Mr. Plourd has an employment contract, effective November 2, 2011, with an annual base salary of $440,000 as of March 1, 2019 and subsequently adjusted to $450,000 as of March 1, 2020 and subsequently adjusted to $500,000 as of March 1, 2021, for his service as President and Chief Executive Officer of the Company and the Bank. The terms of this employment agreement was set to terminate on December 31, 2019,2020, but was automatically renewed under its own terms for an additional 12 months. The employment agreement automatically renews for successive 12 month periods unless at least three months before the expiration of any preceding term or renewal term, either (a) the Board provides written notice of non-renewal to Mr. Plourd or (b) Mr. Plourd provides written notice of non-renewal to the Bank. During January of each year during the term of the employment agreement and any renewal term, the Board will review Mr. Plourd’s base salary and will determine, in its sole discretion, whether or not to adjust such salary. Any such salary adjustment will be effective as of the first day of such calendar year. Subject to the terms of the Company’s Compensation Policy (which is attached as Exhibit C to Mr. Plourd’s employment agreement), Mr. Plourd will be eligible to receive an annual bonus in an amount, if any, as determined by the Board of Directors in its sole discretion. For 2020 and 2019, $250,000 and 2018,$200,000, respectively $200,000of bonus amounts were awarded. Mr. Plourd is eligible to receive stock option grants to purchase shares of Common Stock as may be determined by the Board of Directors in its sole discretion. See “Outstanding Equity Awards at Fiscal Year-End” table. Mr. Plourd was furnished a company car beginning in 2015. The Company also pays for a business club membership on behalf of Mr. Plourd of $350 per month.
In connection with Mr. Plourd’s employment agreement, the Company and Mr. Plourd have also entered into an Indemnification Agreement pursuant to which the Company has agreed to indemnify Mr. Plourd in the event he is made a party to or threatened to be made a party to, or otherwise involved in, any suit or proceeding, whether brought in the name of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, in which he may be or may have been involved as a party or otherwise (other than as plaintiff against the Company), by reason of the fact that he is or was a director or officer of the Company, or is or was serving as a director, officer, employee or agent of any other enterprise at the request of the Company or by reason of any action taken by him or of any inaction on his part while acting in such capacity. Any payments made to Mr. Plourd pursuant to the indemnification agreement are subject to and conditioned upon compliance with any and all applicable Federal and state laws and regulations and all benefits and privileges to which he is otherwise entitled by law or pursuant to the Bylaws of the Company.
In addition, Mr. Plourd has a deferred compensation account established and maintained at CWB for his benefit. To this account, the Company credited $100,000 on December 31, 2011. In addition, 1% per month of his annual salary will also be credited to this account during the term of Mr. Plourd’s employment. Monthly interest credits will be earned throughout the term of the agreement at the then-current CWB three-year certificate of deposit rate on an annualized basis. No funds in this account will vest prior to the date Mr. Plourd attains age 65, and normal payments will not commence until such time as Mr. Plourd attains age 66, whether or not he is employed by the Company. In the event of a change of control before Mr. Plourd attains age 65, the total amount credited to this account will become fully vested.
Mr. Plourd also has a Salary Continuation Agreement, effective as of December 30, 2013. Upon separation from service after normal retirement age, he will receive $1,500,000 in $100,000 payments over a 15-year period commencing the month following his separation from service. No funds in this account will vest prior to the date Mr. Plourd attains age 65. If early involuntary termination occurs, he will be paid 100% of the accrued benefit in one lump sum. Also, in the event of disability prior to normal retirement age, he will be paid 100% of the accrued benefit in lieu of any other benefit hereunder, paid in 180 equal monthly installments. At December 31, 20192020 his accrued unvested benefit was $611,385.$727,889. If a change of control occurs, followed within 24 months by separation of service prior to normal retirement age, Mr. Plourd will receive within 30 days a lump-sum benefit of $1,130,357 and any gross-up required, in lieu of any other benefit thereunder. In the event of death prior to or subsequent to commencement of benefit payments, there are provisions relating to payments to designated beneficiaries.
Mr. Plourd’s employment agreement specifies that, in the event of termination without cause or on non-renewal, he would continue to receive salary and benefits plus deferred compensation for a period of three months following the Bank’s written notice of Mr. Plourd’s termination or non-renewal, and one year’s base salary. The contract continues Mr. Plourd’s health insurance, dental insurance, short-term disability insurance and life insurance for 18 months. Also, the contract contains a change of control (as defined) clause whereby, if he is terminated within one year following such event, he would be entitled to base salary and benefits for a period of one year.
Mr. Filippin has an employment contract, effective June 1, 2015 with an annual base salary as of MarchJuly 1, 20192020 of $268,000.$285,000. Beginning of March 1, 2020,2021, Mr. Filippin’s annual base salary was adjusted to $276,040.$300,000. In addition, he has a deferred compensation account established and maintained at CWB for his benefit. To this account the Company credited $40,000 on September 30, 2015. Also, the Company will credit 1% per month of his annual salary during the term of his employment. Monthly interest credits will be earned throughout the term of the agreement at the then-current CWB three-year certificate of deposit rate. No funds in this account will vest prior to the date Mr. Filippin attains age 65, and normal payments will not commence until such time as Mr. Filippin attains age 66, whether or not he is employed by the Company. In the event of a change of control, the total amount credited to this account will become fully vested. Mr. Filippin was furnished a company car beginning in 2018.
Mr. Filippin’s contract specifies that, in the event of termination without cause, he would continue to receive salary and benefits plus deferred compensation for a period of three months. Also, the contract contains a change of control (as defined) clause whereby, if he is terminated within one year following such event, he would be entitled to base salary and benefits for a period of one year. Mr. Filippin is also eligible for an annual bonus which is determined by the Board in its sole discretion. For 2020 and 2019, respectively, $100,000 and 2018, respectively, $55,000 and $85,000 bonus amounts were awarded.
Mr. Filippin also has a Salary Continuation Agreement, effective as of September 28, 2018. Upon separation from service after normal retirement age, he will receive $750,000 in $50,000 payments over a 15-year period commencing the month following his separation from service. No funds in this account will vest prior to the date Mr. Filippin attains age 65. If early involuntary termination without cause occurs, he will be paid 100% of the accrued benefit in one lump sum. If early involuntary termination with cause occurs he receives no benefit. Also, in the event of disability prior to normal retirement age, he will be paid 100% of the accrued benefit in lieu of any other benefit hereunder, paid in 180 equal monthly installments. At December 31, 20192020 his accrued unvested benefit was $51,319.$92,133. If a change of control occurs, followed within 24 months by separation of service prior to normal retirement age, Mr. Filippin will receive within 30 days a lump-sum benefit of $538,585 and any gross-up required, in lieu of any other benefit thereunder. In the event of death prior to or subsequent to commencement of benefit payments, there are provisions relating to payments to designated beneficiaries.
Mr. Stronks has an employment contract, effective July 23, 2018. Mr. Stronks’ annual base salary was $229,000$242,740 as of March 1, 2019.2020. Beginning March 1, 20202021 Mr. Stronks’ annual base salary was adjusted to $242,740.$256,000. In addition, he has a deferred compensation account established and maintained at CWB for his benefit. To this account, the Company will credit 1% per month of his annual salary during the term of his employment. Monthly interest credits will be earned throughout the term of the agreement at the then-current CWB three-year certificate of deposit rate. No funds in this account will vest prior to the date Mr. Stronks attains age 65, and normal payments will not commence until such time as Mr. Stronks attains age 66, whether or not he is employed by the Company. In the event of a change of control, the total amount credited to this account will become fully vested.
Mr. Stronks’ contract specifies that, in the event of termination without cause, he would continue to receive salary and benefits plus deferred compensation for a period of three months. Also, the contract contains a change of control (as defined) clause whereby, if he is terminated within one year following such event, he would be entitled to base salary and benefits for a period of one year. Mr. Stronks is also eligible for an annual bonus which is determined by the Board in its sole discretion. For 2020 and 2019, respectively, $90,000 and 2018, respectively, $60,000 and $30,000 bonus amounts were awarded.
The Board on February 27, 2020, approved a Salary Continuation Agreement for Mr. Stronks. The completion and execution of that Salary Continuation Agreement is subject to certain conditions. Under the terms of the agreement, upon separation from service after normal retirement age, Mr. Stronks will receive $750,000 in $50,000 payments over a 15-year period commencing the month following his separation from service. No funds in this account will vest prior to the date Mr. Stronks attains age 66. If early involuntary termination without cause occurs, he will be paid 100% of the accrued benefit in one lump sum. If early involuntary termination with cause occurs he receives no benefit. Also, in the event of disability prior to normal retirement age, he will be paid 100% of the accrued benefit in lieu of any other benefit hereunder, paid in 180 equal monthly installments. At December 31, 20192020 his accrued unvested benefit was zero.$20,170. If a change of control occurs, followed within 24 months by separation of service prior to normal retirement age, Mr. Stronks will receive within 30 days a lump-sum benefit of $538,585 and any gross-up required, in lieu of any other benefit thereunder. In the event of death prior to or subsequent to commencement of benefit payments, there are provisions relating to payments to designated beneficiaries.
On March 23, 2006, the Company’s Board adopted the 2006 Stock Option Plan (2006 Plan) and it was subsequently approved by the shareholders at the 2006 Annual Meeting of Shareholders. The 2006 Plan expired on March 23, 2016. At December 31, 2019,2020, the number of shares to be issued upon exercise of outstanding options granted pursuant to the 2006 Plan was 136,900129,900 shares.
On March 27, 2014, the Company’s Board adopted the 2014 Stock Option Plan (2014 Plan) and it was subsequently approved by the shareholders at the 2014 Annual Meeting of Shareholders. The 2014 Plan provides for the issuance of up to 750,000 shares of the Company’s Common Stock to Directors, officers and key employees of the Company and CWB. At December 31, 2019,2020, the number of shares to be issued upon exercise of outstanding options granted pursuant to the 2014 Plan was 594,400598,200 shares, and the number of shares of Common Stock remaining available for future issuance under the 2014 Plan was 55,10050,700 shares. See the tables below entitled “Outstanding Equity Awards at Fiscal Year-End” and “Director Compensation Table” for more information regarding options outstanding as of December 31, 2019.2020.
Adjustments Upon Changes in Capitalization. The total number of shares covered by the 2014 Plan and the price, kind and number of shares subject to outstanding options thereunder, will be appropriately and proportionately adjusted if the outstanding shares of Common Stock are increased, decreased, changed into or exchanged for a different number or kind of shares or securities of the Company through reorganization, merger, recapitalization, reclassification, stock split, stock dividend, stock consolidation or otherwise, without consideration to CWBC as provided in the 2014 Plan. Fractional share interests of such adjustments may be accumulated, although no fractional shares of stock will be issued under the 2014 Plan.
The 2020 Omnibus Equity Incentive Plan
On February 27, 2020, the Company’s Board adopted the 2020 Omnibus Equity Incentive Plan (2020 Plan) and it was subsequently approved by the shareholders at the 2020 Annual Meeting of Shareholders. The 2020 Plan provides for the issuance of up to 500,000 shares of the Company’s Common Stock to Directors, officers and key employees and consultants of the Company and CWB pursuant to stock options and restricted stock awards (Awards). At December 31, 2020, the number of shares to be issued upon exercise of outstanding options granted pursuant to the 2020 Plan was zero shares, and the number of shares of Common Stock remaining available for future issuance under the 2020 Plan was 500,000 shares. Under the 2020 Plan, a non-employee director of the Company may not be granted Awards (whether through grants of restricted stock or stock options) of more than 100,000 shares of Company Common Stock in any one calendar year. See the tables below entitled “Outstanding Equity Awards at Fiscal Year-End” and “Director Compensation Table” for more information regarding options outstanding as of December 31, 2020.
Eligibility. Directors, officers, and key employees of, and consultants to, the Company or any subsidiary, including CWB, are eligible to receive awards under the 2020 Plan at the discretion of the Committee. Consultants may receive such awards if they have rendered bona fide services not in connection with the offer and sale of securities of the Company in a capital raising transaction.
Plan Term. The 2020 Plan’s term commenced on February 27, 2020 and will terminate on February 27, 2030 (subject to early termination is described herein).
Administration. The 2020 Plan is administered by the Company’s Compensation Committee (the “Committee” currently comprised of five non-employee directors each of whom meet current independence and experience requirements of the applicable provision of the NASDAQ Listing Rules and requirements of the SEC; provided, however that the Board may, in its sole discretion, resolve to administer the 2020 Plan. Subject to the express provisions of the 2020 Plan, the Committee is authorized to construe and interpret the 2020 Plan, and make all the determinations necessary or advisable for administration of the 2020 Plan. Members of the Committee and Board receive no additional compensation for their administration of the 2020 Plan. Awards under the Plan may be in the form of restricted stock and/or stock options, including incentive stock options to eligible grantees. The full text of the 2020 Plan is available as Appendix B to the Company’s Schedule 14A filed with the SEC on April 13, 2020.
Restricted Stock. An Award of restricted stock is a grant of shares of the Company Common Stock conditioned upon either the achievement of certain performance criteria or the lapse of time. Performance criteria may include results for net income, return on average assets, return on average equity, efficiency ratio, and various measure of credit quality such as the ratio of non-performing assets to total assets.
Subject to the terms of the 2020 Plan, the Committee will determine the number of restricted stock subject to an Award to a participant. The Committee may provide or impose different terms and conditions on any particular Award, including without limitation: (i) the participant’s right to the restricted stock will not vest for a period of time; (ii) restrictions on the sale, assignment, transfer, hypothecation or other disposition of any right or interest in the award; (iii) the requirement that the participant’s rights and interests in the award be forfeited upon termination of employment for specified reasons within a specified period of time; and (iv) the requirement that the participant’s rights and interests in the award be forfeited upon the failure to achieve previously designated performance-based criteria.
Until the restrictions have lapsed, participants may not assign, transfer, sell, exchange, encumber, pledge, or otherwise hypothecate or dispose of any right or interest in the Award, including the underlying restricted stock, other than as permitted by the 2020 Plan. If participant is employed on the date certain corporate events occur, then all restrictions, terms and conditions applicable to such participant’s restricted stock then outstanding shall be deemed lapsed and satisfied and the participant will become fully vested as of such date.
Until vested and issued in accordance with the 2020 Plan and the restricted stock award agreement, restricted stock underlying an award will not be deemed to be issued and outstanding, and a participant will have no right to vote such shares or receive cash dividends on such shares.
Incentive and Non-Qualified Stock Options. The 2020 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, the CWB or any subsidiary, and are subject to limitations imposed by applicable sections of the Internal Revenue Code, as amended, including a $100,000 limit on the aggregate fair market value (determined on the date the options are granted) of shares of Common Stock with respect to which incentive stock options are exercisable for the first time by an optionee during any calendar year (under the 2020 Plan and all other “incentive stock option” plans of the Company). Any options granted under the 2020 Plan which do not meet the limitations for incentive stock options, or which are otherwise not deemed to be incentive stock options, are deemed “non-qualified.”
Amendment and Termination of the 2020 Plan. The 2020 Plan, and all stock options previously granted under the 2020 Plan, will terminate upon the dissolution or liquidation of the Company, upon a consolidation, reorganization, or merger as a result of which, after the transaction, the Company’s shares do not represent, or are not converted into, a majority of the shares of the surviving corporation is not the surviving corporation, or upon a sale of all or substantially all of the assets of the Company. However, the vesting of all awards will accelerate and all options theretofore granted will become immediately exercisable in their entirety upon the occurrence of any of the foregoing, and any options not exercised immediately upon the occurrence of any of the foregoing events will terminate, unless provision is made for the assumption or substitution thereof. As a result of these acceleration provisions, even if an outstanding award or option were not fully vested as to all increments at the time of the event, that award or option will become fully vested and, in the case of options, exercisable. The Board may at any time suspend, amend or terminate the 2020 Plan, and may, with the consent of the respective optionee, make such modifications to the terms and conditions of outstanding options as it may deem advisable. Certain amendments to the 2020 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 2020 Plan; (b) materially increase the number of shares of Common Stock which may be issued at any time under the 2020 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 2020 Plan; (d) increase or decrease the exercise price of any option granted under the 2020 Plan; (e) increase the maximum term of awards or options provided for in the 2020 Plan; (f) permit awards or options to be granted to any person who is not an eligible participant; or (g) change any provision of the 2020 Plan which would affect the qualification as an incentive stock option under the 2020 Plan. The amendment, suspension or termination of the 2020 Plan will not, without the consent of the participant, alter or impair any rights or obligations under any outstanding Award or option under the 2020 Plan.
Adjustments Upon Changes in Capitalization. The total number of shares covered by the 2020 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 2020 Plan. Fractional share interests of such adjustments may be accumulated, although no fractional shares of stock will be issued under the 2020 Plan.
Holdings of Outstanding Equity Awards
The following table sets forth certain information, pursuant to SEC rules, regarding stock options outstanding at December 31, 20192020 for the Named Executive Officers.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END(1)
Option Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | Option Expiration Date |
William F. Filippin | | | 14,400 | | | | 5,600 | | | | - | | | $ | 6.59 | | 6/25/25 |
| | 3,600 | | | | 2,400 | | | | - | | | $ | 6.86 | | 3/24/26 |
| | 1,000 | | | | 4,000 | | | | - | | | $ | 11.20 | | 2/22/28 |
| | - | | | | 7,500 | | | | - | | | $ | 10.28 | | 2/28/29 |
Martin E. Plourd | | | 20,000 | | | | - | | | | - | | | $ | 3.25 | | 12/13/22 |
| | 20,000 | | | | - | | | | - | | | $ | 7.31 | | 1/30/24 |
| | 20,000 | | | | 5,000 | | | | - | | | $ | 6.6996 | | 3/26/25 |
| | 15,000 | | | | 10,000 | | | | - | | | $ | 6.86 | | 3/24/26 |
| | 8,000 | | | | 12,000 | | | | - | | | $ | 10.30 | | 2/22/27 |
| | 4,000 | | | | 6,000 | | | | - | | | | 10.99 | | 12/20/27 |
| | 4,000 | | | | 16,000 | | | | - | | | $ | 10.56 | | 11/15/28 |
Timothy J. Stronks | | | 4,000 | | | | 16,000 | | | | - | | | $ | 12.68 | | 7/26/28 |
| | - | | | | 5,000 | | | | - | | | $ | 10.28 | | 2/28/29 |
Option Awards |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable (2) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($) | | Option Expiration Date |
William F. Filippin | | | 18,400 | | | | - | | | | - | | | $ | 6.59 | | 6/25/25 |
| | 4,800 | | | | 1,200 | | | | - | | | $ | 6.86 | | 3/24/26 |
| | 2,000 | | | | 3,000 | | | | - | | | $ | 11.20 | | 2/22/28 |
| | 1,500 | | | | 6,000 | | | | - | | | $ | 10.28 | | 2/28/29 |
| | - | | | | 2,000 | | | | - | | | $ | 6.71 | | 4/29/30 |
Martin E. Plourd | | | 20,000 | | | | - | | | | - | | | $ | 3.25 | | 12/13/22 |
| | 20,000 | | | | - | | | | - | | | $ | 7.31 | | 1/30/24 |
| | 5,000 | | | | - | | | | - | | | | 6.996 | | 3/26/25 |
| | 20,000 | | | | - | | | | - | | | $ | 6.6996 | | 3/26/25 |
| | 20,000 | | | | 5,000 | | | | - | | | $ | 6.86 | | 3/24/26 |
| | 12,000 | | | | 8,000 | | | | - | | | $ | 10.30 | | 2/22/27 |
| | 6,000 | | | | 4,000 | | | | - | | | | 10.99 | | 12/20/27 |
| | 8,000 | | | | 12,000 | | | | - | | | $ | 10.56 | | 11/15/28 |
| | - | | | | 20,000 | | | | - | | | $ | 10.70 | | 2/27/30 |
| | - | | | | 3,000 | | | | - | | | $ | 6.71 | | 4/29/30 |
Timothy J. Stronks | | | 8,000 | | | | 12,000 | | | | - | | | $ | 12.68 | | 7/26/28 |
| | 1,000 | | | | 4,000 | | | | - | | | $ | 10.28 | | 2/28/29 |
| | - | | | | 2,000 | | | | - | | | $ | 6.71 | | 4/29/30 |
| (1) | As of December 31, 2019,2020, the Company had not granted nor had outstanding any stock awards. |
| (2) | Each option grant generally vests 20% on each anniversary of the grant date. Each stock option expires 10 years after the date the stock option was granted. |
Option Exercises and Stock Vested
The following table sets forth information related to the value received by each Named Executive Officer during 2019 for stock awards that vested, as well as the value realized upon stock option exercises.
| | Option Awards
| | | Stock Awards
| |
Name | | Number of Shares
Acquired on Exercise
| | | Value Realized on Exercise
| | | Number of Shares Acquired
on Vesting
| | | Value Realized on Vesting
| |
William F. Filippin | | | - | | | | - | | | | - | | | | - | |
Martin E. Plourd | | | - | | | | - | | | | - | | | | - | |
Timothy J. Stronks | | | - | | | | - | | | | - | | | | - | |
Pension Benefits
Excluding any tax-qualified contribution plan and any nonqualified defined contribution plan, none of the Named Executive Officers or any other key officers participate in any plan that provides for payments or other benefits at, following, or in connection with, retirement.
Treatment of Outstanding Stock Options upon Retirement, Termination or Change of Control
Termination of Employment or Affiliation. Under the terms of the 2006, 2014, and 20142020 Plans (Plans), in the event an optionee ceases to be affiliated with the Company or a subsidiary for any reason other than disability, death or termination for cause, the stock options granted to such optionee will expire at the earlier of the expiration dates specified for the options, or 90 days after the optionee ceases to be so affiliated. During such period after cessation of affiliation, the optionee may exercise the option to the extent it was exercisable as of the date of such termination, and thereafter the option expires in its entirety. If an optionee’s stock option agreement so provides, and if an optionee’s status as an eligible participant is terminated for cause, the options held by such person will expire 30 days after termination, although the Board may, in its sole discretion, within 30 days of such termination, reinstate the option. If the option is reinstated, the optionee will be permitted to exercise the option only to the extent, for such time, and upon such terms and conditions as if the optionee’s status as an eligible participant had been terminated for a reason other than cause, disability or death, as described above.
Liquidation or Change of Control. The Plans, and all stock options previously granted under the Plans, terminate upon the dissolution or liquidation of the Company, upon a consolidation, reorganization or merger as a result of which the Company is not the surviving corporation, or upon a sale of all or substantially all of the assets of the Company. However, all options heretofore granted become immediately exercisable in their entirety upon the occurrence of any of the foregoing, and any options not exercised immediately upon the occurrence of any of the foregoing events will terminate unless provision is made for the assumption or substitution thereof. As a result of the acceleration provisions, even if an outstanding option were not fully vested as to all increments at the time of the event, that option will become fully vested and exercisable.
Profit Sharing and 401(k) Plan
The Company has established a 401(k) plan for the benefit of its employees. Employees are eligible to participate in the plan beginning the first of the month following the successful completion of 30 days of employment, subject to certain limitations. Each plan year, the Company will make a Safe Harbor non-elective employer contribution on behalf of eligible participants who have more than 12 months of service with nth Company.an amount equal to 3% of such eligible participant’s compensation for such plan year. The Company’s contributions were determined by the Board and amounted to $361,000 in 2020 and $337,000 in 2019 and $296,000 in 2018.2019.
Directors’ Compensation
CWB’s non-employee Directors are paid for attendance at CWB Board meetings at the rate of $1,400 ($1,700 for the Chairman) for each regular Board meeting, $400 ($500 for Audit Committee Chairman) each for credit and audit committee meetings, and $300 each for Compensation Technology and Cybersecurity, and Nominating and Governance meetings. If a Director attends a meeting by videoconferencing, 100% of the fee is received for committee meetings and 50% of the fee is received for Board meetings. In 2019,2020, no additional discretionary compensation was awarded to the non-employee Directors. There were no CWBC Director fees paid during 2019.2020.
The following table sets forth the information concerning the compensation paid to each of the Company’s Directors during 2019.2020. Compensation paid to Martin E. Plourd, Director, President and Chief Executive Officer of CWBC and CWB, is not included in this table because he was an employee during 20192020 and, therefore, received no additional compensation for his service as a Director.
Name (1) | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($) | | | Option Awards ($) (2) | | | Non-Equity Incentive Plan Compensation ($) | | | Nonqualified Deferred Compensation Earnings ($) | | | All Other Compensation ($) | | | Total ($) | | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)(3) | Total ($) |
Robert H. Bartlein | | | 37,800 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 37,800 | | 43,000 | | - | 3,297 | - | - | - | 46,297 | |
Jean W. Blois | | | 18,500 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 18,500 | | 19,700 | | | 3,297 | | | | 22,997 | |
Dana L. Boutain | | | 19,900 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 19,900 | | 22,600 | | - | 3,297 | - | - | - | 25,897 | |
Suzanne M. Chadwick | | 8,000 | | - | - | - | - | 8,000 | |
Tom L. Dobyns | | | 23,600 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 23,600 | | 19,600 | | - | 3,297 | - | - | 29,625 | 52,522 | |
John D. Illgen | | | 27,800 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 27,800 | | 24,800 | | - | 3,297 | - | - | - | 28,097 | |
James W. Lokey | | | 32,400 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 32,400 | | 42,800 | | - | 3,297 | - | - | - | 46,097 | |
Shereef Moharram | | | 19,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 19,000 | | 19,000 | | - | 3,297 | - | - | - | 22,297 | |
William R. Peeples | | | 22,600 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 22,600 | | 23,000 | | - | 3,297 | - | - | - | 26,297 | |
Christopher R. Raffo | | 8,000 | | - | - | - | - | 8,000 | |
Kirk B. Stovesand | | | 38,700 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 38,700 | | 43,800 | | - | 3,297 | - | - | - | 47,097 | |
(1) Outstanding stock options held by each non-employee Director at December 31, 20192020 are as follows: Robert H. Bartlein, 8,000; Jean W. Blois, 23,000;11,000; Dana L. Boutain, 8,000,11,000, Tom L. Dobyns, 8,000,11,000, John D. Illgen, 23,000;26,000; James W. Lokey, 8,000;11,000; Shereef Moharram, 18,000;21,000; William R. Peeples, 8,000;11,000; Kirk B. Stovesand, 23,000.26,000. Stock options held at December 31, 20192020 by Mr. Plourd are included in the table for the Named Executive Officers under the heading entitled “Outstanding Equity Awards at Fiscal Year-End.”
(2) Column represents the aggregate grant date fair value of option awards granted during the applicable fiscal year as computed in accordance with FASB ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions. The terms of the 2006, 2014 and 20142020 Plans are described above in the section entitled “Stock Option Plans.” Furthermore, the amount recognized for these awards was calculated based on the Black-Scholes option-pricing model. See the Company’s Annual Report on Form 10-K, at Note 11 to the Company’s Financial Statements for the year ended December 31, 2019.2020.
(3) Other compensation consists of payments to Tom Dobyns for consulting services.
Certain Relationships and Related Transactions
Certain Directors and executive officers of the Company, as well as the companies with which such Directors are associated, are customers of and have had banking transactions with CWB in the ordinary course of business. CWB expects to have such ordinary banking transactions with such persons in the future. In the opinion of CWB management, all loans and commitments to lend included in such transactions were made in compliance with applicable laws on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with other persons of similar creditworthiness and did not involve more than a normal risk of collectability or present other unfavorable features. Although CWB does not have any limits on the aggregate amount it would be willing to lend to Directors and officers as a group, loans to individual Directors and officers must comply with CWB’s internal lending policies and statutory lending limits.
PROPOSAL 2
APPROVAL OF THE COMMUNITY WEST BANCSHARES 2020 OMNIBUS EQUITY INCENTIVE PLANPROPOSED AMENDMENT TO THE BYLAWS
Introduction
On February 27, 2020,It is proposed that Article III, Section 3.2, of the Company’s BoardBylaws be amended: (i) to change the authorized range of Directors adopteddirectors from a range of six (6) to eleven (11) to a range of eight (8) to fifteen (15); and (ii) to fix the Community West Bancshares 2020 Omnibus Equity Incentive Plan (the “2020 Plan”) pursuant to which: Company would be permitted to grant stock options and restricted stock awards (Awards) to eligible persons, as more fully described below. The 2020 Plan provides forexact number of directors within the granting to eligible participants of such incentive awards as the Board, the Compensation Committee, or other committee established by the Board, in its sole discretion, to administer the Plan (the “Committee”) mayauthorized range at eleven (11) until changed from time to time approve.
As discussed elsewherewithin the range specified in the Bylaws by resolution adopted by the Board or by the shareholders. In approving this Proxy Statement (see “EXECUTIVE COMPENSATION-Stock Option Plans”, herein)amendment, the 2006 Plan has expired and no options may be granted under the 2006 Plan and 55,100 shares remain available for future grants under the 2014 Plan. The Board has determined that it is in the best interests of the Company and its shareholders to adoptamend the 2020 PlanBylaws as set forth below to provide for the grantBoard with greater flexibility as permitted under Sections 211 and 212 of additional optionsthe California Corporations Code to purchase Company Common Stockfix and to award restricted stock as a meansre-fix the authorized number of providing incentives to retain and attract qualified management and directors to oversee, direct, and implementwithin the range approved by the Company’s shareholders. This authority to fix and re-fix the authorized number of directors of the Board is particularly important in the event a director resigns or is otherwise terminated between annual shareholders’ meetings or the Board deems it in the best interest of the Company and its shareholders to add an individual or individuals to the Board between annual shareholders’ meetings as it permits the Board to either increase or decrease the authorized number of directors serving on the Board within the range approved by the Company’s shareholders. The Company needs to continue to attract and retain qualified persons to serve on the Board and the Bank’s business plansincrease in a successful manner.the maximum number of directors will allow the flexibility to increase the exact number within the authorized range should the Board determine that it is in the best interests of the Company and its shareholders to increase the number of director positions to more than eleven (11) persons. The 2020 Plan will contain 500,000proposed amendment also fixes the exact number of sharesdirectors within the authorized range at eleven (11) to conform to the current number of Company Common Stock fordirectors serving on the issuance of stock options and restricted stock.Board.
HoldersIn order to effectuate the proposed changes, it is necessary to amend Article III, Section 3.2 of Company Common Stock, are being askedthe Bylaws, which currently reads as follows:
“3.2. NUMBER OF DIRECTORS.
The authorized number of directors of the corporation shall be not less than six (6) nor more than eleven (11) and the exact number of directors shall be ten (10) until changed, within the limits specified above, by a resolution amending such exact number, duly adopted by the Board of Directors or by the shareholders. The minimum and maximum number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to approve the 2020 Plan. In accordance with Nasdaq Rule 5635(c),Articles of Incorporation or by an amendment to this Bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares representedentitled to vote; provided, however, that once the number of directors equals or exceeds five (5) an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of an action by written consent, are equal to more than sixteen and voting attwo-thirds percent (16-2/3%) of the Meeting on this proposaloutstanding shares entitled to vote thereon.
No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.”
It is required. Such approval is also required in orderproposed that Article III, Section 3.2, of the Company’s Bylaws be amended to qualify stock options issuable underread as follows:
“3.2. NUMBER OF DIRECTORS.
The authorized number of directors of the 2020 Plancorporation shall be not less than eight (8) nor more than fifteen (15) and the exact number of directors shall be eleven (11) until changed, within the limits specified above, by a resolution amending such exact number, duly adopted by the Board of Directors or by the shareholders. The minimum and maximum number of directors may be changed, or a definite number may be fixed without provision for incentive tax treatment pursuantan indefinite number, by a duly adopted amendment to the Internal Revenue Code (the “Code”). The following descriptionArticles of Incorporation or by an amendment to this Bylaw duly adopted by the vote or written consent of holders of a majority of the 2020 Plan is intendedoutstanding shares entitled to highlightvote; provided, however, that once the number of directors equals or exceeds five (5) an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of an action by written consent, are equal to more than sixteen and summarize the principal termstwo-thirds percent (16-2/3%) of the 2020 Plan, and is qualified in its entirety by the textoutstanding shares entitled to vote thereon.
No reduction of the 2020 Plan, a copyauthorized number of which is attached to this proxy statement as Appendix B.
Summarydirectors shall have the effect of the Planremoving any director before that director’s term of office expires.”
GeneralVote Required; Recommendation
The 2020 Plan is administered byamendment to the Committee currently comprised of five non-employee directors each of whom meet current independence and experience requirementsBylaws requires the favorable vote of the applicable provisionholders of the NASDAQ Listing Rules and requirements of the SEC; provided, however that the Board may, in its sole discretion, resolve to administer the 2020 Plan. Awards under the Plan may be in the form of restricted stock and/or stock options, including incentive stock options to eligible grantees, and may be granted to directors, officers, and key employees of, and consultants to, the Company or any subsidiary. Consultants may receive such awards if they have rendered bona fide services not in connection with the offer and sale of securities of the Company in a capital raising transaction. Presently, that includes 9 directors, 5 executive officers (including one that is also a director), an approximately 133 additional officers and employees.
Shares Available for Awards
Subject to adjustment for stock dividends, recapitalizations, stock splits and similar changes in the Company’s capital structure, as provided in the 2020 Plan, the maximum number of shares of Company Common Stock that may be issued or paid out under the Plan is 500,000 shares. Under the 2020 Plan, a non-employee director of the Company may not be granted Awards (whether through grants of restricted stock or stock options) of more than 100,000 shares of Company Common Stock in any one calendar year.
Term of the Plan
The term of the 2020 Plan is ten (10) years from the date of the Board’s adoption of the 2020 Plan or February 27, 2030.
Transfer of Awards under the Plan
Except to the extent otherwise provided in the Plan and/or in the applicable award agreement, awards granted under the Plan are not assignable or transferable other than by will or by the laws of descent and distribution, and all such awards and rights will be exercisable during the life of the participant only by the participant or the participant’s legal representative.
Acceleration of Vesting/Exercisability of Awards
Under the 2020 Plan immediately prior to the occurrence of certain corporate events, the vesting of restricted stock will accelerate and stock options will become exercisable. Those corporate events include: (i) the consummation of a plan of dissolution or liquidation of Company; (ii) a plan of reorganization, merger or consolidation of Company with one or more corporations, as a result of which the voting securities of the Company immediately prior to the consummation of such transaction do not represent or constitute, immediately after the transaction, at least a majority of the total voting power of the surviving entity (or parent corporation thereof); or (iii) the sale of all or substantially all the assets of Company to another corporation. In the event the Company expressly approves and if provision is made in connection with such transaction for assumption of Awards granted under the 2020 Plan then, in such case such Awards will be converted into awards for a like number and kind foroutstanding shares of the surviving entity, or substitution for such Awards with new awards covering stock of a successor employer corporation, or a parent or subsidiary thereof, solely at the discretion of such successor corporation, or parent or subsidiary, with appropriate adjustments as to number and kind of shares and prices, then the consummation of such transaction.
Assumption of Awards of Another Company
The Company may also substitute or assume outstanding awards granted by another entity in connection with an acquisition of that other entity by the Company, provided the recipient of the substitution or assumption would have been eligible to be granted an award under the 2020 Plan.
Restricted Stock
An award of restricted stock is a grant of shares of the Company Common Stock conditioned upon either the achievement of certain performance criteria or the lapse of time. Performance criteria may include results for net income, return on average assets, return on average equity, efficiency ratio, and various measure of credit quality such as the ratio of non-performing assets to total assets.
Subject to the terms of the 2020 Plan, the Committee will determine the number of restricted stock subject to an award to a participant. The Committee may provide or impose different terms and conditions on any particular award, including without limitation: (i) the participant’s right to the restricted stock will not vest for a period of time; (ii) restrictions on the sale, assignment, transfer, hypothecation or other disposition of any right or interest in the award; (iii) the requirement that the participant’s rights and interests in the award be forfeited upon termination of employment for specified reasons within a specified period of time; and (iv) the requirement that the participant’s rights and interests in the award be forfeited upon the failure to achieve previously designated performance-based criteria.
Until the restrictions have lapsed, participants may not assign, transfer, sell, exchange, encumber, pledge, or otherwise hypothecate or dispose of any right or interest in the award, including the underlying restricted stock, other than as permitted by the 2020 Plan. If participant is employed on the date certain corporate events occur as discussed in “Summary of the Plan – Acceleration of Vesting/Exercisability of Awards”, then all restrictions, terms and conditions applicable to such participant’s restricted stock then outstanding shall be deemed lapsed and satisfied and the participant will become fully vested as of such date.
Until vested and issued in accordance with the 2020 Plan and the restricted stock award agreement, restricted stock underlying an award will not be deemed to be issued and outstanding, and a participant will have no right to vote such shares or receive cash dividends on such shares.
Stock Options
Grant of Stock Options
Awards under the 2020 Plan may also be in the form of grants of stock options for a number of shares of CompanyCompany’s common stock, at price(s) and time(s), and on the terms and conditions as the Committee or the Board deems advisable. Stock option grants typically vest over time and require the participant to pay Company the exercise price to purchase the stock and will be evidenced by a written stock option agreement containing the material terms of each particular grant, including whether the stock options are intended to qualify as incentive stock options or nonqualified stock options.
If stock options are granted to officers or key employees who own, directly or indirectly, 10% or more of the outstanding Company common stock, and the stock options are intended to qualify as incentive stock options, then the minimum option exercise price must be at least 110% of the fair market value of Company common stock on the date of grant.
Subject to the limitations and restrictions set forth in the Plan, a participant who has been granted a stock option may, if otherwise eligible, be granted additional stock options if the Committee shall so determine.
Incentive and Non-Qualified Stock Options
The 2020 Plan provides for the grant of both incentive stock options and non-qualified stock options. All shares are available to be granted as incentive stock options. Incentive stock options are available only to participants who are also employees of Company, the Bank or any subsidiary, and are subject to limitations imposed by applicable sections of the Code, including a $100,000 limit on the aggregate fair market value (determined on the date the stock options are granted) of shares of Company Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year. Any stock options granted under the 2020 Plan which do not meet the limitations for incentive stock options, or which are otherwise not deemed to be incentive stock options, shall be deemed ”non-qualified.” Subject to the foregoing and other limitations set forth in the 2020 Plan, the exercise price, permissible time or times of exercise, and the remaining terms pertaining to any stock options are determined by the Committee; however, the per share exercise price under any stock option may not be less than 100% of the fair market value of Company common stock on the date of grant of the stock options.
Exercise of Options
Subject to the limitation set forth in the 2020 Plan, stock options granted under the Plan may be exercised in such increments, which need not be equal, and upon such contingencies as the Committee may determine. If a participant does not exercise an increment of a stock option in any period during which such increment becomes exercisable, the unexercised increment may be exercised at any time prior to expiration of the stock option unless the respective stock option agreement provides otherwise. Stock options are exercisable only for whole shares of Company common stock and fractional share interest are disregarded except that they may be accumulated.
Subject to the restrictions set forth in the 2020 Plan, each stock option may be exercised in accordance with the terms of the individual stock option agreement. Full payment by the participant for all shares as to which the stock option is being exercised is due and payable at the time of exercise of the stock option. Payment must be in cash and/or, with the prior written approval of the Committee, and subject to any required regulatory approval, in shares of Company common stock, or pursuant to a “net exercise” (where the number of shares issuable is reduced by the number of shares needed to pay the exercise price), or pursuant to a formal “cashless” exercise program entailing the sale of shares pursuant to a brokered transaction, or other form of legal consideration acceptable to the Committee.
Certain Information Concerning All Awards
Company will be disallowed a deduction for compensation to its employees, officers, shareholders, and others that results in an “excess parachute payment” within the meaning of Section 280G(b) of the Code. If such a person is granted an award under the 2020 Plan and there is a change of control, some or all of the value attributable to the award granted under the 2020 Plan may be considered in the determination of whether an excess parachute payment has been made.
Awards under the 2020 Plan are intended to either be exempt from or in compliance with Section 409A of the Code and to the extent of any inconsistencies with the requirements of 409A, the 2020 Plan will be interpreted and amended so as to satisfy such requirements.
Vote Required
In accordance with Nasdaq Rule 5635(c), the approval of the 2020 Plan by a majority of the Company Common Stock represented and voting at the Meeting on this proposal is required. Such approval is also required for the shares covered by the 2020 Plan to qualify as incentive stock options pursuant to the requirements of Section 422 of the Code.
Recommendation of the Board of Directorsstock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMMUNITY WEST BANCSHARES 2020 OMNIBUS EQUITY INCENTIVE PLAN.AMENDMENT TO THE BYLAWS.
PROPOSAL 3
RATIFICATION OF THE COMPANY’S INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of its Audit Committee, has ratified the appointment of RSM US LLP (RSM) to serve as its independent auditors for the fiscal year ending December 31, 2020.2021. Representatives from RSM are expected to be present at the Meeting. The Company will afford the representatives an opportunity to make a statement, should they desire to do so, and expect that the representatives will be available to respond to appropriate questions.
The Board of Directors is requesting that the Company'sCompany’s shareholders ratify the appointment of RSM as the Company'sCompany’s independent auditors for 2020.2021. Although ratification is not required by the Company'sCompany’s Bylaws or otherwise, the Board of Directors is submitting the appointment of RSM to the shareholders for ratification because the Board of Directors values the shareholders'shareholders’ views on the Company'sCompany’s independent auditors and as a matter of good corporate practice. In the event that the shareholders fail to ratify the appointment, it will be considered as a direction to the Board of Directors and the Audit Committee to consider the selection of a different firm. Even if the appointment is ratified, the Audit Committee, in its discretion, may select a different independent auditor, subject to ratification by the Board of Directors, at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF RSM US LLP AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.2021.
Audit Fees
During the years ended December 31, 20192020 and 2018,2019, respectively, the aggregate fees billed by RSM for the audit of the Company’s consolidated financial statements for such fiscal year and for the review of the Company’s interim financial statements was $286,755 and $273,064, and $253,435.respectively. This amount includes fees related to the fiscal year audit and interim reviews, notwithstanding when the fees were billed or when the services were rendered. Expenses included were billed from January through December of the fiscal year, notwithstanding when the expenses were incurred.
Audit-Related Fees
During the year ended December 31,, 2020, $9,975 was billed by RSM for audit related services for review of the SEC Form S-8 filing. During the year ended December 31, 2019, $5,867 was billed by RSM for audit-related services. The fees related to the Company’s adoption of ASU 842. There were no audit relatednone of these fees billed in 2018.2020.
Tax Fees
During the years ended December 31, 20192020 and 2018,2019, the aggregate fees billed by RSM for professional services related to recurring state and federal tax preparation, compliance and consulting were $33,180 and $28,820, and $26,000.respectively.
All Other Fees
During the year ended December 31, 2019, $6,720 was billed by RSM for a SOX readiness assessment. During the year ended December 31, 2018, $20,195 was billed by RSM for a SOX assessment and ASC 606 Revenue Recognition discussion.
The Audit Committee of the Company reviewed and discussed with RSM whether the rendering of the non-audit services provided by them to the Company during fiscal 20192020 was compatible with their independence. The Audit Committee pre-approves all audit and permissible non-audit services to be provided by RSM and the estimated fees for these services.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Auditor
The Audit Committee’s policy is to pre-approve all audit and non-audit services provided by the Company’s independent auditor. These services may include audit, audit-related, tax and other services. Pre-approval is generally provided for up to one year and is detailed as to a particular service or category of service. The independent auditor and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with the pre-approval and the fees for services performed to date. All services performed by RSM for which fees were billed to the Company during the years ended December 31, 20192020 and 20182019 as disclosed herein were approved by the Audit Committee pursuant to the procedures outlined herein. All of the services of RSM in auditing the Company’s Financial Statements for the year ended December 31, 20192020 were performed by RSM or its full-time, permanent employees.
20212022 SHAREHOLDER PROPOSALS
Shareholder proposals to be considered for inclusion in the Proxy Statement for the Company’s 20212022 Annual Meeting of Shareholders (2021(2022 Meeting) must be received by the Company at its offices at 445 Pine Avenue, Goleta, California 93117, no later than December 14, 2020.2021. The proposals must also satisfy the conditions and procedures prescribed by the Company’s Bylaws and by the SEC in Rule 14a-8 for such proposals to be included in the Company’s Proxy Statement for the 20202021 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 20212022 Meeting. Either the proposer, or a representative qualified under California law to present the proposal on the proposer’s behalf, must attend the meeting to present the proposal. Shareholders may not submit more than one proposal.
The SEC has in effect a rule (Rule 14a-4) governing a company'scompany’s ability to use discretionary proxy authority with respect to proposals that were not submitted in time to be included in the Proxy Statement (i.e., outside the processes of Rule 14a-8 as described in the preceding paragraph). As a result, in the event a proposal is not submitted to the Company prior to February 27, 2021,2022, and the proxy materials delivered in connection with the 20212022 Meeting contain a statement conferring discretionary authority to the Proxyholders of the Company (similar to the statement set forth in the third paragraph of this Proxy Statement), the proxies solicited by the Board for the 20212022 Annual Meeting will confer discretionary authority to the proxyholders to vote the shares in accordance with their best judgment and discretion if the proposal is received by the Company after February 27, 2021.2022.
Whether or not you intend to be present at the Meeting electronically through the Webcast, you are urged to return your Proxy promptly. If you are then present at the Meeting electronically and wish to vote your shares by Webcast, your original Proxy may be revoked by voting at the Meeting. However, if you are a shareholder whose shares are not registered in your own name, you will need the legal proxy obtained from your record holder to vote electronically 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.requirements, except that John D. Illgen, a Director of the Company, filed a Form 5 on January 15, 2021, which included one transaction that was effected on November 16, 2020 that was not reported on a timely basis.
DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS
For shareholders requesting a printed paper copy of the proxy materials, only one Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 is being delivered to shareholders sharing an address unless the Company has received contrary instructions from one or more of the shareholders. Upon the written or oral request of a shareholder, the Company will deliver promptly a separate copy of the Proxy Statement and the Annual Report on Form 10-K to a shareholder at a shared address to which a single copy was delivered. Shareholders desiring to receive a separate copy in the future may contact Susan C. Thompson, Executive Vice President and Chief Financial Officer, Community West Bancshares, 445 Pine Avenue, Goleta, CA 93117-3474, telephone (805) 692-5821.
PROXY MATERIALS AND ANNUAL REPORT ON FORM 10-K
CopiesPaper copies of the Company’s proxy materialsProxy Materials described herein and the 20192020 Annual Report on Form 10-K, as filed with the SEC, are available free of charge upon request to: Susan C. Thompson, Executive Vice President and Chief Financial Officer, Community West Bancshares, 445 Pine Avenue, Goleta, CA 93117-3474, telephone (800) 569-2100, e-mail: sthompson@communitywestbank.com.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28, 202027, 2021
This Proxy Statement, the Proxy card, the Company’s Annual Report to Shareholders and the Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020, and directions regarding attending and participating in the Meeting, via the Internet by the Webcast are available on the Internet at www.edocumentview.com/CWBC and on the Company's Company’s website at www.communitywest.comwww.communitywestbank.com..
| By Order of the Board of Directors, |
| COMMUNITY WEST BANCSHARES |
| William R. Peeples, |
| Chairman of the Board |
Dated: April 12, 2021 | |
Dated: April 13, 2020
Goleta, California | |
APPENDIX A
Community West BancsharesAudit Committee Charter
Approved February 25, 2021
Purpose
The Audit Committee (AC) is appointed by the Board of Directors (Board) to assist the Board in monitoring: (1) the integrity of the Company’s financial statements; (2) the compliance by the Company with legal and regulatory requirements; (3) the independence and performance of the Company’s registered public accounting firms performing audit, review or attestation services; and (4) the Company’s internal audit and control function.
The function of the AC is oversight. Management is responsible for the preparation and integrity of the Company’s financial statements. Management is responsible for maintaining appropriate accounting and financial reporting policies and an appropriate internal control environment. The independent auditor is responsible for planning and conducting a proper audit of the Company’s annual financial statements, reviewing the Company’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q and other procedures.
Committee Membership and Meetings
The members of the AC will meet the independence requirements of NASDAQ and the rules and regulations of the SEC and no member will have participated at any time in the preparation of financial statements of the Company or any subsidiary during the prior three years. Each member will be financially literate and at least one member must have the additional financial sophistication required by the NASDAQ rules. The members of the AC will be appointed by the Board on the recommendation of the Chairman of the Board. The AC will have no fewer than three members. The Committee may meet and conduct business via electronic means when circumstances prevent in-person discussions.
Committee Responsibilities
The AC, in its capacity as a committee of the Board, will be directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm (independent auditor) engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Company, and each such registered public accounting firm must report directly to the AC. The AC will be directly responsible for the resolution of disagreements between management and the independent auditor regarding financial reporting. The AC will have the authority to retain independent legal, accounting or other advisors, as it deems necessary to carry out its duties. The AC may request any officer or employee of the Company or the Company’s outside counsel or independent auditor to attend an AC meeting. The Company will provide for appropriate funding, as determined by the AC, for payment of compensation to any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services; compensation to any advisors employed by the AC; and, ordinary administrative expenses that are necessary or appropriate in carrying out its duties.
The AC will pre-approve all auditing services and permitted non-audit services and fees to be paid for such services to be performed for the Company by its independent auditor, subject to the de minimus exceptions for non-audit services described in Section 10A of the Securities Exchange Act. The AC may delegate to one or more of its members the authority to grant pre-approvals of non-audit services and fees. Any such pre-approval will be presented to the full AC at its next scheduled meeting.
The AC may delegate certain responsibilities to a sub-committee, so long as such sub-committee has at least three board members. The AC will ensure each sub-committee will provide a Charter, approved by the AC and Board, which outlines its roles and responsibilities. Each sub-committee Charter will be reviewed at least annually. Each sub-committee of the AC is also authorized to include non-voting members of management appropriate to their role and expertise applicable to the sub-committee responsibilities. Each sub-committee will also provide periodic reports to the AC as defined in its Charter, and within the responsibilities identified for the AC further below.
The AC will make regular reports to the Board.
The AC, to the extent that it deems necessary or appropriate, will be responsible for the following items:
Financial Statement and Disclosure Matters
1. | Review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The revised Charter will be included in the annual proxy statement no less frequently than every three years. |
2. | Review the annual audited financial statements with management and the independent auditor, including disclosures made in management’s discussion and analysis, and recommend to the Board whether the audited financial statements should be included in the Company’s Form 10-K. |
3. | Review with management and the independent auditor any significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls and any special steps adopted in light of material control deficiencies. |
4. | Review with management and the independent auditor the company’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditors’ review of the quarterly financial statements. |
5. | Review and discuss quarterly reports from the independent auditors on: |
| a. | All critical accounting policies and practices to be used. |
| b. | All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative treatments, and the treatment preferred by the independent auditor. |
| c. | The matters required to be discussed by Statement on Auditing Standards Numbers 61 and 90, as they may be amended or supplemented, relating to the audit or the Company’s periodic reports. |
| d. | Other material written communications between the independent auditor and management, such as any management letters or schedule of unadjusted differences. |
6. | Meet quarterly with management to review the Company’s major financial risk exposures and the policies and procedures that management utilizes to monitor and control such exposures. Hold a monthly conference call between the Chair of the Committee and the Chief Risk Officer to discuss any items that require attention and to discuss Committee agenda items. The Chair of the Committee can call extraordinary meetings any time she/he deems necessary. |
7. | Review with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company’s response to that letter. Such reviews should include: |
| a. | Any difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information. |
| b. | Any changes required in the planned scope of the audit. |
| c. | Any significant disagreements with management. |
8. | The Committee will generally discuss the earnings press releases as well as financial information provided to financial analysts and rating agencies, where applicable. |
9. | Review disclosures made to the AC by the Company’s CEO and CFO during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company’s internal controls. This includes management’s report relating to the Company’s review and documentation of Sarbanes-Oxley compliance. |
Oversight of the Company’s Relationship with its Independent Auditors
10. | Review and evaluate the experience and qualifications of the lead members of each independent auditor’s team. |
11. | Evaluate the performance and independence of each independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence. The opinions of management and the internal auditor will be taken into consideration as part of this review. |
12. | Receive and review a report from each independent auditor at least annually regarding the independent auditor’s independence and discuss such reports with the auditor. Ensure that each independent auditor submits a formal written statement, as required by the Independence Standard. |
| Board Statement No. 1, as it may be amended or supplemented, delineating all relationships between the independent auditor and the Company and a formal written statement of the fees billed by the independent auditor for each of the categories of services requiring separate disclosure in the annual proxy statement. The Committee will be entitled to rely upon the accuracy of the information provided by the independent auditor with respect to the services provided and the fees billed for non-audit services. If so determined by the Audit Committee, recommend that the Board take appropriate action to satisfy itself of the independence of the auditor. |
13. | Obtain and review a report from each independent auditor at least annually regarding the independent auditor’s internal quality control procedures. The report should include any material issues raised by the most recent internal quality control review or peer review of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years regarding one or more independent audits carried out by the firm, and any steps taken to deal with any such issues. |
14. | Meet with each independent auditor prior to the audit to review the planning and staffing of the audit. |
15. | The Audit Committee will present its conclusions regarding each independent auditor to the Board. |
Oversight of the Company’s Internal Audit Function
16. | Review the appointment and replacement of the staffing for the internal audit and compliance function. |
17. | Review the reports to management prepared by the internal audit and/or compliance function and management’s responses. |
18. | Discuss with each independent auditor and management the internal audit function responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audits. |
Compliance Oversight Responsibilities
19. | Obtain from each independent auditor assurance that Section 10A of the Securities Exchange Act has not been implicated. |
20. | Obtain reports from management, the Company’s internal auditor (if applicable) and each independent auditor that the Company’s subsidiary affiliated entity is in conformity with applicable regulatory and legal requirements and the Company’s code of ethics. |
21. | Advise the Board with respect to the Company’s policies and procedures regarding compliance with applicable laws and regulations and with the Company’s code of ethics. |
22. | Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. |
23. | Discuss with management and each independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies. |
24. | Review with appropriate members of management or appropriate legal counsel legal matters that may have a material impact on the financial statements, the Company’s compliance policies and any material reports or inquiries received from regulators or governmental agencies. |
25. | Meet at least annually with the internal audit function representative or other members of management, if needed, in separate executive sessions. |
While the AC has the responsibilities and powers set forth in this Charter, it is not the duty of the AC to plan or conduct audits, or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. This is the responsibility of management and the independent auditor.
APPENDIX B
Nominating and Corporate Governance Committee Charter
(Approved February 27, 2020)
24, 2021
Purpose and Scope
The primary function of the Nominating and Corporate Governance Committee (Committee) is to assist the Board of Directors (Board) of Community West Bancshares (Company) in fulfilling its responsibilities by: (i) reviewing and making recommendations to the Board regarding the Board’s composition and structure, establishing criteria for Board membership and evaluating corporate policies relating to the recruitment of Board members; and (ii) establishing, implementing and monitoring policies and processes regarding principles of corporate governance to ensure the Board’s compliance with its fiduciary duties to the Company and its shareholders.
CompositionCommittee Membership and Meetings
The Committee will be comprised of a minimum of three members of the Board as appointed by the Board, each of whom will meet any independence requirements promulgated by the Securities and Exchange Commission, the NASDAQ Stock Market or any governmental or regulatory body exercising authority over the Company (each a “Regulatory Body”), and each member of the Committee will be free from any relationship that, in the opinion of the Board, would interfere with the exercise of his or her independent judgment as a member of the Committee.
The members of the Committee will be elected by the Board and will serve until their successors will be duly elected and qualified or until their earlier resignation or removal. Unless a Chair is elected by the full Board, the members of the Committee may designate a Chair by majority vote of the full Committee membership.
The Committee will meet as necessary, but at least once each year, to enable it to fulfill its responsibilities and duties as set forth herein. The Committee may meet and conduct business via electronic means when circumstances prevent in-person discussions. The Committee will report its actions to the Board and keep written minutes of its meeting which will be recorded and filed with the books and records of the Company.
Committee Responsibilities and Duties
To fulfill its responsibilities and duties, the Committee will:
Corporate Governance Policy Establishment and Review
| 1. | Develop principles of corporate governance including, but not limited to, the establishment of a corporate codeCode of ethicsEthics and conduct for all directors, officers and employees of the company and its affiliates (Code of Conduct), designed to promote honest and ethical conduct, including the ethical handling of conflicts of interest; full, fair, accurate, timely and understandable disclosure in the company’s periodic reports; and compliance with applicable governmental rules and regulations. The Code of Conduct will be submitted by the committee to the Board and the Boards of the company’s affiliates for their approval. |
| 2. | Review and assess the adequacy of the Code of Conduct approved by the board periodically, but at least annually. The Committee will recommend any modifications to the Code of Conduct to the Board for approval. If so approved, the Company will submit the revised Code of Conduct to the Boards of its affiliates for their approval. |
| 3. | Direct members of the Company’s senior management to report any violations of or non-compliance with the Code of Conduct to the committee. |
| 4. | Be available to members of the Company’s senior management team to consult with and to resolve reported violations or instances of non-compliance with the Code of Conduct. |
| 5. | Determine an appropriate response to material violations of or non-compliance with the Code of Conduct including, at the discretion of the committee, reporting any material violations of or non-compliance with the Code of Conduct to the appropriate Regulatory Body. |
| 6. | Review and assess the adequacy of this Charter periodically as conditions dictate, but at least annually and recommend any modifications to the charter if and when appropriate to the Board for its approval. |
| 7. | Review and assess the adequacy of the charters of any committee of the Board (Governing Documents) periodically to ensure compliance with any principles of corporate governance developed by the committee and recommend to the Board any necessary modifications to the Governing Documents. |
Board Composition, Nominations and Shareholder Proposals
| 1. | Evaluate the current composition and organization of the Board and its committees in light of requirements established by any Regulatory Body or any other applicable statute, rule or regulations which the Committee deems relevant and make recommendations regarding the foregoing to the Board for approval. |
| 2. | Review the composition and size of the Board to ensure that the Board is comprised of members reflecting the proper expertise, skills, attributes and personal and professional backgrounds for service as a director of the Company. The mandatory retirement age of Board members, with the exception of Founding Directors, will be 80 years. |
| 3. | Determine the criteria for selection of the Chairman of the Board, Board members and Board committee members. |
| 4. | Evaluate the performance of current Board members proposed for reelection, and make recommendations to the Board regarding the appropriateness of members of the Board standing for reelection. |
| 5. | Evaluate and, if deemed necessary, recommend the termination of Board membership of any director in accordance with the Code of Conduct or any corporate governance principles adopted by the Board, for cause or for other appropriate reason. |
| 6. | Review and recommend to the Board an appropriate course of action upon the resignation of current Board members or any planned expansion of the Board. |
| 7. | Evaluate and recommend to the Board the appointment of Board members to committees of the Board. |
| 8. | Evaluate and approve a slate of nominees for election to the Board and review the qualification, experience and fitness for service on the Board of any potential members of the Board. |
| 9. | Review all stockholder proposals submitted to the Company (including any proposal relating to the nomination of a member of the Board) and the timeliness of the submission thereof and recommend to the Board appropriate action on each such proposal. |
Criteria for Evaluating Board Nominee Candidates
The Board should be composed of:
| 1. | Directors chosen with a view to bringing to the Board a variety of experiences and backgrounds. |
| 2. | Directors who have high level managerial experience or are accustomed to dealing with complex problems. |
| 3. | Directors who will represent the balance, best interests of the shareholders as a whole rather than special interest groups or constituencies, while also taking into consideration the overall composition and needs of the Board. |
| 4. | A majority of the Board’s Directors will be independent directors under the criteria for independence required by the SEC and NASDAQ. |
In considering possible candidates for election as an outside director, the Nominating Committee and other directors should be guided by the foregoing general guidelines and by the following criteria:
5. | 1.In considering possible candidates for election as an outside director, the Nominating Committee and other directors should be guided by the foregoing general guidelines and by the following criteria: |
6. | Each Director should be an individual of the highest character and integrity, have experience at or demonstrated understanding of strategy/policy-setting and a reputation for working constructively with others. |
| 2.7. | Each Director should have sufficient time available to devote to the affairs of the Company to carry out the responsibilities of a Director. |
| 3.8. | Each Director should be free of any conflict of interest which would interfere with the proper performance of the responsibilities of a Director. |
| 4.9. | The Chief Executive Officer is expected to be a Director. Other members of senior management may be considered, but Board membership is not necessary or a prerequisite to a higher management position. |
Conflicts of Interest
| 1. | Resolve actual and potential conflicts of interest a Board member may have and issue to any Board member having an actual or potential conflict of interest instructions on how to conduct him or herself in matters before the Board which may pertain to the conflict. |
| 2. | To the extent deemed necessary by the committee, engage outside counsel and/or independent consultants to review any matter under its responsibility. |
| 3. | Take such other actions regarding the Company’s corporate governance that are in the best interest of the Company and its shareholders as the Committee will deem appropriate or as will otherwise be required by any Regulatory Body. |
APPENDIX C
Compensation Committee Charter
Approved February 25, 2021
PURPOSE
The primary purpose of the Compensation Committee (the “Committee”) is to aid the Board of Directors (the “Board”) in discharging its responsibilities relating to the compensation of the Company’s executive officers, including the Chief Executive Officer. The Committee has overall responsibility for evaluating and approving the Company’s compensation plans, policies and programs. The Committee is also responsible for producing an annual report on executive compensation for inclusion in the Company’s proxy statement.
Committee Membership
The Committee shall be composed of at least three (3) members of the Board, each of whom shall: (a) meet the independence requirements per listing standards and any other applicable laws, rules and regulations governing independence, as determined by the Board; and (b) qualify as “nonemployee directors” as defined in Section 16 of the Securities Exchange Act of 1934.
The members of the Committee shall be appointed by the Board of Directors.
Meeting
The Chairperson of the Committee will preside at each meeting of the Committee and in consultation with the other members of the Committee shall set the frequency and length of each meeting and the agenda of items to be addressed at each meeting. The Committee may meet and conduct business via electronic means when circumstances prevent in-person discussions. The CEO may not be present during voting or deliberations on the CEO’s compensation.
Committee Responsibilities
The Committee shall have the duties, responsibilities, and authority to:
| 1. | Annually review and determine (i) the compensation, including salary, bonus, incentive, and other compensation of the Chief Executive Officer (ii) approve corporate goals and objectives relevant to compensation of the Chief Executive Officer, and (iii) evaluate performance in light of these goals and objectives, approve compensation in accordance therewith, and provide a report thereon to the Board. |
| 2. | Annually review the amounts and terms of base salary, incentive compensation and all other forms of compensation for the Company’s Executive Officers, and report the Committee’s findings to the Board. |
| 3. | Assess bank compensation programs including bonus and incentive plans as well as the Compensation Committee Charter for risk that may materially affect the long‐term viability of the Bank. Risk management practices should include an assessment of the internal control environment surrounding the compensation programs, ensure the review and approval process is evident, and the documentation is adequate to support the results and contains appropriate claw-back provisions. |
| i. | This annual risk assessment will be conducted by the Chief Risk Officer who will then provide documentation supporting his/her recommendations to the Committee. |
| 4. | Review Executive Officer compensation in reference to Section 162(m) of the Internal Revenue Code, as it may be amended from time to time, and any other applicable laws, rules and regulations. This review may be conducted by external compensation consultants as deemed appropriate by the committee. |
| 5. | Annually review and make recommendations to the Board with respect to incentive-based compensation plans and equity-based plans. Establish criteria for the terms of awards granted to participants under such plans. Grant awards in accordance with such criteria and exercise all authority granted to the Committee under such plans, or by the Board in connection with such plans. |
| 6. | Recommend to the Board the compensation for Directors (including retainer, committee and committee chair fees, stock options, and other similar items, as appropriate). |
| 7. | Evaluate the need for or any modifications to employment agreements, severance arrangements or change in control agreements and provisions, as well as any special supplemental benefits. |
| 8. | Conduct an annual review of the Compensation Committee’s performance, and periodically assess the adequacy of its Charter and recommend changes to the Board as needed. |
| 9. | Retain, at the expense of the Bank, compensation consultants, outside counsel and other advisors as the Committee may deem appropriate in its sole discretion. The Committee shall have authority to approve related fees and retention terms. |
| 10. | Perform any other activities consistent with this Charter, the Company’s By‐laws, and governing law as the Committee or the Board deem appropriate. Delegate responsibility to subcommittees of the Committee as necessary or appropriate. Regularly report to the Board on the Committee’s activities. |
Executive Compensation Philosophy
The policies and underlying philosophy governing the Bank’s executive compensation program, as endorsed by the Compensation Committee and the Board of Directors, are designed to accomplish the following:
APPENDIX BProvide opportunities that integrate pay with the Bank’s annual and long‐term performance.
COMMUNITY WEST BANCSHARES
2020 OMNIBUS EQUITY INCENTIVE PLAN
TABLE OF CONTENTSRecognize and reward individual initiative and achievements.
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Maintain an appropriate balance between base salary and incentive compensation.
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COMMUNITY WEST BANCSHARES
2020 OMNIBUS EQUITY INCENTIVE PLAN
As Adopted on February 27, 2020
1.PURPOSE. The purpose of this Plan is to provide incentivesAllow the Bank to attract, retain, and motivate eligible persons whose present and potential contributions are importanttalented executives.The Compensation Committee seeks to target executive compensation at levels that the Compensation Committee believes to be consistent with others in the banking industry. Bank Compensation Surveys, including but not limited to, the successCalifornia Bankers Association Compensation and Benefits Survey as well as independent Executive Compensation Consultants survey data will be utilized on an annual basis to determine current trends in the market. In general, the Bank will pay compensation to the executive officers that are on average at the 50th percentile of other comparable banks in the regional market. If an executive is experienced, high performing, or brings a specific knowledge base to the organization, the Bank may compensate the executive at the upper quartile (75th percentile) of market. In addition to base salary, the following will be considered in combination as part of the Company, its Parent and Subsidiaries, by offering them an opportunitycompensation package for the executive officers.
| • | Annual Incentives: Executive officers are eligible to participate in a cash‐based annual incentive plan as approved by the Board. The annual incentive plan will provide competitive cash incentives at the 50th percentile of market when target performance goals are achieved. When target performance goals are exceeded, the plan will provide additional payout levels that move total cash compensation to the 75th percentile of market. |
| • | Long‐Term Incentives: Executive officers are eligible to participate in long‐term incentive plans as approved by the Board. The long‐term incentive plans will utilize incentive stock options or restricted stock to reward executives for the long‐term performance of the Bank. The value of any long‐term incentive grants is designed to move total compensation for the Executive officers to the 50th percentile of market when performance expectations are met and to the 75th percentile of market when performance expectations are exceeded. |
Executive Benefits: Executive officers are eligible to participate in the Company’s future performance through awards of Optionsall welfare and Restricted Stock. Capitalized terms not defined in the textbenefit programs offered to employees. In addition, executives are defined in Section 21 hereof.
2. SHARES SUBJECT TO THE PLAN.2.1Number of Shares Available. Subject to Sections 2.2eligible for non‐qualified deferred compensation and 15 hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be Five Hundred Thousand (500,000) Shares or such lesser number of Shares as permitted by applicable law, each of which may be grantedeligible for a bank provided automobile or automobile reimbursement, club memberships and any other executive perquisite as ISOs. Furthermore, subject to adjustment in accordance with Sections 2.2 and 15 hereof, in any calendar year, no non-employee Director of the Company shall be granted Awards in respect of more than One Hundred Thousand (100,000) Shares of Common Stock (whether through grants of Options or Restricted Stock Award or rights with respect thereto) under the Plan.Subject to Sections 2.2, 5.10 and 15 hereof, Shares subject to Awards previously granted will again be available for grant and issuance in connection with future Awards under this Plan to the extent such Shares: (i) cease to be subject to issuance upon exercise of an Option, other than due to exercise of such Option; (ii) are subject to an Award granted hereunder but the Shares subject to such Award are forfeited or repurchasedapproved by the Company at the original issue price; or (iii) are subject to an Award that otherwise terminates without Shares being issued. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all Awards granted and outstanding under this Plan.Board.
2.2Adjustment of Shares. In the event that the number of outstanding shares of the Company’s Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (i) the number of Shares reserved for issuance under this Plan, (ii) the Exercise Prices of and number of Shares subject to outstanding Options and (iii) the Purchase Prices of and number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be paid in cash at the Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Committee; and provided, further, that the Exercise Price of any Option may not be decreased to below the par value of the Shares.3.1Eligibility for ISOs and NQSOs ISOs (as defined in Section 5 hereof) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in Section 5 hereof) and Restricted Stock Awards may be granted to employees, officers, directors and consultants of the Company or any Parent or Subsidiary of the Company; provided such consultants render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. A person may be granted more than one Award under this Plan.
3.2Code Section 409A. Notwithstanding anything in the Plan to the contrary, the Plan and Awards granted hereunder are intended to either be exempt from, or comply with, the requirements of Section 409A of the Code and shall be interpreted in a manner consistent with such intention. To the extent of any inconsistencies with the requirements of Section 409A or the applicable exemptions thereunder, the Plan shall be interpreted and amended in order to meet such applicable compliance or exemption requirements.4.1Committee Authority. This Plan will be administered by the Committee. The Committee shall have full discretionary authority to administer the Plan, which shall include the discretionary authority to construe and interpret the terms of the Plan and any Award Agreement, to determine all facts necessary to administer the Plan and any Award Agreement, and to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem necessary or advisable. All decisions or actions by the Committee shall be made in its sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any Award Agreement. Without limitation, the Committee will have the authority to:(a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to this Plan;
(c) approve persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to Awards;
(f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company;
(g) grant waivers of any conditions of this Plan or any Award;
(h) determine the terms of vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement;
(j) determine whether an Award has been earned;
(k) extend the vesting period beyond a Participant’s Termination Date; and
(l) make all other determinations necessary or advisable for the administration of this Plan.
4.2Committee Discretion. Unless in contravention of any express terms of this Plan or Award, any determination made by the Committee with respect to any Award will be made in its sole discretion either (i) at the time of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later time. Any such determination will be conclusive, final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan, provided such officer or officers are members of the Board.4.3Liabilityof Company Plan. The Company (or members of the Board or Committee) shall not be liable to a Participant or other persons as to: (i) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder; and (ii) any unexpected or adverse tax consequence realized by any Participant or other person due to the grant, receipt, exercise or settlement of any Award granted hereunder.5.OPTIONS. The Committee may grant Options to eligible persons described in Section 3 hereof and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NQSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following:5.1Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO (the “Stock Option Agreement”), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan. An ISO is an Award in the form of an Option that is intended to comply with the requirements of Code Section 422, or any successor section of the Code. A NQSO does not qualify for the special tax treatment accorded to ISOs under Code Section 422.5.2Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless a later date is otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.5.3Exercise Period. Options may be exercisable immediately or may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.5.4Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may not be less than the Fair Market Value of the Shares on the date of grant; provided that (i) the Exercise Price of an ISO will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (ii) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 7 hereof.5.5Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the “Exercise Agreement”) in a form approved by the Committee (which need not be the same for each Participant). The Exercise Agreement will state (i) the number of Shares being purchased, (ii) the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and (iii) such representations and agreements regarding Participant’s investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws. Participant shall execute and deliver to the Company the Exercise Agreement together with payment in full of the Exercise Price, and any applicable taxes, for the number of Shares being purchased. If any participant shall make any disposition of shares of Stock issued pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such participant shall notify the Company of such disposition within ten (10) days thereof.5.6Termination. Subject to earlier termination pursuant to Section 15 and 16 hereof and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following:(a) If the Participant is Terminated for any reason other than death, Disability or for Cause, then the Participant may exercise such Participant’s Options only to the extent that such Options are exercisable as to Vested Shares upon the Termination Date or as otherwise determined by the Committee. Such Options must be exercised by the Participant, if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within three (3) months after the Termination Date (or within such shorter time period, not less than thirty (30) days., and in any event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant’s death or Disability (or the Participant dies within three (3) months after a Termination other than for Cause), then Participant’s Options may be exercised only to the extent that such Options are exercisable as to Vested Shares by Participant on the Termination Date or as otherwise determined by the Committee. Such options must be exercised by Participant (or Participant’s legal representative or authorized assignee), if at all, as to all or some of the Vested Shares calculated as of the Termination Date or such other date determined by the Committee, within twelve (12) months after the Termination Date (or within such shorter time period, not less than six (6) months, , with any exercise beyond (i) three (3) months after the Termination Date when the Termination is for any reason other than the Participant’s death or disability, within the meaning of Section 22(e)(3) of the Code, or (ii) twelve (12) months after the Termination Date when the Termination is for Participant’s disability, within the meaning of Section 22(e)(3) of the Code, deemed to be an NQSO) but in any event no later than the expiration date of the Options.
(c) If the Participant is terminated for Cause, the Participant’ Options granted shall expire on the expiration dates specified for said Options at the time of their grant, or thirty (30) days after termination for cause, whichever is earlier.
5.7Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable.5.8Limitations on ISOs. Pursuant to Section 422(d)(1) of the Code, the aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of the Company) will not exceed One Hundred Thousand Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date (as defined in Section 16 hereof) to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.5.9Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may reduce the Exercise Price of outstanding Options without the consent of Participants by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 hereof for Options granted on the date the action is taken to reduce the Exercise Price; and provided, further, that the Exercise Price will not be reduced below the par value of the Shares.5.10No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant, to disqualify any Participant’s ISO under Section 422 of the Code. In no event shall the total number of Shares issued (counting each reissuance of a Share that was previously issued and then forfeited or repurchased by the Company as a separate issuance) under the Plan upon exercise of ISOs exceed Five Hundred Thousand (500,000) Shares (adjusted in proportion to any adjustments under Section 2.2 hereof) over the term of the Plan.6.RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to certain specified restrictions. The Committee will include such conditions and restrictions as the Committee may determine (such as a condition that participants pay a stipulated purchase price for each share of Stock, a condition that the participant’s right to the Restricted Stock shall not vest for a period of time during which service is to be provided, a condition that the Award be subject to forfeiture upon the occurrence of certain specified events, and/or restrictions on the transfer and/or other incidents of ownership), to whom an offer will be made, the number of Shares the person may purchase, the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following:6.1Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement (“Restricted Stock Purchase Agreement”) that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The Restricted Stock Award will be accepted by the Participant’s execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within such thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee.6.2Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee. Payment of the Purchase Price, if any, must be made in accordance with Section 7 hereof.6.3Restrictions. Restricted Stock Awards may be subject to such other restrictions not inconsistent with applicable law.7. PAYMENT FOR SHARE PURCHASES.7.1Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check or wire transfer) or, where expressly approved for the Participant by the Committee and where permitted by law:(a) by cancellation of indebtedness of the Company owed to the Participant;
(b) by surrender of Shares which, when added to the cash payment, if any, has an aggregate Fair Market Value equal to the full amount of the Exercise Price of the Option, or part thereof, then being exercised;
(c) by waiver of compensation due or accrued to the Participant from the Company for services rendered;
(d) delivery of Common Stock of the Company which, when added to the cash payment, if any, has an aggregate Fair Market Value equal to the full amount of the Exercise Price of the Option, or part thereof, then being exercised;
(e) a “net exercise” of the Option (as further described below);
(f) delivery to the Company of a cash payment made pursuant to a “cashless” exercise program (as further described below); or
(g) by any combination of the foregoing or any other form of legal consideration that may be acceptable to the Committee.
In the case of a “net exercise” of an Option, the Company will not require a payment of the Exercise Price of the Option from the Participant but will reduce the number of Shares issued upon the exercise by the largest number of whole shares that have a Fair Market Value that does not exceed the aggregate Exercise Price of the Option. With respect to any remaining balance of the aggregate Exercise Price, the Company will accept a cash payment from the Participant.
The number of Shares underlying an Option will decrease following the exercise of such Option to the extent of (i) Shares used to pay the Exercise Price of an Option under the “net exercise” feature, (ii) shares of Common Stock actually delivered to the Participant as a result of such exercise and (iii) shares of Common Stock withheld for purposes of tax withholding.
In the case of a cash payment made pursuant to a “cashless” exercise program with respect to the exercise of an Option, and provided that a public market for the Company’s stock exists, (i) through a “same day sale” commitment from the Participant and a broker-dealer that is a member of the Financial Industry Regulatory Authority (or any successor thereto) (a “FINRA Dealer”) whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased sufficient to pay the total Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company; or (ii) through a “margin” commitment from the Participant and an FINRA Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the FINRA Dealer in a margin account as security for a loan from the FINRA Dealer in the amount of the total Exercise Price, and whereby the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the total Exercise Price directly to the Company.
8.1Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash by the Company, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements.8.2Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that minimum number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined; but in no event will the Company withhold Shares if such withholding would result in adverse accounting consequences to the Company. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee for such elections and be in writing in a form acceptable to the Committee.9.PRIVILEGES OF STOCK OWNERSHIP. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a stockholder and have such rights of a stockholder with respect to such Shares as are provided in the Award Agreement.10.TRANSFERABILITY. Except as permitted by the Committee and as expressly set forth in the Award Agreement, Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, other than by will or by the laws of descent and distribution, and, with respect to NQSOs, by instrument to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon the death of the trustor (settlor), or by gift to “immediate family” as that term is defined in 17 C.F.R. 240.16a‑1(e), and may not be made subject to execution, attachment or similar process. During the lifetime of the Participant an Award will be exercisable only by the Participant or Participant’s legal representative and any elections with respect to an Award may be made only by the Participant or Participant’s legal representative.11.CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted.12.EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, shares of Common Stock of the Company (including Restricted Stock) or other consideration, based on such terms and conditions as the Committee and the Participant may agree.13.SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (ii) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.14.NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant’s employment or other relationship at any time, with or without Cause.15.CORPORATE TRANSACTIONS.15.1Acceleration, Vesting and Assumption or Replacement of Awards by Successor or Acquiring Company. Notwithstanding any other provision in this Plan to the contrary, the vesting of such Awards will accelerate and the Options will become exercisable in full immediately prior to the consummation of an event described below:(a) a dissolution or liquidation of the Company;
(b) any reorganization, consolidation, merger or similar transaction or series of related transactions (each, a “combination transaction”) in which the Company is a constituent corporation or is a party if, as a result of such combination transaction, the voting securities of the Company that are outstanding immediately prior to the consummation of such combination transaction (otherthan any such securities that are held by an “Acquiring Stockholder”, as defined below) do not represent, or are not converted into, securities of the surviving corporation of such combination transaction (or such surviving corporation’s parent corporation if the surviving corporation is owned by the parent corporation) that, immediately after the consummation of such combination transaction, together possess at least a majorityof the total voting power of all securities of such surviving corporation (or its parent corporation, if applicable) that are outstanding immediately after the consummation of such combination transaction, including securities of such surviving corporation (or its parent corporation, if applicable) that are held by the Acquiring Stockholder; or a sale of all or substantially all of the assets of the Company, that is followed by the distribution of the proceeds to the Company’s stockholders. If provision is made in connection the transaction described in Section 15.1 above, for assumption of Award granted under the Plan and the Company agrees, then the successor or acquiring corporation may assume the Awards and convert them into awards for a like number and kind for shares of the successor or acquiring corporation (if any), or substitute in place such Awards held by the Participant, equivalent new awards covering stock or other property of the successor or acquiring corporation or parent or subsidiary thereof which are no less favorable to the Participant than those of such outstanding Awards immediately prior to the transaction described in this Section 15.1, which assumption, conversion or replacement will be binding on all Participants.
For purposes of this Section 15.1, an “Acquiring Stockholder” means a stockholder or stockholders of the company that (i) merges or combines with the Company in such combination transaction or (ii) owns or controls a majority of another corporation that merges or combines with the Company in such combination transaction.
15.2Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 15, in the event of the occurrence of any transaction described in Section 15.1 hereof, any outstanding Awards will be treated as provided in the applicable agreement or plan of reorganization, merger, consolidation, dissolution, liquidation or sale of assets.15.3Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (i) granting an Award under this Plan in substitution of such other company’s award or (ii) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price.16.ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on the date that it is adopted by the Board (the “Effective Date”). This Plan will be approved by the stockholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to this Plan; provided, however, that: (i) no Option may be exercised prior to initial stockholder approval of this Plan; (ii) no Option granted pursuant to an increase in the number of Shares approved by the Board shall be exercised prior to the time such increase has been approved by the stockholders of the Company; (iii) in the event that initial stockholder approval is not obtained within the time period provided herein, all Awards granted hereunder shall be canceled, any Shares issued pursuant to any Award shall be canceled and any purchase of Shares issued hereunder shall be rescinded; and (iv) Awards granted pursuant to an increase in the number of Shares approved by the Board which increase is not timely approved by stockholders shall be canceled, any Shares issued pursuant to any such Awards shall be canceled, and any purchase of Shares subject to any such Award shall be rescinded.17.TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date or, if earlier, the date of stockholder approval. This Plan and all agreements hereunder shall be governed by and construed in accordance with the laws of the State of California (except its choice-of-law provisions).18.AMENDMENT OR TERMINATION OF PLAN.18.1 Subject to Section 5.9 hereof, the Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations of the Participant under any Award theretofore made under the Plan without the consent of the Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the Award). For purposes of the Plan, any action of the Board or the Committee that alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any Participant.
18.2 Shareholder approval of any amendment shall be obtained to the extent necessary to comply with Section 422 of the Code (relating to Incentive Stock Options) or any other applicable law, regulation or stock exchange listing requirements.
18.3 The Committee may amend any outstanding Award Agreement, including, without limitation, by amendment which would accelerate the time or times at which the Award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the Award Agreement. However, any such amendment (other than an amendment pursuant to Sections 18.1 and 18.4 that materially impairs the rights or materially increases the obligations of a Participant under an outstanding Award shall be made only with the consent of the Participant (or, upon the Participant’s death, the person having the right to exercise the Award).
18.4 Notwithstanding anything to the contrary in this Section 18, the Board or the Committee shall have full discretion to amend the Plan to the extent necessary to preserve fixed accounting treatment with respect to any Award and any outstanding Award Agreement shall be deemed to be so amended to the same extent, without obtaining the consent of any Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the affected Award), without regard to whether such amendment adversely affects a Participant’s rights under the Plan or such Award Agreement.
19.NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options and other equity awards otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.20. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. 20.1 An Option or Restricted Stock Award will not be effective unless such Option or Restricted Stock Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Option or Restricted Stock Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (ii) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.
21.DEFINITIONS. As used in this Plan, the following terms will have the following meanings:“Award” means any award under this Plan, including any Option or Restricted Stock Award.
“Award Agreement” means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award, including the Stock Option Agreement and Restricted Stock Agreement.
“Board” means the Board of Directors of the Company.
“Cause” means, as determined by the Committee and unless otherwise provided in an applicable agreement with the Company or an affiliate, (i) gross negligence or willful misconduct in connection with the performance of duties; (ii) conviction of, or plea of nolo contendre to, a criminal offense (other than minor traffic offenses); or (iii) material breach of any term of any employment, consulting, or other service, confidentiality, intellectual property, nonsolicitation or non- competition agreements, if any, between the participant and the Company or an affiliate. In each of the foregoing, the Committee shall determine, in its sole discretion, whether or not a “Cause” event has occurred, and the Committee’s determination shall be conclusive, final and binding.
“Code” means the Internal Revenue Code of 1986, as amended.
“Committee” means the Compensation Committee of the Board or the Management Committee of the Company, as appropriate. The Compensation Committee of the Board shall administer the Plan for those participants who are Senior Participants. All determinations with respect to the participation of such Senior Participants in the Plan, and the form, amount and timing of any Awards to be granted to any such participants under the Plan, and the payment of any such Awards shall be made solely by the Compensation Committee. The Company’s Management Committee shall administer the Plan for all other participants and shall have responsibility for all determinations with respect to the participation of any such participants in the Plan, and the form, amount and timing of any Awards to be granted to any such participants under the Plan, and the payment of any such Awards. All references to the “Committee” in the Plan shall include both the Compensation Committee and the Management Committee, as appropriate.
“Company” means Community West Bancshares, or any successor corporation.
“Disability” means a disability, whether temporary or permanent, partial or total, as determined by the Committee.
“Exercise Price” means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option.
“Fair Market Value” means, as of any date, the value of a share of the Company’s Common Stock determined as follows, unless determined otherwise by the Committee:
(a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported by The Wall Street Journal (or, if not so reported, as otherwise reported by any newspaper or other source as the Board may determine); or
(d) if none of the foregoing is applicable, by the Committee in good faith.
“Option” means an award of an option to purchase Shares pursuant to Section 5 hereof.
“Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock representing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
“Participant” means a person who receives an Award under this Plan.
“Plan” means this Community West Bancshares 2020 Omnibus Equity Incentive Plan, as amended from time to time.
“Purchase Price” means the price at which a Participant may purchase Restricted Stock.
“Restricted Stock” means Shares purchased pursuant to a Restricted Stock Award.
“Restricted Stock Award” means an award of Shares pursuant to Section 6 hereof.
“SEC” means the Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Senior Participants” are Participants who are members of the Company’s Board, “officers” of the Company as defined in Rule 16a – 1(f) under the Securities Exchange Act of 1934 (the “Exchange Act”), and such other key employees as may be designated by the Compensation Committee of the Board as Participants.
“Shares” means shares of the Company’s Common Stock, no par value, reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 15 hereof, and any successor security.
“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock representing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
“Termination” or “Terminated” means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company. A Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than ninety (90) days (a) unless reinstatement (or, in the case of an employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or statute, or (b) unless provided otherwise pursuant to formal policy adopted from time to time by the Company’s Board and issued and promulgated in writing. In the case of any Participant on (i) sick leave, (ii) military leave or (iii) an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the “Termination Date”).
“Unvested Shares” means “Unvested Shares” as defined in the Award Agreement.
“Vested Shares” means “Vested Shares” as defined in the Award Agreement.
COMMUNITY WEST BANCSHARES PROXY FOR ANNUAL MEETING OF SHAREHOLDERS ON MAY 28, 202027, 2021
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) of Community West Bancshares (Company) hereby appoints Robert H. Bartlein and William R. Peeples, or any of them, agents and proxy of the undersigned, each with full power of substitution, to attend and act as proxy or proxies of the undersigned at the Annual Meeting of Shareholders of Community West Bancshares to be held exclusively online by means of a live webcast over the Internet at: www.meetingcenter.io/255791609on Thursday, May 28, 2020,27, 2021, at 6:30 P.M. Pacific Daylight Time, and at any and all adjournments thereof, and to vote as specified herein the number of shares which the undersigned, if present, would be entitled to vote, as follows:
1. Election of Directors. To elect the following teneleven persons to the Board of Directors of the Company to serve until the 20202022 Annual Meeting of Shareholders and until their successors are elected and have qualified:
____ AUTHORITY GIVEN (except as noted below) ____☐ AUTHORITY GIVEN (except as noted below)
| ☐ WITHHOLD AUTHORITY |
Robert H. Bartlein - Jean W. Blois - Dana L. Boutain - Suzanne M. Chadwick - Tom L. Dobyns - John D. Illgen
James W. Lokey - Shereef Moharram - William R. Peeples - Martin E. Plourd - Christopher R. Raffo - Kirk B. Stovesand
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR SOME, BUT NOT ALL, OF THE NOMINEES NAMED ABOVE, YOU SHOULD CHECK THE BOX "AUTHORITY GIVEN"“AUTHORITY GIVEN” AND YOU SHOULD ENTER THE NAME(S) OF THE NOMINEE(S) WITH RESPECT TO WHOM YOU WISH TO WITHHOLD AUTHORITY TO VOTE IN THE SPACE PROVIDED BELOW
2. Approval of the 2020 Omnibus Equity Incentive Plan.Amendment to the Bylaws. To approve an amendment to the Community West Bancshares 2020 Omnibus Equity Incentive Plan covering 500,000 sharesBylaws to increase the
range of authorzed number of directors of the Company's Common Stock, asCompany to the range of not less than eight(8) nor more fully described in the Company's 2020 Proxy Statement.than fifteen (15).
___ FOR ____ AGAINST ____ ABSTAIN
3. Ratification of the Selection of RSM as the Company'sCompany’s Independent Auditors. To ratify the selection of RSM as the Company'sCompany’s independent auditors for the fiscal year ending December 31, 2020.2021.
___ FOR ____ AGAINST ____ ABSTAIN
4. Other business. To transact such other business as may properly come before the Meeting and any adjournment thereof.
___ FOR ____ AGAINST ____ ABSTAIN
IMPORTANT NOTICE REGARDING THE VIRTUAL VENUE WEBSITE FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 28, 2020.27, 2021.
The Company has made the decision to hold a virtual Annual Meeting over the Internet butvia Zoom. You must register to attend by visiting www.communitywestbank.com/2021Shareholders. Upon registration, you will receive a confirmation email wth the virtual venue web address informationmeeting link and passcode. The passcode to attend the meeting is not available at the time of preparing this proxy card. The Company will announce the virtual venue address by press release as soon as it becomes available to the CompanyCWBC2021.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 28, 202027, 2021
The proxy statement, the proxy card, the Company’s Annual Report to Shareholders and the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020, and instructions as to how to attend the virtual Annual Meeting are available to you online at www.edocumentview.com/CWBC and the Company'sCompany’s website at www.communitywest.com.
PLEASE SIGN AND DATE THE OTHER SIDE
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, DULY EXECUTED PROXY BEARING A LATER DATE, BY VOTING BY INTERNET OR BY TELEPHONE AFTER THE DATE OF THE PROXY SUBMITTED OR BY PARTICIPATING AND VOTING ONLINE AT THE VIRTUAL MEETING OVER THE INTERNET.
THIS PROXY WILL BE VOTED AS SPECIFIED OR IF NO CHOICE IS SPECIFIED, WILL BE VOTED AUTHORITY GIVEN TO ELECT THE TENELEVEN NOMINEES AND FOR PROPOSALSPROPOSAL 2, FOR PROPOSAL 3, AND IN THE DISCRETION OF THE PROXIES ON ALL OTHER MATTERS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING INCLUDING ADJOURNMENT THEREOF. THIS PROXY ALSO CONFERS AUTHORITY TO THE PROXIES TO CAST VOTES IN SUCH A MANNER AS TO EFFECT THE ELECTION OF ALL TENELEVEN NOMINEES FOR DIRECTOR OR AS MANY THEREOF AS POSSIBLE UNDER THE RULES OF CUMULATIVE VOTING AS DETERMINED BY THE PROXIES IN THEIRTHE PROXY’S DISCRETION.
THE UNDERSIGNED HEREBY CONSENTS TO AND ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING, AND THE PROXY STATEMENT, THE ANNUAL REPORT TO SHAREHOLDERS FOR 2020, AND THE ANNUAL REPORT ON FORM 10-K, BY ACCESSING THEM ONLINE AT www.edocumentview.com/CWBC. THIS CONSENT APPLIES ONLY TO THESE PROXY MATERIALS, AND MAY BE WITHDRAWN BY NOTIFYING THE COMPANY BY EMAIL TO: sthompson@communitywestbank.com. Please sign exactly as name appears. When shares are held by joint tenants both should sign. When signing as attorney, as executor, administer, trustee, or guardian, please give title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership please sign in partnership name by authorized person.
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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, A DULY EXECUTED PROXY BEARING A LATER DATE, BY VOTING BY INTERNET OR BY TELEPHONE AFTER THE DATE OF THE PROXY SUBMITTED OR BY PARTICIPATING AND VOTING ONLINE AT THE VIRTUAL MEETING VIA THE LIVE WEBCAST.