UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14 (A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ____)
FILED BY THE REGISTRANT /X/
FILED BY A PARTY OTHER THAN THE REGISTRANT / /
CHECK THE APPROPRIATE BOX:
/ / PRELIMINARY PROXY STATEMENT
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY ( AS PERMITTED BY RULE
14A-6 (E) (2) )
/X/ DEFINITIVE PROXY STATEMENT
/ / DEFINITIVE ADDITIONAL MATERIALS
/ / SOLICITING MATERIAL PURSUANT TO RULE 14A-11 (C) OR RULE 14A-12
COMMUNITY WEST BANCSHARES
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON (S) FILING PROXY STATEMENT, IF OTHER THAN REGISTRANT
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX) :
/X/ NO FEE REQUIRED.
/ / FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I) (1) AND 0-11.
(1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
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(3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11 (SET FORTH THE AMOUNT ON WHICH THE
FILING FEE IS CALCULATED AND STATE HOW IT WAS DETERMINED:
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(4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:
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(5) TOTAL FEE PAID:
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/ / FEE PAID PREVIOUSLY WITH PRELIMINARY MATERIALS.
/ / CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT
RULE 0-11 (A) (2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE WAS PAID
PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR
THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
(1) AMOUNT PREVIOUSLY PAID
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(3) FILING PARTY:
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COMMUNITY WEST BANCSHARES
445 Pine Avenue
Goleta, California 93117-3474
Telephone: (805) 692-5821
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2006
NOTICE IS HEREBY GIVEN that the 2006 Annual Meeting of Shareholders
(Meeting) of Community West Bancshares (Company) will be held at La Cumbre
Country Club, 4015 Via Laguna, Santa Barbara, California 93110, on Thursday, May
25, 2006, at 6:00 P.M. Pacific Daylight Time, for the purpose of considering and
voting on the following matters:
1. ELECTION OF DIRECTORS. To elect eight persons to the Board of
Directors of the Company (Board) to serve until the 2007 Annual Meeting of
Shareholders and until their successors are elected and have qualified. The
following persons are the Board of Directors' nominees:
Robert H. Bartlein William R. Peeples
Jean W. Blois James R. Sims, Jr.
John D. Illgen Kirk B. Stovesand
Lynda J. Nahra C. Richard Whiston
2. APPROVAL OF STOCK OPTION PLAN. To approve the Community West
Bancshares 2006 Stock Option Plan covering 500,000 shares of the Company's
Common Stock, as more fully described in the Company's 2006 Proxy Statement.
3. OTHER BUSINESS. To transact such other business as may properly
come before the Meeting and any adjournment thereof, including, without
limitation, to approve an adjournment(s) of the Meeting, if necessary, to
solicit additional proxies for the eight nominees for election and for Proposal
2.
The Proxy Statement that accompanies this Notice contains additional
information regarding the proposals to be considered at the Meeting and
shareholders are encouraged to read it in its entirety.
The Board has fixed the close of business on March 31, 2006 as the record
date for determination of shareholders entitled to notice of, and the right to
vote at, the Meeting.
As set forth in the enclosed Proxy Statement, proxies are being solicited
by and on behalf of the Board. All proposals set forth above are proposals of
the Company. It is expected that these materials will be mailed to shareholders
on or about April 14, 2006.
The Bylaws of the Company provide for the nomination of Directors in the
following manner:
"Nominations for election of members of the board of directors may be
made by the board of directors or by any shareholder of any outstanding
class of capital stock of the corporation entitled to vote for the election
of directors. Notice of intention to make any nominations (other than for
persons named in the notice of the meeting at which such nomination is to
be made) shall be made in writing and shall be delivered or mailed to the
president of the corporation no more than sixty (60) days prior to any
meeting of shareholders called for the election of directors and no more
than ten (10) days after the date the notice of such meeting is sent to
shareholders pursuant to Section 2.4 of these Bylaws; provided, however,
that if ten (10) days notice of such meeting is sent to shareholders, such
notice of intention to nominate must be received by the president of the
corporation not later than the time fixed in the notice of the meeting for
the opening of the meeting. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name
and address of each proposed nominee; (b) the principal occupation of each
proposed nominee;
(c) the number of shares of capital stock of the corporation owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; (e) the number of shares of capital stock of the corporation
owned by the notifying shareholder; (f) with the written consent of the
proposed nominee, a copy of which shall be furnished with the notification,
whether the proposed nominee has ever been convicted of or pleaded nolo
contendere to any criminal offense involving dishonesty or breach of trust,
filed a petition in bankruptcy or been adjudged a bankrupt. The notice
shall be signed by the nominating shareholder and by the nominee.
Nominations not made in accordance herewith shall be disregarded by the
chairman of the meeting and, upon his instructions, the inspectors of
election shall disregard all votes cast for each such nominee. The
restrictions set forth in this paragraph shall not apply to nomination of a
person to replace a proposed nominee who has died or otherwise become
incapacitated to serve as a director between the last day for giving notice
hereunder and the date of election of directors if the procedure called for
in this paragraph was followed with respect to the nomination of the
proposed nominee. A copy of the preceding paragraph shall be set forth in
the notice to shareholders of any meeting at which directors are to be
elected."
SINCE IMPORTANT MATTERS ARE TO BE CONSIDERED AT THE MEETING, IT IS VERY
IMPORTANT THAT EACH SHAREHOLDER VOTE.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE ENCLOSED PROXY IS
SOLICITED BY THE BOARD. ANY SHAREHOLDER WHO EXECUTES AND DELIVERS SUCH A PROXY
HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE IT IS EXERCISED BY GIVING WRITTEN
NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY, BY SUBMITTING PRIOR TO THE
MEETING A PROPERLY EXECUTED PROXY BEARING A LATER DATE OR BY BEING PRESENT AT
THE MEETING AND ELECTING TO VOTE IN PERSON BY ADVISING THE CHAIRMAN OF THE
MEETING OF SUCH ELECTION.
PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING SO THAT THE COMPANY CAN ARRANGE FOR ADEQUATE ACCOMMODATIONS.
By Order of the Board of Directors,
John D. Illgen, Secretary
Dated: April 7, 2006
Goleta, California
ANNUAL REPORT ON FORM 10-K
COPIES OF THE COMPANY'S 2005 ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, ARE AVAILABLE UPON REQUEST TO: CHARLES G.
BALTUSKONIS, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, COMMUNITY
WEST BANCSHARES, 445 PINE AVENUE, GOLETA, CA 93117-3474, TELEPHONE (805)
692-5821, ON THE COMPANY'S WEBSITE AT WWW.COMMUNITYWEST.COM AND ON THE WEBSITE
OF THE SECURITIES AND EXCHANGE COMMISSION AT WWW.SEC.GOV.
COMMUNITY WEST BANCSHARES
445 PINE AVENUE
GOLETA, CALIFORNIA 93117-3474
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2006
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SOLICITATION AND VOTING OF PROXIES
Community West Bancshares (Company or CWBC) is furnishing this Proxy
Statement to its shareholders in connection with the solicitation by the Board
of Directors (Board) of proxies to be used at the Annual Meeting (Meeting) of
Shareholders, to be held on Thursday, May 25, 2006 at 6:00 P.M. PDT at La Cumbre
Country Club, 4015 Via Laguna, Santa Barbara, California 93110, and at any and
all adjournments and postponements thereof, and, the designated proxyholders
(Proxyholders) are members of the Company's management. Only shareholders of
record (shareholders) on March 31, 2006 (Record Date) are entitled to notice of
and to vote in person or by proxy at the Meeting or any adjournment or
postponement thereof. This Proxy Statement and the enclosed proxy card (Proxy)
first will be mailed to shareholders on or about April 14, 2006. The Company's
Annual Report to Shareholders, including consolidated financial statements for
the year ended December 31, 2005, accompanies this Proxy Statement.
Regardless of the number of shares of Common Stock of the Company (Common
Stock) owned, it is important that the holders of a majority of shares be
represented by proxy or be present in person at the Meeting. Shareholders are
requested to vote by completing the enclosed proxy card and returning it signed
and dated in the enclosed postage-paid envelope. Shareholders are to indicate
their vote in the spaces provided on the proxy card. PROXIES SOLICITED BY THE
BOARD WILL BE VOTED IN ACCORDANCE WITH THE DIRECTIONS GIVEN THEREIN. WHERE NO
INSTRUCTIONS ARE INDICATED, SIGNED PROXY CARDS WILL BE VOTED "FOR ALL NOMINEES"
FOR THE ELECTION OF THE NOMINEES NAMED IN THIS PROXY STATEMENT. If any other
business is properly presented at the Meeting, the Proxy will be voted in
accordance with the recommendations of the Board.
Other than the matters set forth on the attached Notice of the Meeting, the
Board knows of no additional matters that will be presented for consideration at
the Meeting. Execution of a proxy, however, confers to the designated
Proxyholders discretionary authority to vote the shares in accordance with the
recommendations of the Board on such other business, if any, that may properly
come before the Meeting and at any adjournments or postponements thereof,
including whether or not to adjourn the Meeting.
You may revoke your Proxy at any time prior to its exercise by filing a
written notice of revocation with the Secretary of the Company, by delivering to
the Company a duly executed Proxy bearing a later date, or by attending the
Meeting and voting in person. However, if you are a shareholder whose shares
are not registered in your own name, you will need to provide appropriate
documentation from the record holder to vote personally at the Meeting.
The following matters will be considered and voted upon at the Meeting:
1. ELECTION OF DIRECTORS. To elect eight persons to the Board of
Directors of the Company to serve until the 2007 Annual Meeting of Shareholders
and until their successors are elected and have qualified. The following
persons are the Board of Directors' nominees:
Robert H. Bartlein William R. Peeples
Jean W. Blois James R. Sims, Jr.
John D. Illgen Kirk B. Stovesand
Lynda J. Nahra C. Richard Whiston
1
2. APPROVAL OF STOCK OPTION PLAN. To approve the Community West
Bancshares 2006 Stock Option Plan covering 500,000 shares of the Company's
Common Stock, as more fully described in this Proxy.
3. OTHER BUSINESS. To transact such other business as may properly
come before the Meeting and any adjournment thereof, including, without
limitation, approving an adjournment(s) of the Meeting, if necessary, to solicit
additional proxies for the eight nominees for election and for Proposal 2.
This solicitation of proxies is being made by the Board. The expense of
solicitation of proxies for the Meeting will be borne by the Company. It is
anticipated that proxies will be solicited primarily through the use of the
mail. Proxies may also be solicited personally or by telephone by Directors,
officers and employees of the Company, and its wholly-owned subsidiary,
Community West Bank (CWB), without additional compensation therefor. The
Company will also request persons, firms and corporations holding shares in
their names, or in the name of their nominees, that are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners and will reimburse such holders for their reasonable expenses in doing
so. The total estimated cost of the solicitation is $10,000.
VOTING SECURITIES
The securities that may be voted at the Meeting consist of shares of Common
Stock. The close of business on March 31, 2006 has been fixed by the Board as
the Record Date for the determination of shareholders of record entitled to
notice of and to vote at the Meeting and at any adjournment or postponements
thereof. The total number of shares of Common Stock outstanding on the Record
Date was 5,780,153 shares. Each shareholder is entitled to one vote, in person
or by proxy, for each share as of the Record Date, except that in the election
of Directors, each shareholder has the right to cumulate provided that the
candidates' names have been properly placed in nomination prior to commencement
of voting and a shareholder has given notice of their intention to cumulate
votes prior to commencement of voting. Cumulative voting entitles a shareholder
to give one candidate a number of votes equal to the number of Directors to be
elected, multiplied by the number of shares of Common Stock held by that
Shareholder, or to distribute such votes among as many candidates as the
shareholder deems fit. The Company is soliciting authority to cumulate votes in
the election of Directors, and the enclosed Proxy grants discretionary authority
for this purpose. The candidates receiving the highest number of votes, up to
the number of Directors to be elected, will be elected.
Of the shares of Common Stock outstanding on the Record Date, 1,045,184
shares of Common Stock (18.08%) of the issued and outstanding shares of Common
Stock were beneficially owned by Directors and executive officers of the
Company. Such persons have informed the Company that they will vote "FOR" the
election of the nominees to the Board. Under California law and the Company's
Bylaws, a quorum consists of the presence in person or by proxy of a majority of
the shares entitled to vote at the Meeting, and a matter (other than the
election of Directors) voted on by Shareholders will be approved if it receives
the vote of a majority of the shares both present and voting, which shares also
constitute a majority of the required quorum, unless the vote of a greater
number of shares is required. Abstentions and broker non-votes will be included
in the number of shares present at the Meeting and entitled to vote for the
purpose of determining the presence of a quorum. Accordingly, in the event the
number of shares voted affirmatively does not represent a majority of the
required quorum, abstentions and broker non-votes will have the effect of a "no"
vote. Abstentions and broker non-votes do not have the effect of votes in
opposition to any nominee for election of Director.
If you hold Common Stock in "street name" and you fail to instruct your
broker or nominee as to how to vote such Common Stock, your broker or nominee
may, in its discretion, vote such Common Stock "FOR" the election of the Board
nominees.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND
EXECUTIVE OFFICERS
The following table sets forth certain information as of the Record Date,
concerning the beneficial ownership of the Company's outstanding Common Stock by
persons (other than depositories) known to the Company to own more than 5% of
the Company's outstanding Common Stock, by the Company's Directors and executive
officers, and by all Directors and executive officers of the Company as a group.
Management is not aware of any change in control of the Company that has
occurred since January 1, 2005, or any arrangement that may, at a subsequent
date, result in a change in control of the Company.
Except as indicated, the address of each of the persons listed below is c/o
Community West Bancshares, 445 Pine Avenue, Goleta, CA 93117.
NUMBER OF SHARES OF NUMBER OF SHARES PERCENT OF CLASS
COMMON STOCK SUBJECT TO VESTED BENEFICIALLY
NAME AND TITLE BENEFICIALLY OWNED(1) STOCK OPTIONS(2) OWNED(2)
------------------------------------------------- --------------------- ------------------ -----------------
CHARLES G. BALTUSKONIS, Executive Vice President 12,100 8,000 *
and Chief Financial Officer, CWBC and CWB
ROBERT H. BARTLEIN, Director, Chairman of the 135,762 13,545 2.58%
Board, CWB
JEAN W. BLOIS, Director 58,824 15,099 1.28%
CYNTHIA M. HOOPER, Senior Vice President, CWB (3) 6,625 14,000 *
JOHN D. ILLGEN, Director 46,956 27,959 1.29%
INVESTORS OF AMERICA LIMITED PARTNERSHIP AND 946,323 - 16.37%
FIRST BANKS, INC. (4)
BERNARD R. MERRY, Senior Vice President, CWB (3) - 20,500 *
LYNDA J. NAHRA, Director, President and Chief 14,330 54,500 1.18%
Executive Officer, CWBC and CWB
WILLIAM R. PEEPLES, Director, Chairman of the 749,357 - 12.96%
Board, CWBC (5)
JAMES R. SIMS, JR., Director 22,385 27,959 .87%
KIRK B. STOVESAND, Director 2,600 5,000 *
WILLIAM VIANI, Executive Vice President, CWB - 14,000 *
C. RICHARD WHISTON, Director 2,870 5,000 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP 1,045,184 171,062 20.44%
(10 in number) (3)
* Less than .5%
(1) Includes shares beneficially owned, directly and indirectly, together with
associates, except for shares subject to vested stock options and outstanding
warrants. Also includes shares held as trustee and held by or as custodian for
minor children. Unless otherwise noted, all shares are held as community
property under California law or with sole investment and voting power.
(2) Shares subject to options held by Directors or executive officers that are
exercisable within 60 days after the Record Date (vested) are treated as issued
and outstanding for the purpose of computing the percent of the class owned by
such person, but not for the purpose of computing the percent of class owned by
any other person.
(3) This person is not a named executive officer, but is a key officer of the
Company. As such, shares are not included in the line totals for "All Directors
and Executive Officers as a Group".
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(4) Address is: 135 North Meramec, Clayton, MO 63105.
Total shares include 568,696 in name of Investors of America Limited
Partnership and 377,627 in name of First Banks, Inc.
- The securities owned by First Banks, Inc. may be deemed to be
indirectly owned by Investors of America Limited Partnership,
First Securities America, Inc., General Partner. Members of the
Dierberg Family and the Dierberg Family Trusts are shareholders
of First Securities America, Inc. and First Banks, Inc. Investors
of America Limited Partnership disclaims beneficial ownership of
these securities.
- The securities owned by Investors of America Limited Partnership
may be deemed to be indirectly owned by First Banks, Inc. Members
of the Dierberg Family and the Dierberg Family Trusts are
shareholders of First Securities America, Inc., the General
Partner of Investors of America Limited Partnership, and First
Banks, Inc. First Banks, Inc. disclaims beneficial ownership of
these securities.
(5) Includes 173,922 shares held by Mr. Peeples' spouse, concerning which Mr.
Peeples disclaims beneficial ownership.
PROPOSAL 1
ELECTION OF DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Bylaws provide that the authorized number of Directors shall
be not less than six nor more than 11, with the exact number of Directors fixed
from time to time by resolution of a majority of the Board or by resolution of
the shareholders. The number of Directors is currently fixed at eight.
At the Meeting, eight persons will be elected to serve as Directors of the
Company until the 2007 Annual Meeting and until their successors are elected and
have qualified. The eight persons named below, all of whom are currently
Directors of the Company, have been nominated by the Board for re-election. A
Proxy that is submitted with the instruction "FOR all nominees listed" or
without instructions will be voted in such a way as to effect the election of
all eight nominees, or as many thereof as possible. In the event that any of
the nominees should be unable to serve as a Director, it is intended that the
Proxy will be voted for the election of such substitute nominees, if any, as
shall be designated by the Board. Each nominee has consented to being named in
the Proxy Statement and has agreed to serve as a member of the Board, if
elected. The Board has no reason to believe that any of the nominees will be
unable or unwilling to serve. Additional nominations can only be made by
complying with the notice provision set forth in the Bylaws of the Company, an
extract of which is included in the Notice of Annual Meeting of Shareholders
accompanying this Proxy Statement. This Bylaw provision is designed to give the
Board advance notice of competing nominations, if any, and the qualifications of
nominees, and may have the effect of precluding third-party nominations if the
notice provisions are not followed.
Pursuant to Nasdaq Stock Market (NASD) Rule 4200 (a) 15, the Board has made
an affirmative determination that the following members of the Board are
"independent" within the meaning of such rule: Robert H. Bartlein, Jean W.
Blois, John D. Illgen, William R. Peeples, James R. Sims, Jr., Kirk B. Stovesand
and C. Richard Whiston. As such, pursuant to NASD Rule 4350 (c) (1), a majority
of the members of the Board and all the members of the Audit Committee are
"independent" as so defined.
The following persons have been nominated for election by the Board:
Robert H. Bartlein William R. Peeples
Jean W. Blois James R. Sims, Jr.
John D. Illgen Kirk B. Stovesand
Lynda J. Nahra C. Richard Whiston
4
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE BOARD OF
DIRECTORS' NOMINEES.
INFORMATION ABOUT THE NOMINEES
ROBERT H. BARTLEIN (AGE 58)
Mr. Bartlein has been a member of the Board of CWBC since its inception in
1997 and a founder and Director of CWB since 1989. Mr. Bartlein serves on
CWBC's Personnel / Compensation and Nominating and Corporate Governance
Committees and is Chairman of the Board of CWB, Chairman of the Loan Committee
and a member of the Executive Committee. He is President and CEO of Bartlein &
Company, Inc., founded in 1969, which is a property management company with four
California offices. He is a graduate of the University of Wisconsin - Madison,
with a degree in Finance, Investments and Banking, and did post-graduate study
at the University of Wisconsin - Milwaukee. Mr. Bartlein is past President and
Director of the American Lung Association of Santa Barbara and Ventura Counties.
JEAN W. BLOIS (AGE 78)
Mrs. Blois has been a member of the Board of CWBC since its inception in
1997 and of CWB since 1989. She is Chairman of CWB's Personnel / Compensation
Committee and a member of the 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
BS from 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, is currently a council member for the City of Goleta and,
in 2005, served as Mayor.
JOHN D. ILLGEN (AGE 61)
Mr. Illgen has been a member of the Board of CWBC since its inception in
1997 and of CWB since 1989. He is Secretary of the Board of CWBC and a member
of the Nominating and Corporate Governance Committee, Chairman of CWB's Asset /
Liability Committee and a member of the Personnel / Compensation and Compliance
Committees. Mr. Illgen is a Vice President and a Director of Northrop Grumman
Simulation Technologies (NGC). He was Founder (1988), President and Chairman of
Illgen Simulation Technologies, Inc. until its merger with NGC in December 2003.
Mr. Illgen is a Director of the National Defense Industry Association and
appears on General Alexander Haig's "World Business Review" as an industry
expert in information systems, modeling and simulation. Mr. Illgen is an
honorary member of the Santa Barbara Scholarship Foundation Board and a Past
President (1979-80) of Goleta Rotary Club.
LYNDA J. NAHRA (AGE 55)
Ms. Nahra has been President and Chief Executive Officer of CWB since 2000,
and of CWBC since February 2004, after serving in various positions of
increasing responsibility for CWB since 1997. Ms. Nahra is a member of CWB and
CWBC's Boards and serves on CWB's Loan, Asset / Liability, Compliance,
Management Succession and Disclosure Committees. Her banking career began in
1970 with Bank of America and her banking experience has included management
positions in operations, consumer and commercial lending, sales, private banking
and corporate banking. Ms. Nahra serves as: a Director of Women's Economic
Ventures and the Girl Scouts of Tres Condados; a Trustee for the Sansum-Santa
Barbara Medical Foundation Clinic; a Finance Committee member for the Goleta
Montessori Center School and the Santa Barbara United Way; and, a member of
Montecito Rotary Club. Ms. Nahra's educational background is from California
Western University in San Diego and Pacific Coast Banking School.
WILLIAM R. PEEPLES (AGE 63)
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 Audit, Nominating and
Corporate Governance Committees and serves
5
on CWB's Loan, Personnel / Compensation, Executive and Management Succession
Committees. Mr. Peeples served in various financial capacities, including
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.
JAMES R. SIMS JR. (AGE 70)
Mr. Sims has been a member of the Board of CWBC since its inception in 1997
and of CWB since 1989. Mr. Sims serves on CWB's Compliance and Audit Committees
and previously served on the Finance Committee. Mr. Sims is a real estate
broker whose career began in 1970 in Santa Barbara. He is a past President of
the Santa Barbara Board of Realtors, Chairman of the Multiple Listing Service
and served in 1984 as Regional Vice President of the California Association of
Realtors. Mr. Sims served on the Santa Barbara Coastal Housing Association
seeking affordable housing and he developed three Residential Care Facilities
for the elderly in Camarillo that he operated until his retirement in 2000.
KIRK B. STOVESAND (AGE 43)
Mr. Stovesand has been a member of the Board of CWBC and CWB since May
2003. Mr. Stovesand serves on CWB's Audit and Asset / Liability 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.
C. RICHARD WHISTON (AGE 69)
Mr. Whiston has been a member of the Board of CWBC and CWB since June 2004.
He serves on CWBC's Audit Committee and CWB's Loan Committee. Mr. Whiston was a
partner in the Santa Barbara law firm of Mullen, McCaughey & Henzell. He served
from 1983 to 1985 as Principal Deputy General Counsel and as Chief of Legal
Services, U.S. Army, and later returned to private practice of law. Mr. Whiston
was appointed as Principal Deputy Assistant Secretary of the Army for Manpower
and Reserve Affairs in July 2001, and as Special Assistant to the Secretary of
the Army from October 2001 to August 2003. He received a BA and a JD from the
University of California, Berkeley and served in the U.S. Army as a commissioned
officer.
None of the Directors or executive officers of the Company were selected
pursuant to any arrangement or understanding, other than with the Directors and
executive officers of the Company, acting within their capacities as such. The
Company knows of no family relationships between the Directors and executive
officers of the Company, nor do any of the Directors or executive officers of
the Company serve as Directors of any other company which has a class of
securities registered under, or which is subject to the periodic reporting
requirements of, the Securities Exchange Act of 1934 (Exchange Act) or any
investment company registered under the Investment Company Act of 1940.
Officers serve at the discretion of the Board.
EXECUTIVE AND CERTAIN OTHER KEY OFFICERS (not members of the Board)
The following sets forth, as of the Record Date, the names and certain
other information concerning executive and certain other key officers of the
Company, in addition to the executive officer who is nominated for election as a
Director.
6
CHARLES G. BALTUSKONIS (AGE 55)
Mr. Baltuskonis, Executive Vice President and Chief Financial Officer of
CWBC and CWB, has been with the Company since November 2002. He 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 Ernst & Young, 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
and the Board of Directors of Goleta Valley Chamber of Commerce; and, holds a BS
from Villanova University.
CYNTHIA M. HOOPER (AGE 43)
Ms. Hooper, Senior Vice President, SBA Lending, has been with CWB since
1989. She started at CWB in commercial lending and currently manages the SBA
underwriting and processing unit, which underwrites and processes loans for 15
Preferred Lender territories in nine states. Prior to serving at CWB, she was
in commercial lending at City Commerce Bank. Ms. Hooper is a member of the
National Association of Government Guaranteed Lenders and has served as a
Director of the Goleta Valley Chamber of Commerce.
BERNARD R. MERRY (AGE 58)
Mr. Merry, Senior Vice President, Mortgage, has been with CWB since 1998.
His CWB roles have included HUD Administrator and head of Alternative Mortgage
Products. He was named Mortgage Division Manager in November 2001. Currently,
Mr. Merry oversees CWB's Retail and Wholesale Mortgage Departments. He formerly
was a Vice President for ITT Financial Services for 24 years managing their West
Coast Broker Division and California Real Estate Collection Department. Mr.
Merry worked as a consultant for Option One Mortgage Corporation and as
Assistant Vice President for Cityscape Mortgage Corporation, opening its Western
States operation.
WILLIAM VIANI (AGE 58)
Mr. Viani, Executive Vice President and Credit Administrator of CWB, has
been with the Company since 1996. He has held various positions with CWB, most
recently Senior SBA Loan Officer. Mr. Viani began his banking career with
Crocker National Bank and his experience includes commercial credit, special
assets and corporate banking. From 1993 to 1996, he was with El Camino
National Bank, serving as President and Chief Executive Officer from 1995 to
1996. From 1988 to 1993, he was Senior Lending Officer with Ventura County
National Bank. Mr. Viani is a member of Risk Management Associates and holds a
BS in Economics from Loyola University and an MA from the University of Southern
California.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
The Board met 13 times (12 regular meetings and one special meeting) during
the year ended December 31, 2005, and had the following standing committees that
met during the year: Audit Committee, Personnel / 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 that subsidiary. During 2005, 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 Mrs.
Blois, attended the 2005 Annual Meeting of Shareholders.
The Audit Committee is composed of four independent Directors: Messrs.
Peeples, Sims, Stovesand and Whiston. 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 five times during 2005.
The Nominating and Corporate Governance Committee is composed of three
independent Directors: Messrs. Peeples, Bartlein and Illgen. The Committee is
responsible for recommendations regarding the
7
Board's composition and structure and policies and processes regarding overall
corporate governance. The Committee met one time during 2005.
The Personnel / Compensation Committee is composed of four independent
Directors: Mrs. Blois and Messrs. Bartlein, Illgen and Peeples. The Committee
is responsible for determining executive compensation. This Committee met three
times during 2005.
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 93117-3474
DIRECTORS' COMPENSATION
There were no CWBC Director fees paid during 2005.
CWB's non-employee Directors are paid for attendance at Board meetings at
the rate of $1,000 for each regular Board meeting and $200 for each committee
meeting. If a Director attends a meeting by telephone, only 25% of the above
fee is received. Also, in 2005, each non-employee Director received additional
discretionary compensation of $5,000.
AUDIT COMMITTEE REPORT
The Report of the Audit Committee of the Board shall not be deemed filed
under the Securities Act of 1933 (Securities Act) or under the Exchange Act.
The Board maintains an Audit Committee comprised of four of the Company's
Directors, who each met the independence and experience requirements of NASD
Rule 4350 (c) (1). 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 was last amended on
December 16, 2004 and last ratified on December 22, 2005, and is assessed
annually for adequacy by the Audit Committee. A copy of the Charter is included
as Appendix A to the Company's 2005 Proxy Statement, as filed with the SEC on
April 13, 2005, and is available at www.sec.gov.
Based on the attributes, education and experience requirements required by
NASD Rule 4350 (d) (2) (A), the requirements set forth in section 407 of the
Sarbanes-Oxley Act of 2002 and associated regulations, the Board has identified
William R. Peeples as an "Audit Committee Financial Expert" as defined under
Item 401 (h) 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 2005; 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.
The Company's independent auditors, Ernst & Young LLP (Ernst), are
responsible for performing an audit of the Company's financial statements in
accordance with the auditing standards generally accepted in the United States
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
8
conform with accounting principles generally accepted in the United States. In
fulfilling its oversight responsibilities, the Audit Committee:
- Discussed with Ernst the matters required to be discussed by Statement
on Auditing Standards No. 61, as amended (Communication with Audit
Committees), and Section 204 of the Sarbanes-Oxley Act of 2002; and
- Received and discussed with Ernst the written disclosures and the
letter from Ernst required by Independent Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and reviewed and
discussed with Ernst whether the rendering of the non-audit services
provided by them to the Company during fiscal 2005 was compatible with
their independence.
In addition, the Company received a letter from Ernst to the effect that
Ernst'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 Ernst 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. Nor is
it 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
Ernst, the Audit Committee has 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, 2005 for filing with
the Securities and Exchange Commission.
THE AUDIT COMMITTEE
William R. Peeples, Chairman
James R. Sims, Jr.
Kirk B. Stovesand
C. Richard Whiston
Dated: March 23, 2006
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Company's Nominating and Corporate Governance Committee (NCGC
Committee) was established in February 2004 and the committee charter (Charter)
was approved in March 2004. The NCGC Committee, 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
Committee 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 Committee 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 "2007 Shareholder
Proposals". The NCGC Committee will follow the processes in the Charter when
identifying and evaluating overall Board composition and individual nominees to
the Board.
9
Additional information regarding (i) the NCGC Committee'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 Committee's process for identifying and evaluating nominees for
Directors, is incorporated herein by reference to the Charter. A copy of the
Charter is included as Appendix A to the Company's 2004 Proxy Statement, as
filed with the SEC on April 19, 2004, and is available on the SEC's website at
www.sec.gov.
PERSONNEL / COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Personnel / Compensation Committee (PC Committee) is composed of four
Directors: Mrs. Blois, and Messrs. Bartlein (as of March 23, 2006), Illgen and
Peeples, none of whom served as an officer of the Company or of its
subsidiaries. The Company's executive officers have represented to the Company
that none of them served on the Board or PC Committee, or in an equivalent
capacity, of another entity.
PERSONNEL / COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Report of the PC Committee of the Board shall not be deemed to be filed
under the Securities Act or under the Exchange Act.
The PC Committee was responsible for reviewing and approving the Company's
overall compensation and benefit programs and for administering the compensation
of the Company's executive and senior officers.
The PC Committee's functions and objectives are: (i) to determine the
competitiveness of current base salary, annual incentives and long-term
incentive relative to specific competitive markets for the President; (ii) to
develop a performance review mechanism that has written objectives and goals
which are used to make salary increase determinations; (iii) to develop an
annual incentive plan for senior management; and (iv) to provide guidance to the
Board in its role in establishing objectives regarding executive compensation.
The PC Committee's overall compensation philosophy is as follows: (i) to attract
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; (iii) to create a mutuality of interest between
executive and senior officers and shareholders through compensation structures
that share the rewards and risks of strategic decision-making; and (iv) to
encourage executives to achieve substantial levels of ownership of stock in the
Company.
The compensation package offered to executive officers consists of a mix of
salary, incentive bonus awards and, when deemed appropriate, stock option
awards, as well as benefits under employee benefit plans. Salary levels
recommended by the PC Committee are intended to be consistent and competitive
with the practices of comparable financial institutions and each executive's
level of responsibility. The PC Committee generally utilizes internal and/or
external surveys of compensation paid to executive officers performing similar
duties for depository institutions and their holding companies.
In establishing executive compensation for the Chief Executive Officer of
CWBC and CWB, the PC Committee considered the overall financial condition of the
Company, profitability, asset quality and compliance with rules and regulations.
In determining Ms. Nahra's compensation, the PC Committee used both quantitative
and qualitative criteria. They included estimated earnings of $5 million, which
was greater than the budget plan and is indicative of creation of shareholder
value; capital strength, as evidenced by the qualification of CWB as "well
capitalized"; continued strong asset quality; improvements in customer service
and compliance; and, the development of other executive and senior talent in the
Company. The PC Committee also considered the amount of time the executive had
been with the Company, performance goals and general industry customs.
Generally excluded from the PC Committee's consideration of incentive bonuses
would be income or expenses resulting from extraordinary or non-recurring
events, regulatory changes, merger or acquisition activity or the imposition of
changes in generally accepted accounting principles.
10
The PC Committee believes that the Company's compensation program and
compensation levels are effective in attracting, motivating and retaining
outstanding executive and senior officers and that they are consistent with the
Company's immediate and long-term goals.
THE PERSONNEL / COMPENSATION COMMITTEE
Jean W. Blois, Chairman
John D. Illgen
William R. Peeples
Dated: November 17, 2005
EXECUTIVE COMPENSATION
The following table sets forth, for the years ended December 31, 2005, 2004
and 2003, the compensation information for the Company's Chief Executive Officer
and the other four most highly compensated executive officers (collectively, the
Named Executive Officers) and other key officers (Other Key Officers) serving
the Company in 2005.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING (1) ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------------------------- ---- -------- ------- ------------------ ------------ --------------
LYNDA J. NAHRA, President and Chief 2005 $175,000 $90,000 (2) $ 11,331 - $ 4,593
Executive Officer, CWBC and CWB 2004 175,000 60,000 (2) 10,731 - 3,885
2003 165,000 35,000 (2) 7,679 55,000 3,370
CHARLES G. BALTUSKONIS, Executive 2005 157,917 45,000 - - 3,710
Vice President and Chief Financial 2004 135,417 30,000 - 10,000 3,562
Officer, CWBC and CWB 2003 125,000 15,000 - 10,000 1,771
CYNTHIA M. HOOPER, Senior Vice 2005 121,552 11,000 - - 2,195
President, SBA Loans, CWB 2004 114,989 10,000 (3) 3,339 5,000 2,242
2003 109,375 7,500 - - 1,983
BERNARD R. MERRY, Senior Vice 2005 161,252 3,750 - - 3,470
President, Mortgage Division 2004 161,252 7,500 (3) 22,405 5,000 4,242
Manager, CWB 2003 159,972 7,500 - - 3,728
WILLIAM VIANI, Executive Vice 2005 126,000 18,000 - - 2,787
President and Credit Administrator, 2004 119,202 15,000 - 5,000 3,554
CWB
(1) Amounts represent Company's 401(k) matching contribution plus group-term
life insurance premium.
(2) Amount represents deferrals plus interest on Ms. Nahra's deferred
compensation plan.
(3) Amount represents cash paid in lieu of earned vacation time.
STOCK OPTIONS
In connection with the bank holding company reorganization, the Company
adopted the Community West Bancshares 1997 Stock Option Plan (1997 Plan)
providing for the issuance of up to 842,014 option shares. At the 2003 Annual
Meeting of Shareholders, an additional 450,000 option shares were approved, for
an aggregate total of 1,292,014 option shares. As of the Record Date, 426,541
options had been exercised and options for 510,322 shares were outstanding,
leaving 355,151 shares available for future grants.
The following table sets forth certain information regarding stock options
granted under the 1997 Plan by the Company to the Named Executive Officers and
Other Key Officers during 2005:
11
OPTION GRANTS IN LAST FISCAL YEAR
-----------------------------------------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term (2)
-----------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year (1) ($/share) Date 5% 10%
-----------------------------------------------------------------------------------------------------------
Charles G. Baltuskonis - N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------
Cynthia M. Hooper - N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------
Bernard R. Merry - N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------
Lynda J. Nahra - N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------
William Viani - N/A N/A N/A N/A N/A
-----------------------------------------------------------------------------------------------------------
(1) The Company issued options to purchase 38,500 shares of Common Stock in
2005. The Company issued no stock appreciation rights in 2005.
(2) Potential realizable value assumes that the common stock appreciates at
the annual rate shown (compounded annually) from the date of grant until the
options expire. These numbers are calculated based on the SEC's requirements
and do not represent an estimate by CWBC of future stock price growth.
The following table sets forth certain information, pursuant to SEC rules,
regarding stock options outstanding at December 31, 2005 under the 1997 Plan for
the Named Executive Officers and Other Key Officers. There is no assurance that
the values of unexercised in-the-money options reflected in this table will be
realized.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------------------------------
Number of
Securities
Underlying Value of
Unexercised Unexercised In-the-
Options at Fiscal Money Options at
Year End (# Fiscal Year End (1)
Shares Acquired exercisable/ ($exercisable/
Name on Exercise Value Realized unexercisable) unexercisable)
--------------------------------------------------------------------------------------------------
Charles G. Baltuskonis - - 10,500 / 17,000 $ 83,940/ $116,960
--------------------------------------------------------------------------------------------------
Cynthia M. Hooper - - 11,000 / 8,000 91,750/ 59,400
--------------------------------------------------------------------------------------------------
Bernard R. Merry - - 19,500 / 4,000 104,818/ 21,400
--------------------------------------------------------------------------------------------------
Lynda J. Nahra - - 52,500 / 30,000 404,135/ 273,180
--------------------------------------------------------------------------------------------------
William Viani - - 13,000 / 10,000 114,550/ 67,000
--------------------------------------------------------------------------------------------------
(1) Based on the closing price on the Nasdaq National Market at $14.10 per
share on December 31, 2005.
12
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
(AS OF DECEMBER 31, 2005)
---------------------------------------------------------------------------------------------------------------
Number of
securities to be Number of securities
issued upon Weighted-average remaining available for future
exercise of exercise price of issuance under equity
outstanding outstanding compensation plans
options, warrants options, warrants (excluding securities
Plan Category and rights and rights reflected in column (a)
---------------------------------------------------------------------------------------------------------------
(a) (b) (c)
---------------------------------------------------------------------------------------------------------------
Plans approved by shareholders - 1997
Stock Option Plan 539,162 $ 7.29 355,151
---------------------------------------------------------------------------------------------------------------
Plans not approved by shareholders -
None - N/A -
---------------------------------------------------------------------------------------------------------------
Total 539,162 355,151
---------------------------------------------------------------------------------------------------------------
EMPLOYMENT AND OTHER COMPENSATION AGREEMENTS
Ms. Nahra has an Employment Contract that expires December 31, 2006. For
2005, Ms. Nahra's annual base salary was $175,000 and this was increased to
$225,000, effective January 2006. In addition, she has a deferred compensation
account maintained at CWB for her benefit, to which 6% of her base salary
($10,500 per annum in 2005 and $13,500, effective January 2006) is credited,
along with interest at the then-current CWB six-month certificate of deposit
rate. Ms. Nahra is also eligible for an annual bonus at the sole discretion of
CWB's Board Personnel / Compensation Committee. For 2005, such bonus amount
awarded was $90,000. Ms. Nahra's contract specifies that, in the event of
termination without cause, she 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 she is terminated
within one year following such event, she would be entitled to six months base
salary plus deferred compensation.
A former Chief Executive Officer and President of the Company is a party to
an Executive Salary Continuation Agreement (ESC) with the Company dated January
1, 1994. The purpose of the ESC was to provide an incentive for the former
executive's continuing employment with CWB on a long-term basis. The ESC
provides the former executive with a salary continuation benefit of $50,000 per
year for 15 years after retirement. Normal retirement under the ESC was age 61.
The present value of the contractual liability has been recognized in the
Company's audited financial statements. Beginning in March 2004, benefit
payments under the ESC commenced.
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 after three months of
consecutive service. Employees may make contributions to the plan under the
plan's 401(k) component and the Company may make contributions under the plan's
profit sharing component, subject to certain limitations. The Company's
contributions were determined by the Board and amounted to $147,000, $137,000
and $129,000, respectively, in 2005, 2004 and 2003.
STOCK PERFORMANCE GRAPH
The following graph presents the cumulative, five-year total return for the
Company's Common Stock compared with the Nasdaq Total Return Index, a broad
market index of stocks traded on the Nasdaq National Market, and the SNL
Securities Index of banks having under $500 million in total assets, which the
Company believes is representative of peer issuers. The graph assumes an
initial investment of $100 in each of the Company's Common Stock, the securities
underlying the Nasdaq Total Return Index and the securities underlying the SNL
Index for Banks on December 31, 2000, and that all dividends were reinvested.
This
13
graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act or under the Exchange Act, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
[GRAPHIC OMITTED]
PERIOD ENDED
--------------------------------------------------------------
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
-----------------------------------------------------------------------------------------
Community West Bancshares 100.00 154.84 121.03 232.26 351.98 374.17
NASDAQ Composite 100.00 79.18 54.44 82.09 89.59 91.54
SNL <$500M Bank Index 100.00 138.33 177.16 258.59 298.49 316.04
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Some of the Directors and executive officers of the Company, as well as the
companies with which such Directors and executive officers 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
collectibility 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.
14
1997 STOCK OPTION PLAN
ELIGIBILITY
Full-time employees, officers and Board members of the Company and
subsidiaries, including CWB, are eligible to receive awards under the 1997 Plan
at the discretion of the Board.
As of December 31, 2005, the 1997 Plan currently has available unissued and
authorized grants to Directors of options to purchase up to 155,002 shares of
Common Stock.
ADMINISTRATION
The Board, serving as the "Stock Option Committee", administers the 1997
Plan. The Board has the authority to make all determinations and approvals.
Members of the Board receive no additional compensation for their administration
of the 1997 Plan.
TERMS OF THE STOCK OPTIONS
The 1997 Plan authorizes the issuance to employees of two types of
stock-based awards: "Incentive Stock Options", which are intended to satisfy the
definition of "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (Code), and "Non-Qualified Stock
Options", which fall outside the requirements of Section 422. Directors who are
not employees of CWBC or its subsidiaries are eligible to receive only
Non-Qualified Stock Options, while employees may, subject to the requirements of
the Code, receive Incentive Stock Options.
In general, the option exercise price for each share covered by an option
equals the fair market value of the Common Stock on the date of grant. If the
recipient owns in excess of 10% of the total combined vesting power of CWBC or
any subsidiary, the exercise price of any Incentive Stock Option must be at
least 110% of the fair market value on the date of grant.
The Board has the discretion to determine the vesting schedule of all
options under the 1997 Plan, provided that all incentive stock options must vest
at least 20% per year over five years from the date of grant.
Stock Options must be exercised by payment in full of the exercise price,
or, with the prior consent of the Board, may be exercised by the delivery of
previously owned shares of Common Stock.
If a plan participant's employment or affiliation as a Director with CWBC
or a subsidiary ceases for any reason other than death, disability or for cause,
the participant's options expire 90 days after the cessation (or any earlier
date when the option's term expires). Vesting ceases at the time the
affiliation ceases. If the participant's affiliation is terminated for cause,
then the participant's options expire 30 days after termination (or any earlier
date when the option's term expires), unless reinstated by the Board. If the
participant dies while employed by CWBC, or during the 90-day period referred to
above, the participant's estate may exercise any options that had vested on the
date of death for a subsequent period of one year. After the disability of a
participant, the participant may exercise options that had vested when the
disability occurred for a subsequent period of one year.
TERMINATION OF STOCK OPTIONS AND THE 1997 PLAN
The 1997 Plan terminates on January 23, 2007, the tenth anniversary of its
adoption. No option granted under the 1997 Plan shall be exercisable for a
period greater than ten years from its date of grant.
15
PROPOSAL 2
APPROVAL OF THE COMMUNITY WEST BANCSHARES 2006 STOCK OPTION PLAN
GENERAL
On March 23, 2006, the Company's Board adopted, subject to approval by the
Company's shareholders, the Community West Bancshares 2006 Stock Option Plan
(2006 Plan). The 2006 Plan provides for the grant of "incentive stock options"
as permitted under Section 422 of the Internal Revenue Code of 1986 (Code), as
well as for the grant of non-qualified stock options. The 2006 Plan is not
subject to any of the provisions of the Employee Retirement Income Security Act
of 1974, as amended.
The 2006 Plan provides for the issuance of up to 500,000 shares of the
Company's Common Stock (Common Stock) to Directors, officers and key employees
of the Company and CWB. To date, no new grants of options have been made by the
Board under the 2006 Plan. As of March 31, 2006, the market value of the
500,000 shares of Common Stock underlying the options under the 2006 Plan was
$7,085,000.
The Community West Bancshares 1997 Stock Option Plan (1997 Plan) will
continue to remain in effect until January 23, 2007. See the previous section
"1997 Stock Option Plan" for additional information regarding the 1997 Plan.
The Board believes it is advisable for the shareholders to approve the
adoption of the 2006 Plan to continue to have options available to encourage
Directors, officers and key employees to remain with the Company and CWB and to
attract new, qualified officers, employees and Directors in today's competitive
market. Shareholder approval of the 2006 Plan is also required under the NASD
Rules.
PURPOSE
The purpose of the 2006 Plan is:
- To strengthen the Company by providing additional means of attracting
and retaining competent managerial personnel and by providing to
participating Directors, officers and key employees added incentive
for high levels of performance and for unusual efforts to increase the
earnings of the Company; and
- To achieve these purposes and accomplish those results by providing a
means whereby Directors, officers and key employees may purchase
shares of the Common Stock under stock options granted in accordance
with the 2006 Plan.
SUMMARY OF THE 2006 PLAN
The following description of the 2006 Plan is intended to highlight and
summarize the principal terms of the 2006 Plan, and is qualified in its entirety
by the text of the 2006 Plan. The full text of the 2006 Plan is available as
Appendix A.
Plan Term. The 2006 Plan's term will commence effective upon the approval
by a majority of the shares of Common Stock represented and voting at the 2006
Annual Meeting. Assuming that the 2006 Plan is approved by the Company's
shareholders on May 25, 2006, the term will commence on May 25, 2006 and will
terminate on March 23, 2016 (subject to early termination is described herein).
Administration. The 2006 Plan will be 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, Inc. Each Director
will abstain from approving the grant of any options to himself or herself.
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 2006 Plan, the Board is authorized to construe and interpret the 2006 Plan,
and make all the determinations necessary or advisable for administration of the
2006 Plan.
16
Eligible Participants. The 2006 Plan provides that all Directors, officers
and full-time key employees (as such, key employees may be determined by the
Board) of the Company and CWB are eligible to receive grants of stock options.
The 2006 Plan provides that if options are granted to officers or key employees
who own, directly or indirectly, more than 10% of the Company's outstanding
shares, and the options are intended to qualify as "incentive stock options,"
then the minimum option price must be at least 110% of the Common Stock's fair
market value on the date of grant, and the term of the option grant may not
exceed five years. Subject to the foregoing limitations, the Board is empowered
to determine which eligible participants, if any, should receive options, the
number of shares subject to each option, and the terms and provisions of the
option agreements. As of March 31, 2006, the 7 non-employee Directors, 3 named
executive officers and all 139 non-officer employees would all be eligible to
participate in the 2006 Plan.
Shares Subject to the 2006 Plan. 500,000 shares of Common Stock are
covered by the 2006 Plan, which constitutes 8.65% of the shares outstanding as
of March 31, 2006. Options will be granted at no less than the fair market
value of the Common Stock as of the date of grant.
Incentive and Non-Qualified Stock Options. The 2006 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 Code,
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 2006 Plan and all other "incentive stock option"
plans of the Company). Any options granted under the 2006 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 2006 Plan, the exercise
price, permissible time or times of exercise, and the remaining terms pertaining
to any option are determined by the Board; however, the per share exercise price
under any option may not be less than 100% of the fair market value of the
Common Stock on the date of grant of the option.
Terms and Conditions of Options. Subject to the limitations set forth in
the 2006 Plan, options granted thereunder may be exercised in such increments,
which need not be equal, and upon such contingencies as the Board may determine.
If an optionee does not exercise an increment of an option in any period during
which such increment becomes exercisable, the unexercised increment may be
exercised at any time prior to expiration of the option unless the respective
stock option agreement provides otherwise.
Subject to earlier termination as may be provided in any optionee's stock
option agreement, options granted under the 2006 Plan will expire not later than
ten years from the date of grant. Under the terms of the 2006 Plan, the date of
grant is deemed to be either: (i) the date fixed by the Board to be the date of
grant; or (ii) if no such date is fixed, the date on which the Board made its
final determination to grant a stock option.
The Board has the discretion to determine the vesting schedule of all
options under the 2006 Plan, provided that all options must vest at least 20%
per year over five years from the date of grant.
Options granted under the 2006 Plan may not be transferred otherwise than
by will or by the laws of descent and distribution, and during his or her
lifetime, only the optionee or, in the event of the disability of the optionee,
his or her guardian or the conservator of his or her estate may exercise the
option.
Exercise of Options. Subject to the restrictions set forth in the 2006
Plan, an option may be exercised in accordance with the terms of the individual
stock option agreement. Stock options must be exercised by payment in full of
the exercise price, or, with the prior consent of the Board, may be exercised by
the delivery of shares of Common Stock.
An option may be exercised with respect to whole shares only, although
fractional share interests may be accumulated and exercised from time to time as
whole shares during the term of the option. Options may only be exercised with
respect to a minimum of ten whole shares, unless the option agreement requires
that a larger number of shares be exercised at any one time and unless fewer
than ten shares remain subject to
17
the option at the time of exercise. Any shares subject to an option which
expires or terminates without being exercised become available again for
issuance under the 2006 Plan.
Neither an eligible participant nor an optionee has any rights as a
shareholder with respect to the shares of Common Stock covered by any option
which may be or has been granted to such person, and which is thereafter
exercised, until date of issuance of the stock certificate by the Company to
such person.
Repricing Prohibited. Repricing, or increasing or decreasing the exercise
price, of a stock option without shareholder approval, is prohibited.
Stock Option Agreement. Every grant of an option will be evidenced by a
written stock option agreement executed by the Company and the optionee.
Subject to the terms and conditions of the 2006 Plan, the stock option agreement
will contain the terms and provisions pertaining to each option so granted, such
as exercise price, permissible date or dates of exercise, termination date and
such other terms and conditions as the Board deems desirable and not
inconsistent with the 2006 Plan.
Termination of Employment or Affiliation. 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 shall expire at the earlier of the expiration dates specified for the
options, or ninety 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 that 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 option held by
such person will expire thirty days after termination (or any earlier date when
the option term expires), although the Board may, in its sole discretion, within
thirty 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.
If an optionee dies while employed by the Company, or during the 90-day
period referred to above, the optionee's estate may exercise any options that
had vested on the date of death for a subsequent period of one year. After the
disability of an optionee, the optionee may exercise options that had vested
when the disability occurred for a subsequent period of one year.
The 2006 Plan, and all stock options previously granted under the 2006
Plan, shall 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 shall 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 this 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.
Amendment and Termination of the 2006 Plan. The Board may at any time
suspend, amend or terminate the 2006 Plan, and may, with the consent of the
respective optionee, make such modifications to the terms and conditions of
outstanding options as it shall deem advisable. Shareholder approval of the
2006 Plan is required to qualify incentive stock options pursuant to the Code.
The Company is also required to obtain shareholder approval of the 2006 Plan
under the NASD rules. Certain amendments to the 2006 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 2006
Plan; (b) materially increase the number of shares of Common Stock which may be
issued at any time under the 2006 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 2006 Plan; (d) increase or decrease
the exercise price of any option granted under the 2006 Plan; (e) increase the
maximum term of options provided for in the 2006 Plan; (f) permit
18
options to be granted to any person who is not an eligible participant; or (g)
change any provision of the 2006 Plan which would affect the qualification as an
incentive stock option under the 2006 Plan. The amendment, suspension or
termination of the 2006 Plan will not, without the consent of the optionee,
alter or impair any rights or obligations under any outstanding option under the
2006 Plan.
Adjustments Upon Changes in Capitalization. The total number of shares
covered by the 2006 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 2006 Plan. Fractional share
interests of such adjustments may be accumulated, although no fractional shares
of stock will be issued under the 2006 Plan.
NEW PLAN BENEFITS
It is not possible to determine at this time the future awards that will be
granted to any eligible participant under the 2006 Plan if it is approved by
shareholders. However, the Company granted options under its 1997 Plan to
certain key employees during 2005. Option information for the 1997 Plan as of
December 31, 2005 and for 2005 is as follows:
--------------------------------------------------------------------------------------------
Number of Securities Underlying Number of Securities Underlying
Options Granted During 2005 Unexercised Options at Year End
--------------------------------------------------------------------------------------------
Non-Executive Officer
Directors - 94,562
--------------------------------------------------------------------------------------------
Named Executive Officers :
--------------------------------------------------------------------------------------------
Charles G. Baltuskonis - 27,500
--------------------------------------------------------------------------------------------
Lynda J. Nahra - 82,500
--------------------------------------------------------------------------------------------
William Viani - 23,000
--------------------------------------------------------------------------------------------
Sub-total - 133,000
--------------------------------------------------------------------------------------------
Other Employees 38,500 311,600
--------------------------------------------------------------------------------------------
Total 38,500 539,162
--------------------------------------------------------------------------------------------
FEDERAL INCOME TAX CONSEQUENCES
Certain stock options granted under the 2006 Plan are intended to be
"incentive stock options" as defined in Section 422 of the Code. No income will
be recognized by the optionee, and no deduction will be allowed to CWBC, by
reason of the grant or exercise of an incentive stock option. However, the
excess of the fair market value of the shares at the time of exercise over the
option exercise price will be treated as a preference item for purposes of the
alternative minimum tax. If the optionee does not dispose of the shares of the
Common Stock received upon exercise of an incentive stock option by payment in
cash within two years from the date of the grant of the option or within one
year after the transfer of the shares to the optionee, any gain realized by the
optionee upon such disposition of the shares will be long-term capital gain. No
deduction will be available to CWBC upon such disposition by the optionee.
However, if the optionee disposes of such shares within the two year period from
the date of the grant of the option or within the one year period from the
transfer of the shares, gain realized by the optionee upon such disposition will
be ordinary income to the extent that the value of the shares received at the
date of exercise of the option exceeds the price paid for such shares by the
optionee. Such ordinary income will be recognized by the optionee for the tax
year in which the optionee disposes of the shares, and CWBC will be entitled to
a deduction in an amount equal to the ordinary income recognized by the optionee
for the tax year of CWBC in which the optionee recognizes such ordinary income,
provided that applicable income tax withholding requirements are satisfied.
Gain realized in excess of such ordinary income will be capital gain. Such
capital gain will be long-term or short-term depending upon whether the shares
are held for more than 12 months prior to the date of disposition. If the
optionee disposes of the shares within either the two-year period from
19
the date of grant of the option, or within one year after the transfer of the
shares, any ordinary income recognized by the optionee will not exceed the gain
realized on such disposition by the optionee. If the optionee disposes of
shares of Common Stock received upon exercise of an option at a loss, such loss
will be a capital loss, long-term or short-term depending upon whether the
shares are held for more than one year prior to the date of disposition.
The optionee's basis in shares of Common Stock acquired upon the exercise
of an incentive stock option by the transfer to CWBC of its Common Stock already
owned by the optionee is determined by substituting the optionee's basis in the
shares of Common Stock transferred to CWBC to exercise the option to an
equivalent number of shares of its Common Stock acquired upon the exercise of
the option (Substituted Common Stock). The basis of the remainder, if any, of
the shares of Common Stock received upon exercise of the option (Non-Substituted
Common Stock) will be zero. The Substituted Common Stock will have a holding
period which, for purposes of computing whether capital gain or loss is long or
short term, includes the holding period of the shares of previously owned Common
Stock. The Non-Substituted Common Stock will have a holding period which begins
on the date such shares are received. If the optionee does not dispose of the
shares of the Common Stock received upon exercise of an incentive stock option
within two years from the date of the grant of the option or within one year
after the transfer of the shares to the optionee, any gain realized by the
optionee upon the disposition of the shares will be long-term capital gain. No
deduction will be available to CWBC upon such disposition by the optionee.
However, if the optionee disposes of such shares within the two-year period from
the date of the grant of the option or within the one-year period from the
transfer of the shares, the optionee will be treated as disposing of the shares
having the lowest basis. Any gain realized by the optionee upon such
disposition will be ordinary income to the extent that the value of the shares
received at the date of exercise of the option exceeds the amount paid for such
shares. The amount paid for Substituted Common Stock will be its fair market
value on the date of exercise. The amount paid for Non-Substituted Common Stock
will be its basis. Such ordinary income will be recognized by the optionee for
the tax year in which the optionee disposes of the shares and CWBC will be
entitled to a deduction in an amount equal to the ordinary income recognized by
the optionee for the tax year of CWBC in which the optionee recognizes such
ordinary income, provided that applicable income tax withholding requirements
are satisfied. Gain realized in excess of such ordinary income will be capital
gain. Such capital gain will be long-term or short-term depending upon whether
the shares disposed of were held for more than 12 months prior to the date of
disposition taking into account the substituted holding period of any
Substituted Common Stock. If the optionee disposes of the shares within either
the two-year period from the date of grant of the option, or within one year
after the transfer of the shares, any ordinary income recognized by the optionee
will not exceed the gain realized on such disposition by the optionee. If the
optionee disposes of shares of Common Stock received upon exercise of an option
at a loss, such loss will be a capital loss, long-term or short-term depending
upon whether the shares are held for more than one year prior to the date of
disposition, taking into account the substituted holding period of any
Substituted Common Stock.
The aggregate fair market value (determined at the time the options are
granted) of the stock with respect to which incentive stock options are
exercisable by an individual for the first time in any calendar year may not
exceed $100,000. The 2006 Plan provides that outstanding options may become
fully vested and exercisable in the event of a merger or consolidation of CWBC
as a result of which CWBC is not the surviving corporation or upon the sale of
all or substantially all of the property of CWBC, unless the 2006 Plan is
continued and the outstanding options are neither assumed nor replaced with new
options. If, as a result of this provision of the 2006 Plan, the amount of
options granted after 1986 which become exercisable by an optionee for the first
time in any year exceeds the $100,000 limit, the amount of options exceeding the
$100,000 limit will not be treated as incentive stock options.
If options cease to be treated as incentive stock options, such options
will be treated as non-qualified stock options. If such options, or any stock
options originally intended to be non-qualified stock options, are exercised,
the excess of the fair market value of the acquired shares at the time of
exercise over the option exercise price will be treated as ordinary income to
the optionee in the year of exercise.
20
Upon exercise of a stock option other than an incentive stock option by a
cash payment, the optionee's basis in the shares of Common Stock received will
be the sum of the option exercise price and the amount of ordinary income
recognized by the optionee from the exercise of the stock option. The
optionee's holding period in the shares of Common Stock received will begin on
the date received. Upon exercise of such a stock option by transfer of shares
of Common Stock already owned by the optionee, under Internal Revenue Service
Ruling 80-244, the optionee will be deemed to have received an equivalent number
of shares of Common Stock in a non-taxable exchange (Substituted Common Stock)
and the remainder, if any, of the shares of Common Stock will be deemed to have
been received in a taxable transaction (Non-Substituted Common Stock). The
optionee's basis in the Substituted Common Stock will be the same as his basis
in the previously owned shares, and his holding period will include the holding
period of the previously owned shares. The optionee's basis in the
Non-Substituted Common Stock will be the same as the amount of ordinary income
recognized by the optionee. The Non-Substituted Common Stock will have a
holding period which begins on the date when it is received.
On the disposition of shares of Common Stock received upon exercise of a
stock option other than an incentive stock option, the difference between the
amount realized and the optionee's basis in the shares will be a long-term or
short-term capital gain (or loss) depending on whether the optionee's holding
period for the shares is more than 12 months prior to their disposition.
CWBC will be entitled to claim a deduction at the same time and in the same
amount as income is recognized by the optionee exercising a stock option other
than an incentive stock option. No income will be recognized by the optionee,
and no deduction (in the year of the grant) shall be allowable to CWBC, by
reason of the grant of non-qualified stock options.
CERTAIN INFORMATION CONCERNING ALL OPTIONS
In addition to the foregoing, federal tax law provides for an excise tax of
20% and the disallowance of a deduction to a corporation for compensation to its
employees, officers, shareholders and others that results in an "excess
parachute payment" within the meaning of Code Section 280G(b). If such a person
is granted an incentive stock option and there is a change of control, the
incentive stock option may be considered in the determination of whether an
excess parachute payment has been made.
Long-term capital gains and losses are derived from the sales and exchanges
of capital assets held for more than twelve months. Under The Jobs and Growth
Tax Relief Reconciliation Act of 2003, for taxable years beginning before
January 1, 2009, generally the maximum rate of tax on net capital gain of a non-
corporate taxpayer is 15 %. In addition, any net capital gain which otherwise
would have been taxed at a 10% or 15% rate generally is taxed at a 5% rate (zero
for taxable years beginning after 2007). For taxable years beginning after
December 31, 2008, generally the rates on net capital gain are scheduled to
revert to 20% and 10%, respectively. Any gain from the sale or exchange of
property held more than five years that would otherwise be taxed at the 10% rate
is taxed at an 8% rate. Any gain from the sale or exchange of property held
more than five years and the holding period for which began after December 31,
2000, which would otherwise be taxed at a 20% rate will be taxed at an 18% rate.
If the capital asset was held for less than twelve months, any resulting gain
will be taxed at ordinary income rates.
The specific state tax consequences to each optionee under the 2006 Plan
may vary, depending upon the laws of the various states and the individual
circumstances of each optionee. It is suggested that each optionee consult his
or her personal tax advisor regarding both the federal and state tax
consequences of the grant and exercise of options.
VOTE REQUIRED
The 2006 Plan will become effective upon approval by a majority of the
shares of Common Stock represented and voting at the 2006 Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMMUNITY WEST
BANCSHARES 2006 STOCK OPTION PLAN.
21
INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended December 31,
2005 were Ernst & Young LLP (Ernst). The Company has engaged Ernst as
independent auditors for the fiscal year ending December 31, 2006.
Representatives of Ernst will be invited to attend 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.
AUDIT FEES
During the years ended December 31, 2005 and 2004, the aggregate fees
billed by Ernst 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 were $170,100 and $150,525, respectively. (1)
AUDIT-RELATED FEES
During the years ended December 31, 2005 and 2004, there were no fees
billed by Ernst for other audit-related services.
TAX FEES
During the years ended December 31, 2005 and 2004, the aggregate fees
billed by Ernst for professional services related to recurring state and federal
tax preparation, compliance and consulting were $24,400 and $32,100,
respectively. During the year ended December 31, 2005, the aggregate fees
billed by Ernst for other state and federal tax compliance were $22,555.
OTHER FEES
During the years ended December 31, 2005 and 2004, there were no fees
billed by Ernst for information technology consulting services.
The Audit Committee of the Company reviewed and discussed with Ernst
whether the rendering of the non-audit services provided by them to the Company
during fiscal 2005 was compatible with their independence. The Audit Committee
pre-approves all audit and permissible non-audit services to be provided by
Ernst and the estimated fees for these services.
(1) Includes fees related to the fiscal year audit and interim reviews,
notwithstanding when the fees were billed or when the services rendered.
Expenses included were billed from January through December of the fiscal year,
not withstanding when the expenses were incurred.
2007 SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in the Proxy Statement
for the Company's 2007 Annual Meeting of Shareholders (2007 Meeting) must be
received by the Company at its offices at 445 Pine Avenue, Goleta, California
93117, no later than December 8, 2006. The proposals must also satisfy the
conditions and procedures prescribed by the Securities and Exchange Commission
(SEC) in Rule 14a-8 for such proposals to be included in the Company's Proxy
Statement for the 2007 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 2007
Meeting. Either the proposer, or a representative qualified under California
law to present
22
the proposal on the proposer's behalf, must attend the meeting to present the
proposal. Shareholders may not submit more than one proposal.
Shareholders wanting to recommend names of individuals for possible
nomination to the Board may do so according to the following procedures:
1. Contact the Corporate Secretary to obtain the Board membership
criteria.
2. Make typewritten submission to the Corporate Secretary naming the
proposed candidate and specifically noting how the candidate
meets the criteria as set forth by the Board.
3. Submission must be received 120 days prior to the expected
mailing date of the Proxy Statement.
4. Submitter must prove they are a shareholder of the Company and
have held those shares for at least one year at the time of
submission.
5. If the Submittee is aware of the submission, he or she must sign
a statement indicating such.
6. If the Submittee is not aware of the submission, the Submitter
must explain why.
The written submission must be mailed to:
Corporate Secretary
Community West Bancshares
445 Pine Avenue
Goleta, CA 93117-3474
The SEC has in effect a rule governing a company's ability to use
discretionary proxy authority with respect to shareholder proposals that were
not submitted by the shareholders in time to be included in the Proxy Statement
(i.e., outside the processes of Rule 14a-8 as described herein under the heading
"2007 Shareholder Proposals"). As a result, in the event a shareholder proposal
is not submitted to the Company prior to February 27, 2007, the proxies
solicited by the Board for the 2007 Annual Meeting will confer authority on the
Proxyholders to vote the shares in accordance with their best judgment and
discretion if the proposal is presented at the 2007 Annual Meeting without any
discussion of the proposal in the Proxy Statement for such meeting.
The Company's Board knows of no business that will be presented for
consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Shareholders. If however, other matters are properly brought before
the Meeting, it is the intention of the persons named in the accompanying Proxy
to vote the shares represented thereby on such matters in accordance with their
best judgment.
Whether or not you intend to be present at the Meeting, you are urged to
return your proxy card promptly. If you are then present at the Meeting and
wish to vote your shares in person, 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 Proxy card obtained from your
recordholder to vote personally 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.
23
By Order of the Board of Directors,
COMMUNITY WEST BANCSHARES
William R. Peeples,
Chairman of the Board
Dated: April 7, 2006
Goleta, California
24
APPENDIX A
COMMUNITY WEST BANCSHARES
2006 STOCK OPTION PLAN
Adopted by the Board of Directors on March 23, 2006
1. Purpose
-------
The purpose of the Community West Bancshares 2006 Stock Option Plan ("2006
Plan") is to strengthen Community West Bancshares ("Company") and those banks
and corporations which are or hereafter become subsidiary corporations
("Subsidiary" or "Subsidiaries") by providing additional means of attracting and
retaining competent managerial personnel and by providing to participating
Directors, officers and key employees added incentive for high levels of
performance and for unusual efforts to increase the earnings of the Company and
any Subsidiaries. The 2006 Plan seeks to accomplish these purposes and achieve
these results by providing a means whereby such Directors, officers and key
employees may purchase shares of the Common Stock of the Company pursuant to
Stock Options granted in accordance with this Plan.
Stock Options granted pursuant to this Plan are intended to be Incentive
Stock Options or Non-Qualified Stock Options, as shall be determined and
designated by the Stock Option Committee upon the grant of each Stock Option
hereunder.
2. Definitions
-----------
For the purposes of this Plan, the following terms shall have the following
meanings:
(a) "Affiliation" or "affiliated." For purposes of Sections 10,
----------- ----------
11, 12, 13 and 14 hereof, these terms shall mean service as a Director of
the Company or any Subsidiary.
(b) "Common Stock." This term shall mean shares of the Company's
-------------
common stock, no par value, subject to adjustment pursuant to Section 15
(Adjustment Upon Changes in Capitalization) hereunder.
(c) "Company." This term shall mean Community West Bancshares, a
-------
California corporation.
(d) "Eligible Participants." This term shall mean: (i) all
----------------------
Directors of the Company or any Subsidiary; (ii) all officers (whether or
not they are also Directors) of the Company or any Subsidiary; and (iii)
all key employees (as such persons may be determined by the Stock Option
Committee from time to time) of the Company or any Subsidiary, provided
that such officers and key employees have a customary work week of at least
forty hours in the employ of the Company or a Subsidiary.
(e) "Fair Market Value." This term shall mean the fair market
-------------------
value of the Common Stock as determined in accordance with any reasonable
valuation method selected by the Stock Option Committee, including the
valuation methods described in Treasury Regulations Section 20.2031-2.
(f) "Incentive Stock Option." This term shall mean a Stock Option
----------------------
which is an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.
25
(g) "Non-Qualified Stock Option." This term shall mean a Stock
----------------------------
Option which is not an Incentive Stock Option.
(h) "Option Shares." This term shall mean Common Stock covered by
-------------
and subject to any outstanding unexercised Stock Option granted pursuant to
this Plan.
(i) "Optionee." This term shall mean any Eligible Participant to
--------
whom a Stock Option has been granted pursuant to this Plan, provided that
at least part of the Stock Option is outstanding and unexercised.
(j) "Plan." This term shall mean the Community West Bancshares
----
2006 Stock Option Plan as embodied herein and as may be amended from time
to time in accordance with the terms hereof and applicable law.
(k) "Stock Option." This term shall mean the right to purchase a
-------------
specified number of shares of Common Stock under this Plan, at a price and
upon the terms and conditions determined by the Stock Option Committee.
(l) "Stock Option Committee." The Board of Directors of the
------------------------
Company may select and designate a Stock Option Committee consisting of
three or more Directors of the Company, having full authority to act in the
matter. Regardless of whether a Stock Option Committee is selected, the
Board of Directors of the Company may act as the Stock Option Committee and
any action taken by said Board as such shall be deemed to be action taken
by the Stock Option Committee. All references in the Plan to the "Stock
Option Committee" shall be deemed to refer to the Board of Directors of the
Company acting as the Stock Option Committee and to a duly appointed Stock
Option Committee, if there be one. In the event of any conflict between
action taken by the Board acting as a Stock Option Committee and action
taken by a duly appointed Stock Option Committee, the action taken by the
Board shall be controlling and the action taken by the duly appointed Stock
Option Committee shall be disregarded.
(m) "Subsidiary." This term shall mean each "subsidiary
----------
corporation" (treating the Company as the employer corporation) as defined
in Section 424(f) of the Internal Revenue Code of 1986, as amended.
3. Administration
(a) Stock Option Committee. This Plan shall be administered by
------------------------
the Stock Option Committee. The Board of Directors of the Company shall
have the right, in its sole and absolute discretion, to remove or replace
any person from or on the Stock Option Committee at any time for any reason
whatsoever.
(b) Administration of the Plan. Any action of the Stock Option
-----------------------------
Committee with respect to the administration of the Plan shall be taken
pursuant to a majority vote, or pursuant to the unanimous written consent,
of its members. Any such action taken by the Stock Option Committee in the
administration of this Plan shall be valid and binding, so long as the same
is not inconsistent with the terms and conditions of this Plan. Subject to
compliance with the terms, conditions and restrictions set forth in this
Plan, the Stock Option Committee shall have the exclusive right, in its
sole and absolute discretion, to establish the terms and conditions of all
Stock Options granted under the Plan, including, without meaning any
limitation, the power to: (i) establish the number of Stock Options, if
any, to be granted hereunder, in the aggregate and with regard to each
Eligible Participant; (ii) determine the time or times when such Stock
Options, or parts thereof, may be
26
exercised; (iii) determine and designate which Stock Options granted under
the Plan shall be Incentive Stock Options and which shall be Non-Qualified
Stock Options; (iv) determine the Eligible Participants, if any, to whom
Stock Options are granted; (v) determine the duration and purposes, if any,
of leaves of absence which may be permitted to holders of unexercised,
unexpired Stock Options without such constituting a termination of
employment under the Plan; and (vi) prescribe and amend the terms,
provisions and form of each instrument and agreement setting forth the
terms and conditions of every Stock Option granted hereunder.
(c) Decisions and Determinations. Subject to the express
------------------------------
provisions of the Plan, the Stock Option Committee shall have the authority
to construe and interpret this Plan, to define the terms used herein, to
prescribe, amend, and rescind rules and regulations relating to the
administration of the Plan, and to make all other determinations necessary
or advisable for administration of the Plan. Determinations of the Stock
Option Committee on matters referred to in this Section 3 shall be final
and conclusive so long as the same are not inconsistent with the terms of
this Plan.
4. Shares Subject to the Plan
------------------------------
Subject to adjustments as provided in Section 15 hereof, the maximum number
of shares of Common Stock which may be issued upon exercise of all Stock Options
granted under this Plan is limited to Five Hundred Thousand (500,000) in the
aggregate. If any Stock Option shall be canceled, surrendered or expire for any
reason without having been exercised in full, the unpurchased Option Shares
represented thereby shall again be available for grants of Stock Options under
this Plan.
5. Eligibility
-----------
Only Eligible Participants shall be eligible to receive grants of Stock
Options under this Plan.
6. Grants of Stock Options
(a) Grant. Subject to the express provisions of the Plan, the
-----
Stock Option Committee, in its sole and absolute discretion, may grant
Stock Options to Eligible Participants for a number of Option Shares, at
the price(s) and time(s), and on the terms and conditions as it deems
advisable and specifies in the respective grants; provided, however, that
such grants shall vest at least at the rate of twenty percent (20%)
annually over five (5) years from the date of grant. The terms upon which
and the times at which, or the periods within which, the Option Shares
subject to such Stock Options may become acquired or such Stock Options may
be acquired and exercised shall be as set forth in the Plan and the related
Stock Option Agreements. Subject to the limitations and restrictions set
forth in the Plan, an Eligible Participant who has been granted a Stock
Option may, if otherwise eligible, be granted additional Stock Options if
the Stock Option Committee shall so determine. The Stock Option Committee
shall designate in each grant of a Stock Option whether the Stock Option is
an Incentive Stock Option or a Non-Qualified Stock Option.
(b) Date of Grant and Rights of Optionee. The determination of
---------------------------------------
the Stock Option Committee to grant a Stock Option shall not in any way
constitute or be deemed to constitute an obligation of the Company, or a
right of the Eligible Participant who is the proposed subject of the grant,
and shall not constitute or be deemed to constitute the grant of a Stock
Option hereunder unless and until both the Company and the Eligible
Participant have executed and delivered to the other a Stock Option
Agreement in the form then required by the Stock Option Committee as
evidencing the grant of the Stock Option, together with such other
instrument or instruments as may be required by the Stock Option Committee
pursuant to this Plan; provided, however, that the Stock Option Committee
may fix the date of grant as any date on or after the date of its final
determination
27
to grant the Stock Option (or if no such date is fixed, then the date of
grant shall be the date on which the determination was finally made by the
Stock Option Committee to grant the Stock Option), and such date shall be
set forth in the Stock Option Agreement. The date of grant as so determined
shall be deemed the date of grant of the Stock Option for purposes of this
Plan.
(c) Shareholder-Employees. A Stock Option granted hereunder to an
---------------------
Eligible Participant who is also an officer or key employee of the Company
or any Subsidiary, who owns, directly or indirectly, at the date of the
grant of the Stock Option, more than ten percent (10%) of the total
combined voting power of all classes of capital stock of the Company or a
Subsidiary (if permitted in accordance with the provisions of Section 5
herein) shall not qualify as an Incentive Stock Option unless: (i) the
purchase price of the Option Shares subject to said Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Option
Shares, determined as of the date said Stock Option is granted; and (ii)
the Stock Option by its terms is not exercisable after five (5) years from
the date that it is granted. The attribution rules of Section 424(d) of the
Internal Revenue Code of 1986, as amended, shall apply in the determination
of indirect ownership of stock.
(d) Maximum Value of Stock Options. No grant of Incentive Stock
--------------------------------
Options hereunder may be made when the aggregate Fair Market Value of
Option Shares with respect to which Incentive Stock Options (pursuant to
this Plan or any other Incentive Stock Option Plan of the Company or any
Subsidiary) are exercisable for the first time by the Eligible Participant
during any calendar year exceeds One Hundred Thousand Dollars ($100,000).
(e) Substituted Stock Options. If all of the outstanding shares
---------------------------
of common stock of another corporation are changed into or exchanged solely
for the Common Stock in a transaction to which Section 424(a) of the
Internal Revenue Code of 1986, as amended, applies, then, subject to the
approval of the Board of Directors of the Company, Stock Options under the
Plan may be substituted ("Substituted Options") in exchange for valid,
unexercised and unexpired stock options of such other corporation.
Substituted Options shall qualify as Incentive Stock Options under the
Plan, provided that (and to the extent) the stock options exchanged for the
Substituted Options were Incentive Stock Options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended.
(f) Non-Qualified Stock Options. Stock Options and Substituted
-----------------------------
Options granted by the Stock Option Committee shall be deemed Non-Qualified
Stock Options under this Plan if they: (i) are designated at the time of
grant as Incentive Stock Options but do not so qualify under the provisions
of Section 422 of the Code or any regulations or rulings issued by the
Internal Revenue Service for any reason; (ii) are not granted in accordance
with the provisions of Section 6(c); (iii) are in excess of the fair market
value limitations set forth in Section 6(d); (iv) are granted to an
Eligible Participant who is not an officer or key employee of the Company
or any Subsidiary; or (v) are designated at the time of grant as
Non-Qualified Stock Options. Non-Qualified Stock Options granted or
substituted hereunder shall be so designated in the Stock Option Agreement
entered into between the Company and the Optionee.
28
7. Stock Option Exercise Price
------------------------------
(a) Minimum Price. The exercise price of any Option Shares shall
--------------
be determined by the Stock Option Committee, in its sole and absolute
discretion, upon the grant of a Stock Option. Except as provided elsewhere
herein, said exercise price shall not be less than one hundred percent
(100%) of the Fair Market Value of the Common Stock represented by the
Option Shares on the date of grant of the related Stock Option.
(b) Substituted Options. The exercise price of the Option Shares
--------------------
subject to each Substituted Option may be fixed at a price less than one
hundred percent (100%) of the Fair Market Value of the Common Stock at the
time such Substituted Option is granted if said exercise price has been
computed to be not less than the exercise price set forth in the stock
option of the other corporation for which it was exchanged immediately
before substitution, with appropriate adjustment to reflect the exchange
ratio of the shares of stock of the other corporation into the shares of
Common Stock.
(c) Ten Percent Shareholder-Employees. Notwithstanding the
-----------------------------------
provisions of Section 7(a) or Section 7(b), the exercise price of any
Option Shares granted hereunder to an Eligible Participant who is an
officer or key employee of the Company or any Subsidiary, and owns,
directly or indirectly, at the date of the grant of the Stock Option, more
than ten percent (10%) of the total combined voting power of all classes of
capital stock of the Company or a Subsidiary (if permitted in accordance
with the provisions of Section 5 herein), that is intended to qualify as an
Incentive Stock Option shall be at least one hundred ten percent (110%) of
the Fair Market Value of the Option Shares, determined as of the date said
Stock Option is granted.
8. Exercise of Stock Options
----------------------------
(a) Exercise. Except as otherwise provided elsewhere herein, each
--------
Stock Option shall be exercisable in such increments, which need not be
equal, and upon such contingencies as the Stock Option Committee shall
determine at the time of grant of the Stock Option; provided, however, that
if an Optionee shall not in any given period exercise any part of a Stock
Option which has become exercisable during that period, the Optionee's
right to exercise such part of the Stock Option shall continue until
expiration of the Stock Option or any part thereof as may be provided in
the related Stock Option Agreement. No Stock Option or part thereof shall
be exercisable except with respect to whole shares of Common Stock, and
fractional share interests shall be disregarded except that they may be
accumulated.
(b) Prior Outstanding Incentive Stock Options. Incentive Stock
--------------------------------------------
Options granted (or substituted) to an Optionee under the Plan may be
exercisable while such Optionee has outstanding and unexercised any
Incentive Stock Option previously granted (or substituted) to him or her
pursuant to this Plan or any other Incentive Stock Option Plan of the
Company or any Subsidiary. An Incentive Stock Option shall be treated as
outstanding until it is exercised in full or expires by reason of lapse of
time.
(c) Notice and Payment. Stock Options granted hereunder shall be
-------------------
exercised by written notice delivered to the Company specifying the number
of Option Shares with respect to which the Stock Option is being exercised,
together with concurrent payment in full of the exercise price as
hereinafter provided. If the Stock Option is being exercised by any person
or persons other than the Optionee, said notice shall be accompanied by
proof, satisfactory to the counsel for the Company, of the right of such
person or persons to exercise the Stock Option. The Company's receipt of a
notice of exercise without concurrent receipt of the full amount of the
exercise price shall not be deemed an exercise of a Stock Option by an
Optionee, and the Company shall have no obligation to an Optionee
29
for any Option Shares unless and until full payment of the exercise price
is received by the Company and all of the terms and provisions of the Plan
and the related Stock Option agreement have been fully complied with.
(d) Payment of Exercise Price. The exercise price of any Option
---------------------------
Shares purchased upon the proper exercise of a Stock Option shall be paid
in full at the time of each exercise of a Stock Option in cash (or bank,
cashier's or certified check) and/or, with the prior written approval of
the Stock Option Committee at or before the time of exercise, in Common
Stock of the Company which, when added to the cash payment, if any, which
has an aggregate Fair Market Value equal to the full amount of the exercise
price of the Stock Option, or part thereof, then being exercised. Payment
by an Optionee as provided herein shall be made in full concurrently with
the Optionee's notification to the Company of his intention to exercise all
or part of a Stock Option. If all or any part of a payment is made in
shares of Common Stock as heretofore provided, such payment shall be deemed
to have been made only upon receipt by the Company of all required share
certificates, and all stock powers and all other required transfer
documents necessary to transfer the shares of Common Stock to the Company.
(e) Minimum Exercise. Not less than ten (10) Option Shares may be
----------------
purchased at any one time upon exercise of a Stock Option unless the number
of shares purchased is the total number which remains to be purchased under
the Stock Option.
(f) Compliance With Law. No shares of Common Stock shall be
---------------------
issued upon exercise of any Stock Option, and an Optionee shall have no
right or claim to such shares, unless and until: (i) payment in full as
provided hereinabove has been received by the Company; (ii) in the opinion
of the counsel for the Company, all applicable requirements of law and of
regulatory bodies having jurisdiction over such issuance and delivery have
been fully complied with; and (iii) if required by federal or state law or
regulation, the Optionee shall have paid to the Company the amount, if any,
required to be withheld on the amount deemed to be compensation to the
Optionee as a result of the exercise of his or her Stock Option, or made
other arrangements satisfactory to the Company, in its sole discretion, to
satisfy applicable income tax withholding requirements.
(g) Acceleration Upon Reorganization. Notwithstanding any
----------------------------------
provision in any Stock Option Agreement pertaining to the time of exercise
of a Stock Option, or part thereof, or any other provision of this Plan,
upon adoption by the requisite holders of the outstanding shares of Common
Stock of any plan of dissolution, liquidation, reorganization, merger,
consolidation or sale of all or substantially all of the assets of the
Company to another corporation which would, upon consummation, result in
termination of a Stock Option in accordance with Section 16 hereof, all
Stock Options previously granted shall become immediately exercisable,
whether or not vested under the Plan or Stock Option Agreement, as to all
unexercised Option Shares for such period of time as may be determined by
the Stock Option Committee, but in any event not less than thirty (30)
days, on the condition that the terminating event described in Section 16
hereof is consummated. If such terminating event is not consummated or if
the surviving entity (successor entity) assumes such obligation or gives
appropriate substitution thereof, Stock Options granted pursuant to the
Plan shall be exercisable in accordance with the terms of their respective
Stock Option Agreements.
9. Nontransferability of Stock Options
--------------------------------------
Each Stock Option shall, by its terms, be non- transferable by the Optionee
other than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by the Optionee.
10. Continuation of Affiliation
-----------------------------
30
Nothing contained in this Plan (or in any Stock Option Agreement) shall
obligate the Company or any Subsidiary to employ or continue to employ or remain
affiliated with any Optionee or any Eligible Participant for any period of time
or interfere in any way with the right of the Company or a Subsidiary to reduce
or increase the Optionee's or Eligible Participant's compensation.
11. Cessation of Affiliation
--------------------------
Except as provided in Section 12 hereof, if, for any reason other than
disability or death, an Optionee ceases to be employed by or affiliated with the
Company or a Subsidiary, the Stock Options granted to such Optionee shall expire
on the expiration dates specified for said Stock Options at the time of their
grant, or ninety (90) days after the Optionee ceases to be so affiliated,
whichever is earlier. During such period after cessation of affiliation, such
Stock Options shall be exercisable only as to those increments, if any, which
had become exercisable as of the date on which such Optionee ceased to be
affiliated with the Company or the Subsidiary, and any Stock Options or
increments which had not become exercisable as of such date shall expire
automatically on such date.
12. Termination for Cause
-----------------------
If the Stock Option Agreement so provides and if an Optionee's employment
by or affiliation with the Company or a Subsidiary is terminated for cause, the
Stock Options granted to such Optionee shall expire on the expiration dates
specified for said Stock Options at the time of their grant, or thirty (30) days
after termination for cause, whichever is earlier; provided, however, that the
Stock Option Committee may, in its sole discretion, within thirty (30) days of
such termination, reinstate such Stock Options by giving written notice of such
reinstatement to the Optionee. In the event of such reinstatement, the Optionee
may exercise the Stock Options only to such extent, for such time, and upon such
terms and conditions as if the Optionee had ceased to be employed by or
affiliated with the Company or a Subsidiary upon the date of such termination
for a reason other than cause, disability or death. Termination for cause shall
include, but shall not be limited to, termination for malfeasance or gross
misfeasance in the performance of duties or conviction of illegal activity in
connection therewith and, in any event, the determination of the Stock Option
Committee with respect thereto shall be final and conclusive.
13. Death of Optionee
-------------------
If an Optionee dies while employed by or affiliated with the Company or a
Subsidiary, or during the ninety-day period referred to in Section 11 hereof,
the Stock Options granted to such Optionee shall expire on the expiration dates
specified for said Stock Options at the time of their grant, or one (1) year
after the date of such death, whichever is earlier. After such death, but
before such expiration, subject to the terms and provisions of the Plan and the
related Stock Option Agreements, the person or persons to whom such Optionee's
rights under the Stock Options shall have passed by will or by the applicable
laws of descent and distribution, or the executor or administrator of the
Optionee's estate, shall have the right to exercise such Stock Options to the
extent that increments, if any, had become exercisable as of the date on which
the Optionee died.
14. Disability of Optionee
------------------------
If an Optionee is disabled while employed by or affiliated with the Company
or a Subsidiary or during the ninety (90) day period referred to in Section 11
hereof, the Stock Options granted to such Optionee shall expire on the
expiration dates specified for said Stock Options at the time of their grant, or
one (1) year after the date such disability occurred, whichever is earlier.
After such disability occurs, but before such expiration, the Optionee or the
guardian or conservator of the Optionee's estate, as duly appointed by a court
of competent jurisdiction, shall have the right to exercise such Stock Options
to the extent that increments, if any, had become exercisable as of the date on
which the Optionee became disabled
31
or ceased to be employed by or affiliated with the Company or a Subsidiary as a
result of the disability. An Optionee shall be deemed to be "disabled" if it
shall appear to the Stock Option Committee, upon written certification delivered
to the Company of a qualified licensed physician, that the Optionee has become
permanently and totally unable to engage in any substantial gainful activity by
reason of a medically determinable physical or mental impairment which can be
expected to result in the Optionee's death, or which has lasted or can be
expected to last for a continuous period of not less than 12 months.
15. Adjustment Upon Changes in Capitalization
---------------------------------------------
If the outstanding shares of Common Stock of the Company are increased,
decreased or changed into or exchanged for a different number or kind of shares
or securities of the Company, through a reorganization, merger,
recapitalization, reclassification, stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares as to which Stock Options may be granted. A corresponding adjustment
changing the number or kind of Option Shares and the exercise prices per share
allocated to unexercised Stock Options, or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Such adjustments
shall be made without change in the total price applicable to the unexercised
portion of the Stock Option, but with a corresponding adjustment in the price
for each Option Share subject to the Stock Option. Adjustments under this
Section shall be made by the Stock Option Committee, whose determination as to
what adjustments shall be made, and the extent thereof, shall be final and
conclusive. No fractional shares of stock shall be issued or made available
under the Plan on account of such adjustments, and fractional share interests
shall be disregarded, except that they may be accumulated.
16. Terminating Events
-------------------
Upon consummation of a plan of dissolution or liquidation of the Company,
or upon consummation of a plan of reorganization, merger or consolidation of the
Company with one or more corporations, as a result of which the Company is not
the surviving entity, or upon the sale of all or substantially all the assets of
the Company to another corporation, the Plan shall automatically terminate and
all Stock Options theretofore granted shall be terminated, unless provision is
made in connection with such transaction for assumption of Stock Options
theretofore granted (in which case such Stock Options shall be converted into
Stock Options for a like number and kind for shares of the surviving entity), or
substitution for such Stock Options with new stock options covering stock of a
successor employer corporation, or a parent or subsidiary corporation thereof,
solely at the discretion of such successor corporation, or parent or subsidiary
corporation, with appropriate adjustments as to number and kind of shares and
prices.
17. Amendment and Termination
---------------------------
The Board of Directors of the Company may at any time and from time to time
suspend, amend, or terminate the Plan and may, with the consent of an Optionee,
make such modifications of the terms and conditions of that Optionee's Stock
Option as it shall deem advisable; provided that, except as permitted under the
provisions of Section 15 hereof, no amendment or modification may be adopted
without the Company having first obtained the approval of the holders of a
majority of the Company's outstanding shares of Common Stock present, or
represented, and entitled to vote at a duly held meeting of shareholders of the
Company, or by written consent, if the amendment or modification would:
(a) materially increase the number of securities which may be
issued under the Plan;
(b) materially modify the requirements as to eligibility for
participation in the Plan;
(c) increase or decrease the exercise price of any Stock Option
granted under the Plan;
32
(d) increase the maximum term of Stock Options provided for
herein;
(e) permit Stock Options to be granted to any person who is not an
Eligible Participant; or
(f) change any provision of the Plan which would affect the
qualification as an Incentive Stock Option under the internal revenue laws
then applicable of any Stock Option granted as an Incentive Stock Option
under the Plan.
No Stock Option may be granted during any suspension of the Plan or after
termination of the Plan. Amendment, suspension, or termination of the Plan
shall not (except as otherwise provided in Section 15 hereof), without the
consent of the Optionee, alter or impair any rights or obligations under any
Stock Option theretofore granted.
18. Rights of Eligible Participants and Optionees
--------------------------------------------------
No Eligible Participant, Optionee or other person shall have any claim or
right to be granted a Stock Option under this Plan, and neither this Plan nor
any action taken hereunder shall be deemed to give or be construed as giving any
Eligible Participant, Optionee or other person any right to be retained in the
employ of the Company or any Subsidiary. Without limiting the generality of the
foregoing, no person shall have any rights as a result of his or her
classification as an Eligible Participant or Optionee, such classifications
being made solely to describe, define and limit those persons who are eligible
for consideration for privileges under the Plan.
19. Privileges of Stock Ownership; Regulatory Law Compliance; Notice of
-------------------------------------------------------------------
Sale
----
No Optionee shall be entitled to the privileges of stock ownership as to
any Option Shares not actually issued and delivered. No Option Shares may be
purchased upon the exercise of a Stock Option unless and until all then
applicable requirements of all regulatory agencies having jurisdiction and all
applicable requirements of the securities exchanges upon which securities of the
Company are listed (if any) shall have been fully complied with. The Optionee
shall, not more than five (5) days after each sale or other disposition of
shares of Common Stock acquired pursuant to the exercise of Stock Options, give
the Company notice in writing of such sale or other disposition.
20. Effective Date of the Plan
------------------------------
The Plan shall be deemed adopted as of March 23, 2006, but the Plan shall
only be effective if (and immediately as of the date that) the Plan is approved
by the holders of at least a majority of the Company's outstanding shares of
Common Stock represented and voting at a meeting of shareholders.
21. Termination
-----------
Unless previously terminated as aforesaid, the Plan shall terminate on
March 23, 2016. No Stock Options shall be granted under the Plan thereafter,
but such termination shall not affect any Stock Option theretofore granted.
22. Option Agreement
-----------------
Each Stock Option granted under the Plan shall be evidenced by a written
Stock Option Agreement executed by the Company and the Optionee, and shall
contain each of the provisions and agreements herein
33
specifically required to be contained therein, and such other terms and
conditions as are deemed desirable by the Stock Option Committee and are not
inconsistent with this Plan.
23. Stock Option Period
---------------------
Each Stock Option and all rights and obligations thereunder shall expire on
such date as the Stock Option Committee may determine, but not later than ten
(10) years from the date such Stock Option is granted, and shall be subject to
earlier termination as provided elsewhere in this Plan.
24. Exculpation and Indemnification of Stock Option Committee
---------------------------------------------------------------
In addition to such other rights of indemnification which they may have as
directors of the Company or as members of the Stock Option Committee, the
members of the Stock Option Committee, and each of them, shall be indemnified by
the Company for and against all costs, judgments, penalties and reasonable
expenses, including reasonable attorneys' fees, actually and appropriately
incurred by them in connection with all actions, suits and proceedings, and in
connection with appeals thereof, to which they or any of them may be a party by
reason of any act or omission of any member of the Stock Option Committee under
or in connection with the Plan or any Stock Option granted thereunder; provided,
however, that a member of the Stock Option Committee shall not be entitled to
any indemnification whatsoever pursuant to this Section for or as a result of
any act or omission of such member which was not taken in good faith and which
constituted willful misconduct or gross negligence by such member; provided
further, that any amounts paid by any member of the Stock Option Committee in
settlement of an action, suit or proceeding for which indemnification may be
sought pursuant to this Section shall be first approved in writing by
independent legal counsel selected by the Company; and, provided further, that
within thirty (30) days after institution of an action, suit or proceeding
against any member with respect to which such member is entitled to
indemnification hereunder, such member shall, in writing, offer the Company the
opportunity, at its own expense, to handle (including settle) and conduct the
defense thereof. The provisions of this Section shall apply to the estate,
executor and administrator of each member of the Stock Option Committee.
25. Notices
-------
All notices and demands of any kind which the Stock Option Committee, any
Optionee, Eligible Participant, or other person may be required or desires to
give under the terms of this Plan shall be in writing and shall be delivered in
hand to the person or persons to whom addressed (in the case of the Stock Option
Committee, with the Chief Executive Officer of the Company), by leaving a copy
of such notice or demand at the address of such person or persons as may be
reflected in the records of the Company, or by mailing a copy thereof, properly
addressed as above, by certified or registered mail, postage prepaid, with
return receipt requested. Delivery by mail shall be deemed made upon receipt by
the notifying party of the return receipt request acknowledging receipt of the
notice or demand.
26. Limitation on Obligations of the Company
---------------------------------------------
All obligations of the Company arising under or as a result of this Plan or
Stock Options granted hereunder shall constitute the general unsecured
obligations of the Company, and not of the Board of Directors of the Company,
any member thereof, the Stock Option Committee, any member thereof, any officer
of the Company, or any other person or any Subsidiary, and none of the
foregoing, except the Company, shall be liable for any debt, obligation, cost or
expense hereunder.
27. Limitation of Rights
----------------------
34
The Stock Option Committee, in its sole and absolute discretion, is
entitled to determine who, if anyone, is an Eligible Participant under this
Plan, and which, if any, Eligible Participant shall receive any grant of a Stock
Option. No oral or written agreement by any person on behalf of the Company
relating to this Plan or any Stock Option granted hereunder is authorized, and
such may not bind the Company or the Stock Option Committee to grant any Stock
Option to any person.
28. Severability
------------
If any provision of this Plan as applied to any person or to any
circumstance shall be adjudged by a court of competent jurisdiction to be void,
invalid, or unenforceable, the same shall in no way affect any other provision
hereof, the application of any such provision in any other circumstances, or the
validity or enforceability hereof.
29. Construction
------------
Where the context or construction requires, all words applied in the plural
herein shall be deemed to have been used in the singular and vice versa, and the
masculine gender shall include the feminine and the neuter and vice versa.
30. Headings
--------
The headings of the several sections herein are inserted solely for
convenience of reference and are not intended to form a part of and are not
intended to govern, limit or aid in the construction of any term or provision
hereof.
31. Successors
----------
This Plan shall be binding upon the respective successors, assigns, heirs,
executors, administrators, guardians and personal representatives of the Company
and Optionees.
32. Governing Law
--------------
This Plan shall be governed by and construed in accordance with the laws of
the State of California.
33. Conflict
--------
In the event of any conflict between the terms and provisions of this Plan,
and any other document, agreement or instrument, including, without meaning any
limitation, any Stock Option Agreement, the terms and provisions of this Plan
shall control.
35
COMMUNITY WEST BANCSHARES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON MAY 25, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marcy Shewmon and Susan Thompson, 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, California on Thursday, May 25, 2006, at
6:00P.M., 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:
__ FOR all nominees listed below __ WITHHOLD AUTHORITY
Robert H. Bartlein - Jean W. Blois - John D. Illgen - Lynda J. Nahra
William R. Peeples - James R. Sims, Jr. - Kirk B. Stovesand - C. Richard Whiston
2. Other business.To transact such other business as may properly come before
the Meeting and any adjournment thereof.
PLEASE SIGN AND DATE THE OTHER SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
THIS PROXY WILL BE VOTED AS SPECIFIED OR IF NO CHOICE IS SPECIFIED, WILL BE
VOTED FOR THE EIGHT NOMINEES FOR ELECTION AND FOR PROPOSAL 2. (Please sign
exactly as name appears. When shares are held by joint tenants, both should
sign. When signing as attorney, as executor, administrator, 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.)
Dated:__________________,2006
____________________________
(Signature)
____________________________
(Signature, if held jointly)
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 OR BY APPEARING AND VOTING IN PERSON AT THE
MEETING.
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