) | Any significant disagreements with management. |
8. | The Committee will generally discuss the earnings press releases as well as financial information provided to financial analysts and rating agencies, where applicable. |
9. | Review disclosures made to the AC by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls. This includes management’s report relating to the Company’s review and documentation of Sarbanes-Oxley compliance. |
Oversight of the Company’s Relationship with its Independent Auditors
10. | Review and evaluate the experience and qualifications of the lead members of each independent auditor’s team. |
11. | Evaluate the performance and independence of each independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence. The opinions of management and the internal auditor will be taken into consideration as part of this review. |
12. | Receive and review a report from each independent auditor at least annually regarding the independent auditor’s independence and discuss such reports with the auditor. Ensure that each independent auditor submits a formal written statement, as required by the Independence Standard Board Statement No. 1, as it may be amended or supplemented, delineating all relationships between the independent auditor and the Company and a formal written statement of the fees billed by the independent auditor for each of the categories of services requiring separate disclosure in the annual proxy statement. The Committee will be entitled to rely upon the accuracy of the information provided by the independent auditor with respect to the services provided and the fees billed for non-audit services. If so determined by the Audit Committee, recommend that the Board take appropriate action to satisfy itself of the independence of the auditor. |
13. | Obtain and review a report from each independent auditor at least annually regarding the independent auditor’s internal quality control procedures. The report should include any material issues raised by the most recent internal quality control review or peer review of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years regarding one or more independent audits carried out by the firm, and any steps taken to deal with any such issues. |
14. | Meet with each independent auditor prior to the audit to review the planning and staffing of the audit. |
15. | The Audit Committee will present its conclusions regarding each independent auditor to the Board. |
Oversight of the Company’s Internal Audit Function
16. | Review the appointment and replacement of the staffing for the internal audit and compliance function. |
17. | Review the reports to management prepared by the internal audit and/or compliance function and management’s responses. |
18. | Discuss with each independent auditor and management the internal audit function responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audits. |
Compliance Oversight Responsibilities
19. | Obtain from each independent auditor assurance that Section 10A of the Securities Exchange Act has not been implicated. |
20. | Obtain reports from management, the Company’s internal auditor (if applicable) and each independent auditor that the Company’s subsidiary affiliated entity is in conformity with applicable regulatory and legal requirements and the Company’s code of ethics. |
21. | Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s code of ethics. |
22. | Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. |
23. | Discuss with management and each independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies. |
24. | Review with appropriate members of management or appropriate legal counsel legal matters that may have a material impact on the financial statements, the Company’s compliance policies and any material reports or inquiries received from regulators or governmental agencies. |
25. | Meet at least annually with the internal audit function representative or other members of management, if needed, in separate executive sessions. |
While the AC has the responsibilities and powers set forth in this Charter, it is not the duty of the AC to plan or conduct audits, or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor.
APPENDIX B
Community West Bancshares
Nominating and Corporate Governance Committee Charter
(as ratified on October 22, 2015)February 27, 2020)
Purpose and Scope
The primary function of the Nominating and Corporate Governance Committee (Committee) is to assist the Board of Directors (Board) of Community West Bancshares (Company) in fulfilling its responsibilities by: (i) reviewing and making recommendations to the Board regarding the Board’s composition and structure, establishing criteria for Board membership and evaluating corporate policies relating to the recruitment of Board members; and (ii) establishing, implementing and monitoring policies and processes regarding principles of corporate governance to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders.
Composition and Meetings
The Committee will be comprised of a minimum of three members of the Board as appointed by the Board, each of whom will meet any independence requirements promulgated by the Securities and Exchange Commission, the NASDAQ Stock Market or any governmental or regulatory body exercising authority over the Company (each a “Regulatory Body”), and each member of the Committee will be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee.
The members of the Committee will be elected by the Board and will serve until their successors will be duly elected and qualified or until their earlier resignation or removal. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.
The Committee will meet as necessary, but at least once each year, to enable it to fulfill its responsibilities and duties as set forth herein. The Committee will report its actions to the Board and keep written minutes of its meeting, which will be recorded and filed with the books and records of the Company.
Responsibilities and Duties
To fulfill its responsibilities and duties, the Committee will:
Corporate Governance Policy Establishment and Review
Develop principles of corporate governance including, but not limited to, the establishment of a corporate code of ethics and conduct for all directors, officers and employees of the company and its affiliates, (Code of Conduct) designed to promote honest and ethical conduct, including the ethical handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in the company’s periodic reports; and compliance with applicable governmental rules and regulations. The Code of Conduct will be submitted by the committee to the Board and the Boards of the company’s affiliates for their approval.
Review and assess the adequacy of the Code of Conduct approved by the board periodically, but at least annually. The Committee will recommend any modifications to the Code of Conduct to the Board for approval. If so approved, the Company will submit the revised Code of Conduct to the Boards of its affiliates for their approval.
1.Direct members of the Company’s senior management to report any violations of or non-compliance with the Code of Conduct to the committee.
2.Be available to members of the Company’s senior management team to consult with and to resolve reported violations or instances of non-compliance with the Code of Conduct.
3.Determine an appropriate response to material violations of or non-compliance with the Code of Conduct including, at the discretion of the committee, reporting any material violations of or non-compliance with the Code of Conduct to the appropriate Regulatory Body.
4.Review and assess the adequacy of this Charter periodically as conditions dictate, but at least annually and recommend any modifications to the charter if and when appropriate to the Board for its approval. | 1. | Develop principles of corporate governance including, but not limited to, the establishment of a corporate code of ethics and conduct for all directors, officers and employees of the company and its affiliates, (Code of Conduct) designed to promote honest and ethical conduct, including the ethical handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in the company’s periodic reports; and compliance with applicable governmental rules and regulations. The Code of Conduct will be submitted by the committee to the Board and the Boards of the company’s affiliates for their approval. |
| 2. | Review and assess the adequacy of the Code of Conduct approved by the board periodically, but at least annually. The Committee will recommend any modifications to the Code of Conduct to the Board for approval. If so approved, the Company will submit the revised Code of Conduct to the Boards of its affiliates for their approval. |
| 3. | Direct members of the Company’s senior management to report any violations of or non-compliance with the Code of Conduct to the committee. |
| 4. | Be available to members of the Company’s senior management team to consult with and to resolve reported violations or instances of non-compliance with the Code of Conduct. |
5.Review and assess the adequacy of the charters of any committee of the Board (Governing Documents) periodically to ensure compliance with any principles of corporate governance developed by the committee and recommend to the Board any necessary modifications to the Governing Documents.
| 5. | Determine an appropriate response to material violations of or non-compliance with the Code of Conduct including, at the discretion of the committee, reporting any material violations of or non-compliance with the Code of Conduct to the appropriate Regulatory Body. |
| 6. | Review and assess the adequacy of this Charter periodically as conditions dictate, but at least annually and recommend any modifications to the charter if and when appropriate to the Board for its approval. |
| 7. | Review and assess the adequacy of the charters of any committee of the Board (Governing Documents) periodically to ensure compliance with any principles of corporate governance developed by the committee and recommend to the Board any necessary modifications to the Governing Documents. |
Board Composition, Nominations and Shareholder Proposals
1.Evaluate the current composition and organization of the Board and its committees in light of requirements established by any Regulatory Body or any other applicable statute, rule or regulations which the Committee deems relevant and make recommendations regarding the foregoing to the Board for approval.
| 1. | Evaluate the current composition and organization of the Board and its committees in light of requirements established by any Regulatory Body or any other applicable statute, rule or regulations which the Committee deems relevant and make recommendations regarding the foregoing to the Board for approval. |
2.Review the composition and size of the Board to ensure that the Board is comprised of members reflecting the proper expertise, skills, attributes and personal and professional backgrounds for service as a director of the Company. The mandatory retirement age of Board members, with the exception of Founding Directors, will be 80 years.
3.Determine the criteria for selection of the Chairman of the Board, Board members and Board committee members.
| 2. | Review the composition and size of the Board to ensure that the Board is comprised of members reflecting the proper expertise, skills, attributes and personal and professional backgrounds for service as a director of the Company. The mandatory retirement age of Board members, with the exception of Founding Directors, will be 80 years. |
4.Evaluate the performance of current Board members proposed for reelection, and make recommendations to the Board regarding the appropriateness of members of the Board standing for reelection.
| 3. | Determine the criteria for selection of the Chairman of the Board, Board members and Board committee members. |
5.Evaluate and, if deemed necessary, recommend the termination of Board membership of any director in accordance with the Code of Conduct or any corporate governance principles adopted by the Board, for cause or for other appropriate reason.
6.Review and recommend to the Board an appropriate course of action upon the resignation of current Board members or any planned expansion of the Board.
| 4. | Evaluate the performance of current Board members proposed for reelection, and make recommendations to the Board regarding the appropriateness of members of the Board standing for reelection. |
7.Evaluate and recommend to the Board the appointment of Board members to committees of the Board.
| 5. | Evaluate and, if deemed necessary, recommend the termination of Board membership of any director in accordance with the Code of Conduct or any corporate governance principles adopted by the Board, for cause or for other appropriate reason. |
8.Evaluate and approve a slate of nominees for election to the Board and review the qualification, experience and fitness for service on the Board of any potential members of the Board.
9.Review all stockholder proposals submitted to the Company (including any proposal relating to the nomination of a member of the Board) and the timeliness of the submission thereof and recommend to the Board appropriate action on each such proposal.
| 6. | Review and recommend to the Board an appropriate course of action upon the resignation of current Board members or any planned expansion of the Board. |
| 7. | Evaluate and recommend to the Board the appointment of Board members to committees of the Board. |
| 8. | Evaluate and approve a slate of nominees for election to the Board and review the qualification, experience and fitness for service on the Board of any potential members of the Board. |
| 9. | Review all stockholder proposals submitted to the Company (including any proposal relating to the nomination of a member of the Board) and the timeliness of the submission thereof and recommend to the Board appropriate action on each such proposal. |
Criteria for Evaluating Board Nominee Candidates
The Board should be composed of:
| 1. | Directors chosen with a view to bringing to the Board a variety of experiences and backgrounds. |
| 2. | Directors who have high level managerial experience or are accustomed to dealing with complex problems. |
| 3. | Directors who will represent the balance, best interests of the shareholders as a whole rather than special interest groups or constituencies, while also taking into consideration the overall composition and needs of the Board. |
| 4. | A majority of the Board’s Directors will be independent directors under the criteria for independence required by the SEC and NASDAQ. |
1. - 31 -Directors chosen with a view to bringing to the Board a variety of experiences and backgrounds.
3. Directors who will represent the balance, best interests of the shareholders as a whole rather than special interest groups or constituencies, while also taking into consideration the overall composition and needs of the Board.
4. A majority of the Board’s Directors will be independent directors under the criteria for independence required by the SEC and NASDAQ.
In considering possible candidates for election as an outside director, the Nominating Committee and other directors should be guided by the foregoing general guidelines and by the following criteria:
1. Each Director should be an individual of the highest character and integrity, have experience at or demonstrated understanding of strategy/policy-setting and a reputation for working constructively with others.
| 1. | Each Director should be an individual of the highest character and integrity, have experience at or demonstrated understanding of strategy/policy-setting and a reputation for working constructively with others. |
2. Each Director should have sufficient time available to devote to the affairs of the Company to carry out the responsibilities of a Director.
3. Each Director should be free of any conflict of interest which would interfere with the proper performance
| 2. | Each Director should have sufficient time available to devote to the affairs of the Company to carry out the responsibilities of a Director. |
4. The Chief Executive Officer is expected to be a Director. Other members of senior management may be considered, but Board membership is not necessary or a prerequisite to a higher management position.
| 3. | Each Director should be free of any conflict of interest which would interfere with the proper performance of the responsibilities of a Director. |
| 4. | The Chief Executive Officer is expected to be a Director. Other members of senior management may be considered, but Board membership is not necessary or a prerequisite to a higher management position. |
Conflicts of Interest
| 1. | Resolve actual and potential conflicts of interest a Board member may have and issue to any Board member having an actual or potential conflict of interest instructions on how to conduct him or herself in matters before the Board which may pertain to the conflict. 2. To the extent deemed necessary by the committee, engage outside counsel and/or independent consultants to review any matter under its responsibility.
3. Take such other actions regarding the Company’s corporate governance that are in the best interest of the Company and its shareholders as the Committee will deem appropriate or as will otherwise be required by any Regulatory Body.
APPENDIX C
Community West Bancshares
Compensation Committee Charter
(as ratified on October 22, 2015)
The Compensation Committee (CC) is appointed by the Board of Directors (Board) to discharge the Board’sresponsibilities relating to compensation and benefits programs for the Bank. The CC will function as an independent force in determining compensation. This includes oversight of bank-wide personnel and human resource policies, approval of executive compensation programs, senior management incentive plans, and oversight of the performance review process for the Bank.
The CC’s overall compensation philosophy is as follows:
| · | To attract and retain quality talent which is critical to both short-term and long-term success; |
| · | To reinforce strategic performance objectives; |
| · | To create a mutuality of interest between executive and senior officers and shareholders through compensation structures that share rewards and risks of strategic decision-making; |
| · | To encourage executives to achieve substantial levels of ownership of stock in the Company. |
The members of the CC will meet the independence requirements of NASDAQ, the rules and regulations of the SEC and no member will be in direct management of the bank. The members of the CC will be appointed by the Board on the recommendation of the Chairman of the Board and may be replaced by the Board. The CC will have no fewer than three members however any independent Board member is welcome to attend any CC meeting. The CC, to the extent that it deems necessary or appropriate, will be responsible for the following items:
| 1. | Reviewing and approving the Company’s overall compensation and benefit programs and for administering the compensation for the Company’s executive and senior officers; |
| 2. | Determining the competitiveness of current base salaries, annual and long-term incentives relative to specific competitive markets for the President/CEO, Chief Financial Officer, Chief Credit Officer and other Senior Executive Officers. This process should consider selecting and reviewing the external peer organizations used for purposes of conducting benchmarking for the executive officer compensation. Also, work with management to develop performance metrics that support corporate strategies and contain a strong link between compensation and company performance; |
| 3. | Establishing goals and objectives relevant to the compensation for the President/CEO, evaluating and approving goals and objectives for other Senior Executive Officers, and evaluating performance in light of the goals and objectives; |
| 4. | Evaluate and approve the annual compensation and incentive plans (including equity-based compensation) for the President/CEO and report to the independent members of the Board; |
| 5. | Evaluate and approve recommendations from the CEO/President for the annual compensation and incentive plans (including equity-based compensation) for the other Senior Executive Officers (SEO). This includes review and approval of the recommendations from the CEO for annual bonus programs/amounts, as applicable, and approval of SEO Employment Agreements; |
| 6. | Ensure the performance review mechanism has written objectives, measurement goals, and interim period evaluations. The performance review process is used to gauge an employee’s performance level; |
| 7. | The CC has the authority to retain compensation advisors such as compensation consultants or legal counsel and be responsible for their appointment, payment and oversight as it deems necessary to carry out its duties. Prior to engaging a compensation consultant, the CC must evaluate their independence and/or potential conflicts of interest as part of the consultant due diligence process; |
| 8. | The CC meets at least twice annually to discuss and evaluate employee compensation plans, including updates or changes in compensation, benefits, HR policy, regulatory changes and other related matters; |
| 9.2. | The CC hasTo the responsibilityextent deemed necessary by the committee, engage outside counsel and/or independent consultants to annually evaluate employee compensation plansreview any matter under its responsibility. |
| 3. | Take such other actions regarding the Company’s corporate governance that are in light of an assessment of risks posed to the Company from such plans. This evaluation will be reviewed with the senior risk officer, to ensure that the employee incentive compensation arrangements do not encourage such officers to take unnecessary or excessive risks that threaten the valuebest interest of the Company and do not encourage the manipulation of reported earnings to enhance the compensation of any employees; |
| 10. | Ensure that any bonus paid to a Senior Executive Officer (SEO) or the next twenty most highly compensated employees is subject to a provision for recovery or “claw back” by the Company if the bonus payment is based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria. The claw back provision also applies to stock options that may have been based on erroneous data and paid during the 3-year period preceding the date when the material inaccuracy was identified; |
| 11. | The CC should ensure sound risk management practices are employed when considering the development or assessment of compensation programs. Risk management practices should include an assessment of the internal control environment surrounding the compensation programs, ensure the review and approval process is evident and the documentation is adequate to support the results; |
| 12. | The CC will meet with the Human Resource (HR) Director, as deemed necessary, for updates on current trends in compensation, federal or state law changes that will affect the company/industry and to receive an overview of the most recent California Bankers Association Compensation & Benefits Benchmark Survey annual results. In the fourth quarter of each year, the HR Director will also provide the CC with the annual tally sheets showing an estimate of the complete compensation package for the 25 most highly compensated employees; |
| 13. | The CC shall be responsible for taking all actions required of board compensation committees to comply with compensation-related regulatory requirements established by applicable regulatory organizations. The CC should consider requesting the senior risk officer to assess changing regulations on a periodic basis; |
| 14. | Sponsor continuing education for CC members so as to ensure ongoing input on the latest executive compensation developments; |
| 15. | The CC Chairman shall preside at each meeting. In the event the Chairman is not present at a meeting, the CC members present at that meeting shall designate one of its membersshareholders as the acting Chair of such meeting. CC members shouldCommittee will deem appropriate or as will otherwise be rotated periodically, as decidedrequired by the Board of Directors; |
| 16. | Review, reassess and document the adequacy of this Charter annually through a self-assessment process and recommend any proposed changes to the Board for approval. The revised Charter will be included in or discussed in the annual proxy statement no less frequently than every three years; | Regulatory Body.
| 17. | A printable version of the CWB Compensation Committee Charter is available on the website; |
| 18. | Adopt use of a Calendar of Events to track and record annual requirements of the CC charter. |
APPENDIX B COMMUNITY WEST BANCSHARES
2020 OMNIBUS EQUITY INCENTIVE PLAN 1. | | 1 | 2. | | 1 | | 2.1 | | 1 | | 2.2 | | 1 | 3. | | 1 | | 3.1 | | 1 | | 3.2 | | 2 | 4. | | 2 | | 4.1 | | 2 | | 4.2 | | 3 | | 4.3 | | 3 | 5. | | 3 | | 5.1 | | 3 | | 5.2 | | 3 | | 5.3 | | 4 | | 5.4 | | 4 | | 5.5 | | 4 | | 5.6 | | 4 | | 5.7 | | 5 | | 5.8 | | 5 | | 5.9 | | 5 | | 5.10 | | 6 | 6. | | 6 | | 6.1 | | 6 | | 6.2 | | 6 | | 6.3 | | 6
| 7. | | 6 | | 7.1 | | 6 | 8. | | 8 | | 8.1 | | 8 | | 8.2 | | 8 | 9. | | 8 | 10. | | 8 | 11. | | 8 | 12. | | 8 | 13. | | 9 | 14. | | 9 | 15. | | 9 | | 15.1 | | 9
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| 15.2 | | 10 | | 15.3 | | 10 | 16. | | 10 | 17. | | 11 | 18. | | 11 | 19. | | 11 | 20. | | 11 | 21. | | 12 |
COMMUNITY WEST BANCSHARES 2020 OMNIBUS EQUITY INCENTIVE PLAN As Adopted on February 27, 2020 1.PURPOSE.The CC willpurpose of this Plan is to provide incentives to attract, retain, and motivate eligible persons whose present a summary of its activitiesand potential contributions are important to the Board by way of submitting the minutessuccess of the CC meetings. WhileCompany, its Parent and Subsidiaries, by offering them an opportunity to participate in the CCCompany’s future performance through awards of Options and Restricted Stock. Capitalized terms not defined in the text are defined in Section 21 hereof. 2. SHARES SUBJECT TO THE PLAN. 2.1Number of Shares Available. Subject to Sections 2.2 and 15 hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be Five Hundred Thousand (500,000) Shares or such lesser number of Shares as permitted by applicable law, each of which may be granted as ISOs. Furthermore, subject to adjustment in accordance with Sections 2.2 and 15 hereof, in any calendar year, no non-employee Director of the Company shall be granted Awards in respect of more than One Hundred Thousand (100,000) Shares of Common Stock (whether through grants of Options or Restricted Stock Award or rights with respect thereto) under the Plan. Subject to Sections 2.2, 5.10 and 15 hereof, Shares subject to Awards previously granted will again be available for grant and issuance in connection with future Awards under this Plan to the extent such Shares: (i) cease to be subject to issuance upon exercise of an Option, other than due to exercise of such Option; (ii) are subject to an Award granted hereunder but the Shares subject to such Award are forfeited or repurchased by the Company at the original issue price; or (iii) are subject to an Award that otherwise terminates without Shares being issued. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all Awards granted and outstanding under this Plan. 2.2Adjustment of Shares. In the event that the number of outstanding shares of the Company’s Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (i) the number of Shares reserved for issuance under this Plan, (ii) the Exercise Prices of and number of Shares subject to outstanding Options and (iii) the Purchase Prices of and number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be paid in cash at the Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Committee; and provided, further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares. 3.1Eligibility for ISOs and NQSOs ISOs (as defined in Section 5 hereof) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in Section 5 hereof) and Restricted Stock Awards may be granted to employees, officers, directors and consultants of the Company or any Parent or Subsidiary of the Company; provided such consultants render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. A person may be granted more than one Award under this Plan. 3.2Code Section 409A. Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to either be exempt from, or comply with, the requirements of Section 409A of the Code and shall be interpreted in a manner consistent with such intention. To the extent of any inconsistencies with the requirements of Section 409A or the applicable exemptions thereunder, the Plan shall be interpreted and amended in order to meet such applicable compliance or exemption requirements. 4.1Committee Authority. This Plan will be administered by the Committee. The Committee shall have full discretionary authority to administer the Plan, which shall include the discretionary authority to construe and interpret the terms of the Plan and any Award Agreement, to determine all facts necessary to administer the Plan and any Award Agreement, and to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem necessary or advisable. All decisions or actions by the Committee shall be made in its sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award Agreement. Without limitation, the Committee will have the authority to: (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; (b) prescribe, amend and rescind rules and regulations relating to this Plan; (c) approve persons to receive Awards; (d) determine the form and terms of Awards; (e) determine the number of Shares or other consideration subject to Awards; (f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company; (g) grant waivers of any conditions of this Plan or any Award; (h) determine the terms of vesting, exercisability and payment of Awards; (i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement;
(j) determine whether an Award has been earned; (k) extend the responsibilitiesvesting period beyond a Participant’s Termination Date; and powers (l) make all other determinations necessary or advisable for the administration of this Plan. 4.2Committee Discretion. Unless in contravention of any express terms of this Plan or Award, any determination made by the Committee with respect to any Award will be made in its sole discretion either (i) at the time of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later time. Any such determination will be conclusive, final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan, provided such officer or officers are members of the Board. 4.3Liabilityof Company Plan. The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to: (i) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder; and (ii) any unexpected or adverse tax consequence realized by any Participant or other person due to the grant, receipt, exercise or settlement of any Award granted hereunder. 5.OPTIONS. The Committee may grant Options to eligible persons described in Section 3 hereof and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following: 5.1Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (the “Stock Option Agreement”), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan. An ISO is an Award in the form of an Option that is intended to comply with the requirements of Code Section 422, or any successor section of the Code. A NQSO does not qualify for the special tax treatment accorded to ISOs under Code Section 422. 5.2Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless a later date is otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option. 5.3Exercise Period. Options may be exercisable immediately or may be exercisable within the times or upon the events determined by the Committee as set forth in this Charter, itthe Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is not the dutygranted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the CC to administer the day-to-day compensation practicestotal combined voting power of all classes of stock of the Bank. ThisCompany or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the responsibilityCommittee determines. 5.4Exercise Price. The Exercise Price of management.an Option will be determined by the Committee when the Option is granted and may not be less than the Fair Market Value of the Shares on the date of grant; provided that (i) the Exercise Price of an ISO will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 7 hereof. 5.5Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant). The Exercise Agreement will state (i) the number of Shares being purchased, (ii) the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and (iii) such representations and agreements regarding Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws. Participant shall execute and deliver to the Company the Exercise Agreement together with payment in full of the Exercise Price, and any applicable taxes, for the number of Shares being purchased. If any participant shall make any disposition of shares of Stock issued pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such participant shall notify the Company of such disposition within ten (10) days thereof. 5.6Termination. Subject to earlier termination pursuant to Section 15 and 16 hereof and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following: (a) If the Participant is Terminated for any reason other than death, Disability or for Cause, then the Participant may exercise such Participant’s Options only to the extent that such Options are exercisable as to Vested Shares upon the Termination Date or as otherwise determined by the Committee. Such Options must be exercised by the Participant, if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within three (3) months after the Termination Date (or within such shorter time period, not less than thirty (30) days., and in any event, no later than the expiration date of the Options. (b) If the Participant is Terminated because of Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause), then Participant’s Options may be exercised only to the extent that such Options are exercisable as to Vested Shares by Participant on the Termination Date or as otherwise determined by the Committee. Such options must be exercised by Participant (or Participant’s legal representative or authorized assignee), if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within twelve (12) months after the Termination Date (or within such shorter time period, not less than six (6) months, , with any exercise beyond (i) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or disability, within the meaning of Section 22(e)(3) of the Code, or (ii) twelve (12) months after the Termination Date when the Termination is for Participant’s disability, within the meaning of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any event no later than the expiration date of the Options. (c) If the Participant is terminated for Cause, the Participant’ Options granted shall expire on the expiration dates specified for said Options at the time of their grant, or thirty (30) days after termination for cause, whichever is earlier. 5.7Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable. 5.8Limitations on ISOs. Pursuant to Section 422(d)(1) of the Code, the aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of the Company) will not exceed One Hundred Thousand Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date (as defined in Section 16 hereof) to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. 5.9Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may reduce the Exercise Price of outstanding Options without the consent of Participants by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 hereof for Options granted on the date the action is taken to reduce the Exercise Price; and provided, further, that the Exercise Price will not be reduced below the par value of the Shares. 5.10No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant, to disqualify any Participant’s ISO under Section 422 of the Code. In no event shall the total number of Shares issued (counting each reissuance of a Share that was previously issued and then forfeited or repurchased by the Company as a separate issuance) under the Plan upon exercise of ISOs exceed Five Hundred Thousand (500,000) Shares (adjusted in proportion to any adjustments under Section 2.2 hereof) over the term of the Plan. 6.RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to certain specified restrictions. The Committee will include such conditions and restrictions as the Committee may determine (such as a condition that participants pay a stipulated purchase price for each share of Stock, a condition that the participant’s right to the Restricted Stock shall not vest for a period of time during which service is to be provided, a condition that the Award be subject to forfeiture upon the occurrence of certain specified events, and/or restrictions on the transfer and/or other incidents of ownership), to whom an offer will be made, the number of Shares the person may purchase, the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following: 6.1Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (“Restricted Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The Restricted Stock Award will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within such thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee. 6.2Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee. Payment of the Purchase Price, if any, must be made in accordance with Section 7 hereof. 6.3Restrictions. Restricted Stock Awards may be subject to such other restrictions not inconsistent with applicable law. 7. PAYMENT FOR SHARE PURCHASES. 7.1Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check or wire transfer) or, where expressly approved for the Participant by the Committee and where permitted by law: (a) by cancellation of indebtedness of the Company owed to the Participant; (b) by surrender of Shares which, when added to the cash payment, if any, has an aggregate Fair Market Value equal to the full amount of the Exercise Price of the Option, or part thereof, then being exercised; (c) by waiver of compensation due or accrued to the Participant from the Company for services rendered; (d) delivery of Common Stock of the Company which, when added to the cash payment, if any, has an aggregate Fair Market Value equal to the full amount of the Exercise Price of the Option, or part thereof, then being exercised; (e) a “net exercise” of the Option (as further described below); (f) delivery to the Company of a cash payment made pursuant to a “cashless” exercise program (as further described below); or (g) by any combination of the foregoing or any other form of legal consideration that may be acceptable to the Committee. In the case of a “net exercise” of an Option, the Company will not require a payment of the Exercise Price of the Option from the Participant but will reduce the number of Shares issued upon the exercise by the largest number of whole shares that have a Fair Market Value that does not exceed the aggregate Exercise Price of the Option. With respect to any remaining balance of the aggregate Exercise Price, the Company will accept a cash payment from the Participant. The number of Shares underlying an Option will decrease following the exercise of such Option to the extent of (i) Shares used to pay the Exercise Price of an Option under the “net exercise” feature, (ii) shares of Common Stock actually delivered to the Participant as a result of such exercise and (iii) shares of Common Stock withheld for purposes of tax withholding.
In the case of a cash payment made pursuant to a “cashless” exercise program with respect to the exercise of an Option, and provided that a public market for the Company’s stock exists, (i) through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the Financial Industry Regulatory Authority (or any successor thereto) (a “FINRA Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased sufficient to pay the total Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company; or (ii) through a “margin” commitment from the Participant and an FINRA Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the FINRA Dealer in a margin account as security for a loan from the FINRA Dealer in the amount of the total Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company.
8.1Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash by the Company, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements. 8.2Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that minimum number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined; but in no event will the Company withhold Shares if such withholding would result in adverse accounting consequences to the Company. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee for such elections and be in writing in a form acceptable to the Committee. 9.PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have such rights of a stockholder with respect to such Shares as are provided in the Award Agreement. 10.TRANSFERABILITY. Except as permitted by the Committee and as expressly set forth in the Award Agreement, Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, other than by will or by the laws of descent and distribution, and, with respect to NQSOs, by instrument to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to “immediate family” as that term is defined in 17 C.F.R. 240.16a‑1(e), and may not be made subject to execution, attachment or similar process. During the lifetime of the Participant an Award will be exercisable only by the Participant or Participant’s legal representative and any elections with respect to an Award may be made only by the Participant or Participant’s legal representative. 11.CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted. 12.EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, shares of Common Stock of the Company (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree. 13.SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (ii) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. 14.NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without Cause. 15.CORPORATE TRANSACTIONS. 15.1Acceleration, Vesting and Assumption or Replacement of Awards by Successor or Acquiring Company. Notwithstanding any other provision in this Plan to the contrary, the vesting of such Awards will accelerate and the Options will become exercisable in full immediately prior to the consummation of an event described below: (a) a dissolution or liquidation of the Company; (b) any reorganization, consolidation, merger or similar transaction or series of related transactions (each, a “combination transaction”) in which the Company is a constituent corporation or is a party if, as a result of such combination transaction, the voting securities of the Company that are outstanding immediately prior to the consummation of such combination transaction (otherthan any such securities that are held by an “Acquiring Stockholder”, as defined below) do not represent, or are not converted into, securities of the surviving corporation of such combination transaction (or such surviving corporation’s parent corporation if the surviving corporation is owned by the parent corporation) that, immediately after the consummation of such combination transaction, together possess at least a majorityof the total voting power of all securities of such surviving corporation (or its parent corporation, if applicable) that are outstanding immediately after the consummation of such combination transaction, including securities of such surviving corporation (or its parent corporation, if applicable) that are held by the Acquiring Stockholder; or a sale of all or substantially all of the assets of the Company, that is followed by the distribution of the proceeds to the Company’s stockholders. If provision is made in connection the transaction described in Section 15.1 above, for assumption of Award granted under the Plan and the Company agrees, then the successor or acquiring corporation may assume the Awards and convert them into awards for a like number and kind for shares of the successor or acquiring corporation (if any), or substitute in place such Awards held by the Participant, equivalent new awards covering stock or other property of the successor or acquiring corporation or parent or subsidiary thereof which are no less favorable to the Participant than those of such outstanding Awards immediately prior to the transaction described in this Section 15.1, which assumption, conversion or replacement will be binding on all Participants. For purposes of this Section 15.1, an “Acquiring Stockholder” means a stockholder or stockholders of the company that (i) merges or combines with the Company in such combination transaction or (ii) owns or controls a majority of another corporation that merges or combines with the Company in such combination transaction. 15.2Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 15, in the event of the occurrence of any transaction described in Section 15.1 hereof, any outstanding Awards will be treated as provided in the applicable agreement or plan of reorganization, merger, consolidation, dissolution, liquidation or sale of assets. 15.3Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (i) granting an Award under this Plan in substitution of such other company’s award or (ii) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. 16.ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on the date that it is adopted by the Board (the “Effective Date”). This Plan will be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to this Plan; provided, however, that: (i) no Option may be exercised prior to initial stockholder approval of this Plan; (ii) no Option granted pursuant to an increase in the number of Shares approved by the Board shall be exercised prior to the time such increase has been approved by the stockholders of the Company; (iii) in the event that initial stockholder approval is not obtained within the time period provided herein, all Awards granted hereunder shall be canceled, any Shares issued pursuant to any Award shall be canceled and any purchase of Shares issued hereunder shall be rescinded; and (iv) Awards granted pursuant to an increase in the number of Shares approved by the Board which increase is not timely approved by stockholders shall be canceled, any Shares issued pursuant to any such Awards shall be canceled, and any purchase of Shares subject to any such Award shall be rescinded. 17.TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date or, if earlier, the date of stockholder approval. This Plan and all agreements hereunder shall be governed by and construed in accordance with the laws of the State of California (except its choice-of-law provisions). 18.AMENDMENT OR TERMINATION OF PLAN. 18.1 Subject to Section 5.9 hereof, the Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations of the Participant under any Award theretofore made under the Plan without the consent of the Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the Award). For purposes of the Plan, any action of the Board or the Committee that alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any Participant. 18.2 Shareholder approval of any amendment shall be obtained to the extent necessary to comply with Section 422 of the Code (relating to Incentive Stock Options) or any other applicable law, regulation or stock exchange listing requirements. 18.3 The Committee may amend any outstanding Award Agreement, including, without limitation, by amendment which would accelerate the time or times at which the Award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the Award Agreement. However, any such amendment (other than an amendment pursuant to Sections 18.1 and 18.4 that materially impairs the rights or materially increases the obligations of a Participant under an outstanding Award shall be made only with the consent of the Participant (or, upon the Participant’s death, the person having the right to exercise the Award). 18.4 Notwithstanding anything to the contrary in this Section 18, the Board or the Committee shall have full discretion to amend the Plan to the extent necessary to preserve fixed accounting treatment with respect to any Award and any outstanding Award Agreement shall be deemed to be so amended to the same extent, without obtaining the consent of any Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the affected Award), without regard to whether such amendment adversely affects a Participant’s rights under the Plan or such Award Agreement. 19.NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 20. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. 20.1 An Option or Restricted Stock Award will not be effective unless such Option or Restricted Stock Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Option or Restricted Stock Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (ii) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. 21.DEFINITIONS. As used in this Plan, the following terms will have the following meanings: “Award” means any award under this Plan, including any Option or Restricted Stock Award. “Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award, including the Stock Option Agreement and Restricted Stock Agreement. “Board” means the Board of Directors of the Company. “Cause” means, as determined by the Committee and unless otherwise provided in an applicable agreement with the Company or an affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of, or plea of nolo contendre to, a criminal offense (other than minor traffic offenses); or (iii) material breach of any term of any employment, consulting, or other service, confidentiality, intellectual property, nonsolicitation or non- competition agreements, if any, between the participant and the Company or an affiliate. In each of the foregoing, the Committee shall determine, in its sole discretion, whether or not a “Cause” event has occurred, and the Committee’s determination shall be conclusive, final and binding. “Code” means the Internal Revenue Code of 1986, as amended. “Committee” means the Compensation Committee of the Board or the Management Committee of the Company, as appropriate. The Compensation Committee of the Board shall administer the Plan for those participants who are Senior Participants. All determinations with respect to the participation of such Senior Participants in the Plan, and the form, amount and timing of any Awards to be granted to any such participants under the Plan, and the payment of any such Awards shall be made solely by the Compensation Committee. The Company’s Management Committee shall administer the Plan for all other participants and shall have responsibility for all determinations with respect to the participation of any such participants in the Plan, and the form, amount and timing of any Awards to be granted to any such participants under the Plan, and the payment of any such Awards. All references to the “Committee” in the Plan shall include both the Compensation Committee and the Management Committee, as appropriate. “Company” means Community West Bancshares, or any successor corporation. “Disability” means a disability, whether temporary or permanent, partial or total, as determined by the Committee. “Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option. “Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows, unless determined otherwise by the Committee: (a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal; (b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal; (c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported by The Wall Street Journal (or, if not so reported, as otherwise reported by any newspaper or other source as the Board may determine); or (d) if none of the foregoing is applicable, by the Committee in good faith. “Option” means an award of an option to purchase Shares pursuant to Section 5 hereof. “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock representing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. “Participant” means a person who receives an Award under this Plan. “Plan” means this Community West Bancshares 2020 Omnibus Equity Incentive Plan, as amended from time to time. “Purchase Price” means the price at which a Participant may purchase Restricted Stock. “Restricted Stock” means Shares purchased pursuant to a Restricted Stock Award. “Restricted Stock Award” means an award of Shares pursuant to Section 6 hereof. “SEC” means the Securities and Exchange Commission. “Securities Act” means the Securities Act of 1933, as amended. “Senior Participants” are Participants who are members of the Company’s Board, “officers” of the Company as defined in Rule 16a – 1(f) under the Securities Exchange Act of 1934 (the “Exchange Act”), and such other key employees as may be designated by the Compensation Committee of the Board as Participants. “Shares” means shares of the Company’s Common Stock, no par value, reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 15 hereof, and any successor security. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock representing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. “Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company. A Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than ninety (90) days (a) unless reinstatement (or, in the case of an employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or statute, or (b) unless provided otherwise pursuant to formal policy adopted from time to time by the Company’s Board and issued and promulgated in writing. In the case of any Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”). “Unvested Shares” means “Unvested Shares” as defined in the Award Agreement. “Vested Shares” means “Vested Shares” as defined in the Award Agreement.
COMMUNITY WEST BANCSHARES PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON MAY 26, 201628, 2020 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Community West Bancshares (Company) hereby appoints Deborah ScottRobert H. Bartlein and Janice Stewart,William R. Peeples, or any of them, agents and proxy of the undersigned, each with full power of substitution, to attend and act as proxy or proxies of the undersigned at the Annual Meeting of Shareholders of Community West Bancshares to be held at La Cumbre Country Club, 4015 Via Laguna, Santa Barbara, Californiaexclusively online by means of a live webcast over the Internet at: www.meetingcenter.io/255791609 on Thursday, May 26, 2016,28, 2020, at 6:30 P.M., Pacific Daylight Time, and at any and all adjournments thereof, and to vote as specified herein the number of shares which the undersigned, if personally present, would be entitled to vote, as follows:
1. Election of Directors. To elect the following eightten persons to the Board of Directors of the Company to serve until the 20172020 Annual Meeting of Shareholders and until their successors are elected and have qualified: ____ AUTHORITY GIVEN (except as noted below) | ____ WITHHOLD AUTHORITY |
____ AUTHORITY GIVEN (except as noted below) ____ WITHHOLD AUTHORITY
Robert H. Bartlein - Jean W. Blois - Dana L. Boutain - Tom L. Dobyns - John D. Illgen - James W. Lokey - Shereef Moharram - William R. Peeples - Martin E. Plourd - Kirk B. Stovesand
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR SOME, BUT NOT ALL, OF THE NOMINEES NAMED ABOVE, YOU SHOULD CHECK THE BOX "AUTHORITY GIVEN" AND YOU SHOULD ENTER THE NAME(S) OF THE NOMINEE(S) WITH RESPECT TO WHOM YOU WISH TO WITHHOLD AUTHORITY TO VOTE IN THE SPACE PROVIDED BELOW
2. Shareholder Advisory (non-Binding) Vote on Executive Compensation.Approval of the 2020 Omnibus Equity Incentive Plan. To approve the following advisory (non-binding) proposal: "RESOLVED, that the shareholders of Community West Bancshares approve2020 Omnibus Equity Incentive Plan covering 500,000 shares of the compensation of executive officersCompany's Common Stock, as more fully described under the heading "Executive Compensation" including the tabular disclosure regarding executive officer compensation and the accompanying narrative disclosure in the Company's 2020 Proxy Statement."
___ FOR ____ AGAINST ____ ABSTAIN
3. Ratification of the Selection of RSM US LLP (formerly McGladrey LLP) as the Company's Independent Auditors. To ratify the selection of RSM as the Company's independent auditors for the fiscal year ending December 31, 2016.2020.
___ FOR | ____ AGAINST | ____ ABSTAIN |
___ FOR ____ AGAINST ____ ABSTAIN
4. Other business.To transact such other business as may properly come before the Meeting and any adjournment thereof.
___ FOR ____ AGAINST ____ ABSTAIN
IMPORTANT NOTICE REGARDING THE VIRTUAL VENUE WEBSITE FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 28, 2020.
The Company has made the decision to hold a virtual Annual Meeting over the Internet, but the virtual venue web address information is not available at the time of preparing this proxy card. The Company will announce the virtual venue address by press release as soon as it becomes available to the Company
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 26, 201628, 2020
ThisThe proxy statement, the proxy card and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2019, and directionsinstructions as to how to attend the location of thevirtual Annual Meeting are available to you ononline at www.edocumentview.com/CWBC and the Company's website at www.communitywest.com.
PLEASE SIGN AND DATE THE OTHER SIDE - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND THE ACCOMPANYING PROXY STATEMENT.
THIS PROXY WILL BE VOTED AS SPECIFIED OR IF NO CHOICE IS SPECIFIED, WILL BE VOTED AUTHORITY GIVEN TO ELECT THE EIGHTTEN NOMINEES AND FOR PROPOSALS 2, andFOR PROPOSAL 3 AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING.MEETING INCLUDING ADJOURNMENT THEREOF.( THIS PROXY ALSO CONFERS AUTHORITY TO THE PROXIES TO CAST VOTES IN SUCH A MANNER AS TO EFFECT THE ELECTION OF ALL TEN NOMINEES FOR DIRECTOR OR AS MANY THEREOF AS POSSIBLE UNDER THE RULES OF CUMULATIVE VOTING AS DETERMINED BY THE PROXIES IN THEIR DISCRETION.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING AND THE PROXY STATEMENT, BY ACCESSING THEM ONLINE AT www.edocumentview.com/CWBC. Please sign exactly as name appears. When shares are held by joint tenants both should sign. When signing as attorney, as executor, administrator,administer, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership please sign in partnership name by authorized person.)
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I do __ do not __ expect to attend the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED BY THE SHAREHOLDER DELIVERING IT PRIOR TO ITS EXERCISE BY FILING WITH THE CORPORATE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING THIS PROXY, OR A DULY EXECUTED PROXY BEARING A LATER DATE, BY VOTING BY INTERNET OR BY APPEARINGTELEPHONE AFTER THE DATE OF THE PROXY SUBMITTED OR BY PARTICIPATING AND VOTING IN PERSONONLINE AT THE MEETING.VIRTUAL MEETING VIA THE LIVE WEBCAST.
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