COMMUNITY WEST BANCSHARES
445 Pine Avenue
Goleta, California 93117-3474
Telephone: (805) 692-1862
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 2001
TO THE SHAREHOLDERS OF COMMUNITY WEST BANCSHARES:
NOTICE IS HEREBY GIVEN that, pursuant to the Bylaws of Community West
Bancshares and the call of its Board of Directors, the 2001 Annual Meeting of
Shareholders of Community West Bancshares (the "Company") will be held at the
Holiday Inn, 5650 Calle Real, Goleta, California 93117, on Thursday, May 24,
2001, at 6:00 p.m. Pacific Daylight Time (the "Meeting"), for the purpose of
considering and voting on the following matters:
1. ELECTION OF DIRECTORS. Electing the following eleven (11)
----------------------
persons to the Board of Directors to serve until the 2002 Annual Meeting of
Shareholders and until their successors are elected and have qualified:
Michael A. Alexander Michel Nellis
Mounir R. Ashamalla William R. Peeples
Robert H. Bartlein Richard M. Sanborn
Jean W. Blois James R. Sims, Jr.
John D. Illgen Llewellyn W. Stone
Lynda Nahra
2. INDEPENDENT PUBLIC ACCOUNTANTS. Ratification of Arthur
---------------------------------
Andersen, LLP to continue to serve as the Company's independent public
accountants for the current fiscal year, ending December 31, 2001.
3. OTHER BUSINESS. Transacting such other business as may
---------------
properly come before the Meeting and any adjournment or adjournments
thereof.
The Board of Directors has fixed the close of business on April 2, 2001, as
the record date for determination of shareholders entitled to notice of, and the
right to vote at, the Meeting.
The Bylaws of the Company provide for the nomination of directors in the
following manner:
"Nominations for election of members of the board of directors may be made
by the board of directors or by any shareholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Notice of intention to make any nominations (other than for persons named in the
notice of the meeting at which such nomination is to be made) shall be made in
writing and shall be delivered or mailed to the president of the corporation no
more than sixty (60) days prior to any meeting of shareholders called for the
election of directors and no more than ten (10) days after the date the notice
of such meeting is sent to shareholders pursuant to Section 2.4 of these Bylaws;
provided, however, that if ten (10) days notice of such meeting is sent to
shareholders, such notice of intention to nominate must be received by the
president of the corporation not later than the time fixed in the notice of the
meeting for the opening of the meeting. Such notification shall contain the
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of capital stock of the corporation
owned by each proposed nominee; (d) the name and residence address of the
notifying shareholder; (e) the number of shares of capital stock of the
corporation owned by the notifying shareholder; (f) with the written consent of
the proposed nominee, a copy of which shall be furnished with the notification,
whether the proposed nominee has ever been convicted of or pleaded nolo
contendere to any criminal offense involving dishonesty or breach of trust,
filed a petition in bankruptcy, or been adjudged a bankrupt. The notice shall
be signed by the nominating shareholder and by the nominee. Nominations not
made in accordance herewith shall be disregarded by the chairman of the meeting
and, upon his instructions, the inspectors of election shall disregard all votes
cast for each such nominee. The restrictions set forth in this paragraph shall
not apply to nomination of a person to replace a proposed nominee who has died
or otherwise become incapacitated to serve as a director between the last day
for giving notice hereunder and the date of election of directors if the
procedure called for in this paragraph was followed with respect to the
nomination of the proposed nominee. A copy of the preceding paragraph shall be
set forth in the notice to shareholders of any meeting at which directors are to
be elected."
SINCE IMPORTANT MATTERS ARE TO BE CONSIDERED AT THE MEETING, IT IS VERY
IMPORTANT THAT EACH SHAREHOLDER VOTE.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. THE ENCLOSED PROXY IS
SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS. ANY SHAREHOLDER WHO EXECUTES AND
DELIVERS SUCH A PROXY HAS THE RIGHT TO REVOKE IT AT ANY TIME BEFORE IT IS
EXERCISED BY GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE
COMPANY, BY SUBMITTING PRIOR TO THE MEETING A PROPERLY EXECUTED PROXY BEARING A
LATER DATE, OR BY BEING PRESENT AT THE MEETING AND ELECTING TO VOTE IN PERSON BY
ADVISING THE CHAIRMAN OF THE MEETING OF SUCH ELECTION.
PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING SO THAT THE COMPANY CAN ARRANGE FOR ADEQUATE ACCOMMODATIONS.
By Order of the Board of Directors
April 27, 2001 Michel Nellis, Secretary
2
ANNUAL REPORT ON FORM 10-K
--------------------------
COPIES OF THE COMPANY'S 2000 ANNUAL REPORT ON FORM 10-K, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, ARE AVAILABLE UPON REQUEST TO: MS. LYNDA
PULLON RADKE, SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, COMMUNITY WEST
BANCSHARES, 445 PINE AVENUE, GOLETA, CALIFORNIA 93117-3474, TELEPHONE (805)
692-1862.
3
COMMUNITY WEST BANCSHARES
445 PINE AVENUE
GOLETA, CALIFORNIA 93117-3474
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 2001
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to shareholders of Community West
Bancshares (the "Company") in connection with the solicitation by the Board of
Directors ("Board of Directors") of proxies to be used at the Annual Meeting of
Shareholders, to be held on Thursday, May 24, 2001 at 6:00 p.m. Pacific time at
the Holiday Inn, 5650 Calle Real, Goleta, California 93117 (the "Meeting"), and
at any and all adjournments thereof. The Company's 2000 Annual Report to
Shareholders, including consolidated financial statements for the year ended
December 31, 2000 accompanies this Proxy Statement, which is first being mailed
to recordholders on or about April 27, 2001.
Regardless of the number of shares of Common Stock owned, it is important
that the shareholders of a majority of shares be represented by proxy or present
in person at the Meeting. Shareholders are requested to vote by completing the
enclosed proxy card and returning it signed and dated in the enclosed postage
paid envelope. Shareholders are to indicate their vote in the spaces provided
on the proxy card. Proxies solicited by the Board of Directors of the Company
will be voted in accordance with the directions given therein. Where no
instructions are indicated, signed proxy cards will be voted "AUTHORITY GIVEN"
for the election of the nominees for directors named in this Proxy Statement,
"FOR" ratification of Arthur Andersen, LLP ("Andersen") as independent public
accountants of the Company for year ending 2001. If any other business is
properly presented at the Meeting, the proxy will be voted in accordance with
the recommendations of the Company's Board of Directors.
Other than the matters set forth on the attached Notice of the Meeting, the
Board of Directors knows of no additional matters that will be presented for
consideration at the Meeting. Execution of a proxy, however, confers the
designated proxy holder's discretionary authority to vote the shares in
accordance with the recommendations of the Company's Board of Directors on such
other business, if any, that may properly come before the Meeting and at any
adjournments thereof, including whether or not to adjourn the Meeting.
You may revoke your proxy at any time prior to its exercise by filing a written
notice of revocation with the Secretary of the Company, by delivering to the
Company a duly executed proxy bearing a later date, or by attending the Meeting
and voting in person. However, if you are a shareholder whose shares are not
registered in your own name, you will need to provide appropriate documentation
from the recordholder to vote personally at the Meeting.
The matters to be considered and voted upon at the Meeting will be:
4
1. ELECTION OF DIRECTORS. Electing the following eleven persons to the
-----------------------
Board of Directors to serve until the 2002 Annual Meeting and until their
successors are elected and have qualified:
Michael A. Alexander Michel Nellis
Mounir R. Ashamalla William R. Peeples
Robert H. Bartlein Richard M. Sanborn
Jean W. Blois James R. Sims, Jr.
John D. Illgen Llewellyn W. Stone
Lynda Nahra
2. INDEPENDENT PUBLIC ACCOUNTANTS. Ratification of Arthur Andersen, LLP
--------------------------------
to continue to serve as the Company's independent public accountants
for the current fiscal year, ending December 31, 2001. Such services
will include the examination of the financial statements of the
Company for the fiscal year ending on such date and other appropriate
accounting services.
3. OTHER BUSINESS. Transacting such other business as may properly come
---------------
before the Meeting and any adjournment or adjournments thereof.
This solicitation of proxies is being made by the Board of Directors of the
Company. The expense of solicitation of proxies for the Meeting will be borne by
the Company. It is anticipated that proxies will be solicited primarily through
the use of the mail. Proxies may also be solicited personally or by telephone by
directors, officers and employees of the Company, and its wholly owned
subsidiaries, Goleta National Bank ("Goleta") and Palomar Community Bank
("Palomar"), without additional compensation therefor. The Company will also
request persons, firms and corporations holding shares in their names, or in the
name of their nominees, which are beneficially owned by others, to send proxy
materials to and obtain proxies from such beneficial owners, and will reimburse
such holders for their reasonable expenses in doing so.
VOTING SECURITIES
The securities which may be voted at the Meeting consist of shares of
common stock of the Company (the "Common Stock"), with each share entitling its
owner to one vote on all matters to be voted on at the Meeting. The close of
business on April 2, 2001 has been fixed by the Board of Directors as the record
date (the "Record Date") for the determination of shareholders of record
entitled to notice of and to vote at the Meeting and at any adjournment or
adjournments thereof. The total number of shares of Common Stock outstanding on
the Record Date was 6,107,216 shares. In connection with the election of
directors, shares shall be voted cumulatively if a candidate's or candidates'
name(s) have been properly placed in nomination prior to voting and the
shareholder has properly given notice of the intention to vote cumulatively.
Cumulative voting allows a shareholder to cast a number of votes equal to the
number of shares held in his or her name as of the Record Date, multiplied by
the number of directors to be elected. The total number of votes may be cast for
one nominee or may be distributed amongst as many nominees, or in such
proportions, as the shareholder so directs.
5
Directors are elected by plurality vote. Abstentions and broker non-votes do
not have the effect of votes in opposition to a director. Abstentions are,
however, counted towards a quorum.
6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, AND MANAGEMENT
Except as set forth below, Management of the Company does not know of any
person who owns beneficially or of record, more than 5% of the Company's
outstanding Common Stock. The following table sets forth certain information as
of the Record Date, concerning the beneficial ownership of the Company's
outstanding Common Stock by the Company's directors, and executive officers(1),
and by all directors and executive officers of the Company as a group.
Management is not aware of any change in control of the Company, which has
occurred since January 1, 2000, nor of any arrangement, which may, at a
subsequent date, result in a change in control of the Company.
NUMBER OF SHARES NUMBER OF SHARES PERCENT OF CLASS
OF COMMON STOCK SUBJECT TO VESTED BENEFICIALLY
NAME AND TITLE BENEFICIALLY OWNED(2) STOCK OPTIONS(3) OWNED(3)
------------------------------------- --------------------- ------------------ -----------------
MICHAEL A. ALEXANDER, 121, 039 - 1.98%
Chairman of the Board
MOUNIR R. ASHAMALLA, 97,391 - 1.59%
Director
ROBERT H. BARTLEIN, 125,762 - 2.06%
Director
JEAN W. BLOIS, 50,824 11,554 1.02%
Director
JOHN D. ILLGEN, 46,956 14,414 1.00%
Director
LYNDA NAHRA 1,350 15,500 0.28%
Director, President of Goleta
National Bank
MICHEL NELLIS, 41,644 14,414 0.92%
Secretary and Director
WILLIAM R. PEEPLES,(4) 605,728 - 9.92%
Vice Chairman of the Board
LYNDA PULLON RADKE, 2,100 38,000 0.65%
Senior Vice President and
Chief Financial Officer
RICHARD M. SANBORN, 995 11,500 .20%
Director and President
of Palomar
JAMES R. SIMS, JR., 29,141 14,414 0.71%
Director
LLEWELLYN STONE 79,084 20,000 1.62%
Director, President and Chief
Executive Officer
ALL DIRECTORS AND EXECUTIVE 1,202,014 139,796 21.48%
OFFICERS AS A GROUP (12 in number)
PRINCIPAL SHAREHOLDER
---------------------
JOHN D. MARKEL,(5) 585,366 - 9.58%
Principal Shareholder
===================================================================================================
(1) As used throughout this Proxy Statement, the term "executive officer" means
the President and Chief Executive Officer and the Senior Vice President and
Chief Financial Officer of the Company. The term "executive officer" also
includes the President and Chief Executive Officer of Palomar and the
President of Goleta National Bank. The Company's Chairman of the Board,
Vice Chairmen of the Board, and Secretary are not deemed to be executive
officers of the Company.
(2) Includes shares beneficially owned, directly and indirectly, together with
associates, except for shares subject to vested stock options and
outstanding warrants. Also includes shares held as trustee and held by or
as custodian
(Footnotes continued on the next page)
(Footnotes continued)
7
for minor children. Unless otherwise noted, all shares are held as
community property under California law or with sole investment and voting
power.
(3) Shares subject to options held by directors or executive officers that were
exercisable within 60 days after the Record Date ("vested") are treated as
issued and outstanding for the purpose of computing the percent of the
class owned by such person, but not for the purpose of computing the
percent of class owned by any other person.
(4) Mr. Peeples' business address is c/o Community West Bancshares 445 Pine
Avenue Goleta, CA 93117.
(5) Mr. Markel's business address is c/o Community West Bancshares 445 Pine
Avenue Goleta, CA 93117.
PROPOSALS TO BE VOTED ON AT THE ANNUAL MEETING
PROPOSAL 1.
ELECTION OF DIRECTORS
Article 3.2 of the Company's Bylaws provides that the authorized number of
directors shall not be less than six (6) nor more than eleven (11), with the
exact number of directors fixed from time to time by resolution of a majority of
the full Board of Directors or by resolution of the shareholders. The number of
directors has been fixed at eleven (11) by action of the Board of Directors.
The eleven nominees named below, all of whom are currently members of the
Company's Board of Directors, will be nominated for re-election as directors to
serve until the 2002 Annual Meeting of Shareholders and until their successors
are elected and have qualified. Votes will be cast in such a way as to effect
the election of all eleven (11) nominees, or as many thereof as possible. In the
event that any of the nominees should be unable to serve as a director, it is
intended that the Proxy will be voted for the election of such substitute
nominees, if any, as shall be designated by the Board of Directors. The Board
of Directors has no reason to believe that any of the nominees will be unable or
unwilling to serve. Additional nominations can only be made by complying with
the notice provision set forth in the Bylaws of the Company, an extract of which
is included in the Notice of Annual Meeting of Shareholders accompanying this
Proxy Statement. This Bylaw provision is designed to give the Board of
Directors advance notice of competing nominations, if any, and the
qualifications of nominees, and may have the effect of precluding third-party
nominations if the notice provisions are not followed.
None of the directors or executive officers of the Company were selected
pursuant to any arrangement or understanding, other than with the directors and
executive officers of the Company, acting within their capacities as such. The
Company knows of no family relationships between the directors and executive
officers of the Company, nor do any of the directors or executive officers of
the Company serve as directors of any other company which has a class of
securities registered under, or which is subject to the periodic reporting
requirements of, the Securities Exchange Act of 1934 or any investment company
registered under the Investment Company Act of 1940.
8
The following table sets forth, as of the Record Date, the names of the nominees
and certain information concerning the persons to be nominated by the Board of
Directors for re-election as directors of the Company:
YEAR FIRST
ELECTED OR
BUSINESS EXPERIENCE APPOINTED YEAR FIRST ELECTED
DURING THE PAST DIRECTOR OF OR APPOINTED DIRECTOR OF
NAME AND TITLE AGE FIVE YEARS THE COMPANY GOLETA OR PALOMAR
------------------------------ --- ----------------------------------- ----------- ------------------------
MICHAEL A. ALEXANDER, 70 Chairman of Utilicom Corp. since 1997 1989
Chairman of the Board 1994. (Electronics)
MOUNIR R. ASHAMALLA, 63 Oral-Maxillo-Facial Surgeon 1997 1989
Director
ROBERT H. BARTLEIN, 53 President of Bartlein Group, Inc. 1997 1989
Director and Bartlein & Company, Inc.
(Real estate management)
JEAN W. BLOIS, 73 Independent consultant 1997 1989
Director
JOHN D. ILLGEN, 56 President and Chairman of Illgen 1997 1989
Director Simulation Technologies, Inc.
(Computer software simulations)
LYNDA NAHRA, 50 President of Goleta National Bank, 2001 2000
Director(1) Regional President Goleta National
Bank, COO Goleta National Bank
(1997-Present), Vice President
Business Sales Manager,
WestAmerica Bank (1996-1997),
Vice President, Team Leader, First
Interstate Bank, Private Banking
Services (1995-1996)
MICHEL NELLIS, 54 Partner, Nellis Associates. 1997 1989
Secretary and Director (Financial Services)
WILLIAM R. PEEPLES, 58 Private investor 1997 1989
Vice Chairman of the
Board
RICHARD M. SANBORN, 38 President and Chief Executive 2000 2000
Director(1) Officer, Palomar Community Bank
(1999-Present),Vice President,
Regional Director, Home Savings
(1999 - 1997), Senior Vice
President Domestic Lending, Bank
of Southern California (1995 -
1997)
JAMES R. SIMS, JR., 65 Realtor 1997 1989
Director
LLEWELLYN W. STONE, 58 President and Chief Executive 1997 1989
Director, President and Officer
Chief Executive Officer (1)
_____________________________
(1) This person is an executive officer of the Company.
9
EXECUTIVE OFFICER AND SIGNIFICANT EMPLOYEE
----------------------------------------------
The following table sets forth the names and certain information as of the
Record Date, concerning the other executive officer of the Company and a
significant employee of Goleta except Ms. Nahra, Mr. Sanborn, and Mr. Stone, who
are directors of the Company and included in the table set forth above:
TITLE WITH BUSINESS EXPERIENCE TERM OF
TITLE WITH GOLETA OR DURING THE PAST FIVE OFFICE WITH
NAME THE COMPANY PALOMAR AGE YEARS THE COMPANY
------------------- --------------- ----------------- --- ----------------------------- -----------
LYNDA PULLON RADKE Senior Vice Senior Vice 31 Senior Vice President and Since 1999
President and President and Chief Financial Officer, the
Chief Financial Chief Financial Company (1999 - Present);
Officer Officer, Goleta Senior Vice President and
Chief Financial Officer,
Goleta (1997 - Present);
Vice President and
Controller, Goleta (1996 -
1997)
MICHEAL S. RICE N/A Senior Vice 39 Senior Vice President/SBA Since 1998
President and Regional Manager, Goleta
SBA Regional (1998-Present); Vice
Manager for the President, Sales and
Western Region Marketing, The Associates
of SBA, Goleta (1996-1998)
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS
MEETINGS AND COMMITTEES
-------------------------
The Board of Directors of the Company met 13 times (12 regular meetings and
one special meeting) during the year ended December 31, 2000, and had the
following standing committees which met during the year: the Audit Committee and
the Compensation Committee. The Company does not have a nominating committee.
In addition, the Company's directors served on the Boards of Directors of Goleta
and/or Palomar, including the various committees established by those
subsidiaries. During 2000, none of the Company's directors attended less than
75% of the Company's board meetings and meetings of committees on which they
served.
The Audit Committee, which is currently composed of four members of the
Board of Directors; Messrs. Alexander, Peeples, and Sims and Ms. Nellis. This
Committee is responsible for review of all internal and external examination
reports and selection of the Company's independent accountants. The Audit
Committee met four times during 2000.
The Compensation Committee, which is currently composed of four members of
the Board of Directors; Messrs. Alexander, Illgen, and Peeples and Ms. Blois.
The Committee is responsible for deciding executive compensation. The
Compensation Committee met once in 2000.
10
DIRECTORS' COMPENSATION
------------------------
In 2000, the Company's directors except for Messrs. Sanborn and Stone and Ms.
Nahra, were paid for attendance at Company Board meetings at the rate of $500
for each regular Board meeting (with the Chairmen receiving $750); and, for all
directors except Messrs. Sanborn and Stone and Ms. Nahra, $150 for each
committee meeting.
AUDIT COMMITTEE REPORT
------------------------
The role of the Audit Committee is to assist the Board of Directors in its
oversight of the Company's financial reporting process. The Board of Directors,
in its business judgement, has determined that all members of the Audit
Committee are "independent" as required by applicable listing standards of the
National Association of Securities Dealers. The Audit Committee operates
pursuant to a Charter that was last amended and restated by the Board on April
5, 2000, a copy of which is attached to this Proxy Statement as Exhibit A.
As set forth in the Charter, management of the Company is responsible for
the preparation, presentation and integrity of the Company's financial
statements, the Company's accounting and financial reporting principles and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. The independent auditors are
responsible for auditing the Company's financial statements and expressing an
opinion as to their conformity with generally accepted accounting principles.
It is the Audit Committee's responsibility to monitor and oversee these
processes on behalf of the Board of Directors.
In the performance of its oversight function, the Audit Committee has
considered and discussed the audited financial statements with management and
the independent auditors. The Audit Committee also has discussed with the
independent public accountants the matters required to be discussed by Statement
on Auditing Standards No. 61, Communication with Audit Committees, as currently
in effect. Finally, the Audit Committee has received the written disclosures
and the letter from the independent public accountants required by Independence
Standards Board No. 1, Independence Discussions with Audit Committees, as
currently in effect, and written confirmations from management with respect to
internal audit services provided by the auditors. The Audit Committee has
considered whether other non-audit services provided by the independent public
accountants to the Company is compatible with maintaining the auditor's
independence and has discussed with the auditors the auditors' independence.
The members of the Audit Committee are not professionally engaged in the
practice of auditing or accounting and some of the members are not financial
experts in the fields of accounting or auditing, including in respect to auditor
independence. Members of the Audit Committee rely on the information provided to
them without independent verification and on the representations made by
management and the independent public accountants. Accordingly, the Audit
Committee's oversight does not provide an independent basis to determine that
management has maintained appropriate accounting and financial reporting
principles or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committee's considerations and discussions referred to
above do not assure that the audit of the Company's financial statements have
been carried out in accordance with generally accepted auditing standards, that
the financial statements are presented in accordance with generally accepted
accounting principles, or that the Company's auditors are in fact "independent".
11
Based on the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Audit Committee
referred to above and in the Charter, the Audit Committee recommended to the
Board that the audited financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000, filed with the
Securities and Exchange Commission. By recommending to the Board of Directors
that the audited financial statements be so included, the Audit Committee is not
opining on the accuracy, completeness or presentation of the information
contained in the Company's audited financial statements.
SUBMITTED BY THE AUDIT COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Dated: February 22, 2001
Michael A. Alexander Michel Nellis William R. Peeples James R. Sims, Jr.
PROPOSAL 2.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The accounting firm of Arthur Andersen, LLP was engaged as the Company's
independent public accountants on May 15, 2000 and served as the Company's
independent public accountants for the year ended December 31, 2000. In
addition to independent auditing services Andersen has rendered certain
non-audit services at the Company's request. All services rendered by Andersen
were approved by the Audit Committee of the Company who considered the possible
effect of each such service on Andersen's independence.
The Board of Directors, upon recommendation of its Audit Committee, has
recommended to continue the services of this firm for the current fiscal year,
ending December 31, 2001, subject to ratification of such appointment by the
shareholders. Such services will include the examination of the financial
statements of the Company for the fiscal year ending on such date and other
appropriate accounting services. A member of Andersen will attend the Meeting
and will have the opportunity to make a statement if desired. Such member will
also be available to respond to questions of the shareholders.
AUDIT FEES
-----------
The aggregate fees billed by Andersen for professional services rendered
for the audit of the Company's annual financial statements for the fiscal year
ended December 31, 2000 and for the review of the financial statements included
in the Company's Quarterly Reports on Form 10-Q for that fiscal year were
$241,616, inclusive of costs associated with auditing the Company's financial
statements for the years ended December 31, 1999 and 1998.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
------------------------------------------------------------------
There were no fees paid to Andersen for financial information systems
designs and implementation.
12
ALL OTHER FEES
----------------
The aggregate fees billed for all other services rendered by Andersen
amounted to $86,635.
DISMISSAL OF INDEPENDENT ACCOUNTANTS
---------------------------------------
Effective May 12, 2000, the Company's Audit Committee of the Board of
Directors did not reappoint the Company's former independent accountants,
Deloitte and Touche, LLP ("Deloitte").
Reports issued by Deloitte during the last two years did not contain any
adverse opinion or a disclaimer of opinion, and were not qualified or modified
as to uncertainty, audit scope or accounting principles, except that Deloitte's
report on its audit of the Company's financial statements for the year ended
December 31, 1999, included an emphasis of matter paragraph relating to an
agreement with the regulators.
During the fiscal years ended December 31, 1999 and 1998, there were no
disagreements with Deloitte on any matter of accounting principles or practices,
financial statement disclosures, or auditing scope or procedures which
disagreements if not resolved to the satisfaction of Deloitte, would have caused
them to make reference to the subject matter of the disagreements in connection
with its reports, except that, subsequent to the issuance of the Company's
fiscal year 1998 financial statements, which had been audited by Deloitte,
information came to the attention of the Company's management that caused it to
conclude that those financial statements were (as was subsequently reported in
the Company's form 10-K), materially erroneous. The information caused the
Company to disagree with the audited accounting treatment of certain matters in
its previously issued fiscal year 1998 financial statements. The Company's Audit
Committee discussed the subject matter of these disagreements before authorizing
the restated fiscal year 1998 financial statements. Accordingly, the Company
restated its 1998 financial statements.
In the subsequent interim period through the date of their dismissal, there
were no disagreements with Deloitte on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures which
disagreements, if not resolved to the satisfaction of Deloitte, would have
caused it to make reference to the subject matter in connection with its report.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
----------------------------------------------------------------
The Compensation Committee (the "Committee") is made up of four directors,
Messrs. Alexander, Illgen, and Peeples, and Ms. Blois, none of whom serve as an
officer of the Company or of its subsidiaries. None of the Company's executive
officers served on the board of directors compensation committee, or equivalent,
of another entity.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
------------------------------------------------------------
The Committee was responsible for reviewing and approving the Company's
overall compensation and benefit programs, and for administering the
compensation of the Company's executive and senior officers.
The Committee's functions and objectives are: (i) to determine the
competitiveness of current base salary, annual incentives and long-term
incentive relative to specific competitive markets for the President; (ii) to
develop a performance review mechanism that has written objectives and goals
which are used to make salary increase determinations; (iii) to develop an
annual incentive plan for senior management; and (iv) to provide guidance to the
Board of Directors in their role in establishing objectives regarding executive
compensation. The Committee's overall compensation philosophy is as follows: (i)
13
to attract and retain quality talent which is critical to both short-term and
long-term success; (ii) to reinforce strategic performance objectives through
the use of incentive compensation programs; (iii) to create a mutuality of
interest between executive and senior officers and shareholders through
compensation structures that share the rewards and risks of strategic
decision-making; and (iv) to encourage executives to achieve substantial levels
of ownership of stock in the Company.
The compensation package offered to executive officers consists of a mix of
salary, incentive bonus awards, and stock option awards as well as benefits
under employee benefit plans. Salary levels recommended by the Committee are
intended to be consistent and competitive with the practices of comparable
financial institutions and each executive's level of responsibility. The
Committee generally utilizes internal and/or external surveys of compensation
paid to executive officers performing similar duties for depository institutions
and their holding companies.
In establishing executive compensation for the President, the Committee
considered the overall financial condition of the Company, profitability, asset
quality and compliance with rules and regulations. Excluded from the
Committee's consideration of incentive bonuses would be income or expenses
resulting from extraordinary or non-recurring events, regulatory changes, merger
or acquisition activity, or the imposition of changes in generally accepted
accounting principles.
When determining Mr. Stone's bonus compensation for 2000, the Committee
noted the overall financial condition of the Company at December 31, 2000.
Finally, the Committee reviewed Mr. Stone's total compensation in light of the
above-referenced peer surveys.
The Committee believes that the Company's compensation program and
compensation levels are effective in attracting, motivating and retaining
outstanding executive and senior officers and that they are consistent with the
Company's immediate and long-term goals.
COMPENSATION COMMITTEE
Dated: November 6, 2000
Michael A. Alexander Jean W. Blois John D. Illgen William R. Peeples
14
EXECUTIVE COMPENSATION
-----------------------
The following table sets forth, for years ended December 31, 2000, 1999 and
1998, the cash compensation paid by the Company and Subsidiaries as well as
certain other compensation paid for those years, to the Chief Executive Officer
and the other three most highly compensated executive officers at the Company
(the "Named Executive Officers").
LONG-TERM COMPENSATION
AWARDS
------
ANNUAL COMPENSATION
--------------------
NAME AND POSITION SECURITIES UNDERLYING
IN GOLETA OR PALOMAR YEAR SALARY BONUS OPTIONS(1)
----------------------- ---- -------- ------- ----------
LYNDA NAHRA, 2000 $101,458 $23,577 7,500
President/Chief 1999 $103,227 $ - -
Executive Officer 1998 $ 91,260 $ 5,000 -
Goleta National
Bank
LYNDA PULLON RADKE, 2000 $110,000 $25,000 19,000
Senior Vice 1999 $ 86,408 $ - -
President 1998 $ 74,873 $ 7,500 4,000
and Chief Financial
Officer
RICK SANBORN, 2000 $123,700 $15,000 4,000
President and 1999 $120,000 $20,000 7,500
Chief Executive 1998 - - -
Officer, Palomar
LLEWELLYN W. STONE, 2000 $175,000 $60,000 -
President and Chief 1999 $175,000 $ - -
Executive Officer 1998 $176,373 $60,000 -
_____________________________
(1) All share figures have been adjusted for the Company's two-for-one stock
split in 1998.
STOCK OPTIONS
--------------
In connection with the bank holding company reorganization, the Company
adopted the Community West Bancshares 1997 Stock Option Plan (the "1997 Plan")
providing for the issuance of up to 924,398(1) shares. As of the Record Date
337,731 options had been exercised and options for 392,196 shares were
outstanding, leaving 194,471 shares available for future grants.
15
Under the terms of the 1997 Plan, full time salaried employees may be
granted either nonqualified or incentive stock options, and directors of the
Company may only be granted nonqualified options. Options may be granted at a
price of not less than 100% of the fair market value of the stock on the date of
grant. Options are exercisable in such increments, which need not be equal, as
may be determined by the Board of Directors provided, however, that the options
granted shall vest and become exercisable at a rate of at least 20% annually
over five years from the date of grant. The optionee is not obligated to
exercise any portion of an option granted under the 1997 Plan in the period that
any portion becomes exercisable. Rather, the optionee's right to exercise such
portion shall continue until the option expires. All options expire no later
than ten years from the date of grant. Options are granted at the discretion of
the Company's Board of Directors.
16
The following table sets forth certain information regarding stock options
granted by the Company to the "named" executive officers during 2000:
OPTIONS GRANTED TO PRICE APPRECIATION
GRANTED IN EMPLOYEES EXERCISE EXPIRATION FOR OPTION TERM
NAME 2000 DURING 2000 PRICE DATE 5% 10%
------------------ --------- ----------- --------- --------- ---------- ----------
Lynda Nahra 4000 2.4% $6.75 01/27/10 $16,980 $43,031
3500 2.1% $5.25 09/28/10 $11,556 $29,285
Lynda Pullon Radke 4000 2.4% $6.75 01/27/10 $16,980 $43,031
15000 8.0% $5.63 06/22/10 $53,063 $134,472
Richard Sanborn 4000 2.4% $6.75 01/27/10 $16,980 $43,031
Llewellyn W. Stone - 0% - - - -
The following table sets forth certain information regarding stock options
outstanding at December 31, 2000 for the "named" executive officers. No options
were exercised by the following individuals during 2000.
OPTIONS AT DECEMBER 31, IN THE MONEY OPTIONS
2000 AT DECEMBER 31, 2000 (1)
-------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ----------- ------------- ------------ -------------
Lynda Nahra 4,800 10,700 - -
Lynda Pullon Radke 13,400 24,600 $ 4,425 -
Rick Sanborn 1,500 10,000 - -
Llewellyn W. Stone 20,000 - - -
____________________
(1) Assumes a market value of $3.875 per share on December 31, 2000.
EMPLOYMENT AND OTHER COMPENSATION AGREEMENTS
------------------------------------------------
Mr. Stone has an employment agreement with the Company to serve as its
President and Chief Executive Officer. The agreement provides for Mr. Stone to
serve for a term of ten years beginning November 16, 1993. Under the terms of
the employment agreement, Mr. Stone's base annual salary for 1999 and 2000 was
$175,000. The agreement also provides Mr. Stone with the use of a bank-owned
automobile, vacation of five weeks per year, country club membership, group
medical accident and health disability and life, insurance benefits. In the
event Mr. Stone is terminated by the Company without cause or in the event of:
(i) a merger or consolidation where the Company or Goleta is not the surviving
corporation; (ii) a merger or consolidation or transfer of all or substantially
all of the assets of the Company or Goleta; or (iii) certain changes in
ownership of the Company, the employment agreement is terminated and Mr. Stone
will be entitled to severance pay equal to six months' salary.
17
On January 1, 1994, Goleta's Board of Directors entered into an Executive
Salary Continuation Agreement with Mr. Stone. The purpose of the Executive
Salary Continuation Agreement is to provide special incentive to Mr. Stone for
his continuing employment with Goleta on a long-term basis. The Executive
Salary Continuation Agreement provides Mr. Stone with salary continuation
benefits of up to $50,000 per year for 15 years after retirement. Normal
retirement in the Executive Salary Continuation Agreement is age 61. In the
event of death prior to retirement, Mr. Stone's beneficiary will receive the
full salary continuation benefits. In the event of disability, wherein Mr.
Stone does not continue employment with the Bank, Mr. Stone is entitled to a
total yearly payment equal to $5,000 per year of service beginning with January
1, 1994, up to a total yearly payment of $50,000. If Mr. Stone terminates
employment with the Bank for a reason other than death, disability, cause, or
voluntary termination, prior to the normal retirement age, he will be entitled
to salary continuation benefits calculated as set forth above for disability,
except no salary continuation benefits are payable in the event Mr. Stone
voluntarily terminates within five years of the date of the Executive Salary
Continuation Agreement. In the event of a transfer of controlling ownership or
sale of the Company or Goleta, Mr. Stone will become fully vested as to the full
amount of salary continuation benefits if termination of employment thereafter
occurs. The salary continuation program is funded through life insurance. The
cash surrender value of the policies at December 31, 2000 was $781,128 and the
annual premiums were $10,602. Earnings on the policy for 2000 were $30,717, and
the expense accrual for the present value of benefits to be paid was $36,025.
PROFIT SHARING AND 401(K) PLAN
----------------------------------
Effective as of September 1, 1995, the Board of Directors of Goleta adopted
the Goleta National Bank 401(k) Plan (the "Plan"). The Plan is a qualified
profit sharing plan under section 401(a) of the Internal Revenue Code of 1986,
as amended, with a 401(k) salary deferral feature. In connection with the bank
holding company reorganization and acquisition of Palomar, the Company adopted
the Plan. Employees of the Company, Goleta and Palomar are eligible to
participate in the Plan if they were employed by Goleta on September 1, 1995, by
Palomar on December 18, 1998, or after three months of consecutive service with
the Company, Goleta or Palomar. Employees can choose to make contributions of
their salary under the Plan's 401(k) salary deferral feature, and the Company
may make contributions under the profit sharing feature, subject to certain
limitations. The Company's contributions are determined by the Board of
Directors. Participating employees vest in the Company's contributions over a
five-year period. Benefits from the Plan become available to employees upon
retirement, or in the event of total disability. If employment is terminated
prior to normal retirement, the employee receives all voluntary salary deferral
contributions made and the vested portion of the Company's profit sharing
contributions, based on the established vesting schedule.
As of December 31, 2000, 278 employees were participating in the Plan.
During 2000, the Company made a $164,125 profit sharing contribution. The
401(k) Plan has been qualified by the Internal Revenue Service pursuant to the
Employee Retirement Income Security Act of 1974.
STOCK PERFORMANCE GRAPH
-------------------------
The following graph presents the cumulative, five-year total return for the
Company's (and previously Goleta's) Common Stock compared with the NASDAQ Total
Return Index, a broad market index of stocks traded in the NASDAQ National
Market and the SNL Securities Index of Banks over $500 million in total assets.
18
[GRAPHIC OMITED]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------
CWBC 100 310 420 426 322 175
NASDAQ -- Total US 100 174 213 300 542 238
SNL $500M - $1B Bank 100 166 270 265 246 177
Asset Size Index
SNL <$500M Bank Asset-Size 100 182 315 287
Index
The SNL Index for Banks under $500 million was originally selected as the
most representative of peer issuers. However, by year-end 1999 the Company's
total assets exceeded $500 million. The SNL Index for Banks between $500
million and $1 billion is now deemed most representative. The graph assumes the
value of an investment in the Company's Common Stock, the NASDAQ Index and the
SNL Bank Index each was $100 on December 31, 1995, and that all dividends were
reinvested.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------
During 2000 there were no, and as of the date of this Proxy Statement there
are no existing or proposed material transactions between the Company and any
of the Company's executive officers, directors, or beneficial owners of 5% or
more of the Company's Common Stock, or the immediate family or associates of any
of the foregoing persons, except as indicated below.
Some of the directors and executive officers of the Company, as well as the
companies with which such directors and executive officers are associated, are
customers of, and have had banking transactions with Goleta and/or Palomar in
the ordinary course of the subsidiaries' businesses and the subsidiaries expect
to have such ordinary banking transactions with such persons in the future. In
the opinion of Management of the subsidiaries, all loans and commitments to lend
included in such transactions were made in compliance with applicable laws on
substantially the same terms, including interest rates and collateral, as those
prevailing for comparable transactions with other persons of similar
creditworthiness and did not involve more than a normal risk of collectibility
or present other unfavorable features. Although the subsidiaries do not have
any limits on the aggregate amount they would be willing to lend to directors
and officers as a group, loans to individual directors and officers must comply
with their internal lending policies and statutory lending limits. The maximum
aggregate amount of all such loans during 2000 was approximately $5,707,318. At
December 31, 2000, there was approximately $5,407,595 outstanding in such loans,
representing 15% of the Company's shareholders' equity. There were no
outstanding commitments to lend to the Company's directors and executive
officers at December 31, 2000.
19
On March 30, 2000, ePacific.com redeemed 1,800,000 of its 2,100,000 shares
held by the Company and repaid a loan from Goleta with a balance of $3,725,000
for $4,500,000 in cash. The Company continues to hold a 10% interest in
ePacific.com but is no longer required to include ePacific.com in its
consolidated financial statements.
In November 1999, the Company obtained a $3,600,000 loan from William R.
Peeples, a director of the Company, the proceeds of which were used to make a
capital contribution to Goleta. Under the terms of the loan, interest accrued
at the rate of 8.25%, with the principal and accrued interest due and payable
May 1, 2001. On March 30, 2001 the loan from shareholder was repaid from the
proceeds of a loan obtained by the Company from Union Bank of California.
SHAREHOLDER PROPOSALS
The deadline for shareholders to submit proposals to be considered for
inclusion in the Proxy Statement for the Company's 2002 Annual Meeting of
Shareholders, which is tentatively scheduled for May 23, 2002, and must be
received by the Company at its offices at 445 Pine Avenue, Goleta, California
93117, no later than December 22, 2001. The proposals must also satisfy the
conditions established by the Securities and Exchange Commission (the "SEC") for
such proposals in order to be included in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers (as defined in regulations promulgated by the SEC thereunder) and
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 it complied with all
filing requirements applicable to its officers, directors and greater than ten
percent beneficial owners.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The SEC's rules permit the Proxy to confer discretionary authority to vote
on any matter if the Company did not have notice of the matter at least 45 days
before the date on which the Company first mailed its Proxy Materials for the
prior year's Annual Meeting of Shareholders. The Company mailed its Proxy
Materials for the 2000 Annual Meeting on April 21, 2000 and, accordingly,
discretionary authority is conferred to the persons named in the accompanying
Proxy to vote on any matter, notice of which is not received at least on or
before March 7, 2001.
The Company's Board of Directors knows of no business which will be
presented for consideration at the Meeting other than as stated in the Notice of
Annual Meeting of Shareholders. If however, other matters are properly brought
before the Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgement.
20
Whether or not you intend to be present at the Meeting, you are urged to
return your proxy card promptly. If you are then present at the Meeting and wish
to vote your shares in person, your original proxy may be revoked by voting at
the Meeting. However, if you are a shareholder whose shares are not registered
in your own name, you will need the proxy card obtained from your recordholder
to vote personally at the Meeting.
COMMUNITY WEST BANCSHARES
Dated: April 27, 2001 Michel Nellis, Secretary
21
PROXY
COMMUNITY WEST BANCSHARES
ANNUAL MEETING OF SHAREHOLDERS
MAY 24, 2001
6:00 P.M. PACIFIC TIME
The undersigned shareholder of Community West Bancshares (the "Company")
hereby nominates, constitutes and appoints Michel Nellis, and Robert H.
Bartlein, each of them as the attorney, agent, and proxy of the undersigned,
with full powers of substitution, to vote all stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at the Holiday Inn, 5650 Calle Real, Goleta, California
93117, on Thursday, May 24, 2001, at 6:00 p.m. and at any and all adjournments
thereof, as fully and with the same force and effect as the undersigned might or
could do if personally present thereat, as follows:
1. ELECTION OF DIRECTORS. Authority to elect the eleven persons named
------------------------
below and in the Proxy Statement dated April 27, 2001, accompanying
the Notice of said Meeting, to serve until the 2002 Annual Meeting of
Shareholders and until their successors are elected and have
qualified:
Michael A. Alexander Michel Nellis
Mounir R. Ashamalla William R. Peeples
Robert H. Bartlein Richard Sanborn
Jean W. Blois James R. Sims, Jr.
John D. Illgen Llewellyn W. Stone
Lynda Nahra
AUTHORITY GIVEN [ ] AUTHORITY WITHHELD [ ]
IF YOU WISH TO VOTE FOR SOME, BUT NOT ALL OF THE NOMINEES NAMED ABOVE,
YOU SHOULD ENTER THE NAME (S) OF THE NOMINEE (S) WITH RESPECT TO WHOM
YOU DO NOT WISH TO VOTE FOR IN THE SPACE PROVIDED BELOW:
2. RATIFICATION OF INDEPENDENT ACCOUNTANTS. The ratification of Arthur
-------------------------------------------
Andersen, LLP as the Company's independent accountants for 2001.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. OTHER BUSINESS. To transact such other business as may properly
----------------
come before the Meeting and any adjournment or adjournments thereof.
PLEASE SIGN AND DATE THE OTHER SIDE
PLEASE SIGN AND DATE BELOW
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" ON PROPOSAL 1
AND "FOR" ON PROPOSAL 2. THE PROXY CONFERS AUTHORITY AND SHALL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATION OF THE BOARD OF DIRECTORS, UNLESS A CONTRARY
INSTRUCTION IS INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE
WITH SUCH INSTRUCTION. THIS PROXY CONFERS DISCRETIONARY AUTHORITY TO VOTE ON
ANY OTHER MATTER, IF ANY, PRESENTED AT THE MEETING, NOTICE OF WHICH IS RECEIVED
BY THE COMPANY AFTER MARCH 7, 2001. THIS PROXY SHALL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS WITH RESPECT TO SUCH OTHER
MATTERS.
Dated:____________, 2001
_________________________________
(Number of Shares)
_________________________________
(Please Print Your Name) (Signature of Shareholder)
_________________________________
(Please Print Your Name) (Signature of Shareholder)
(Please date this Proxy and sign your name as it appears on the stock
certificates. Executors, administrators, trustees, etc., should give their full
titles. All joint owners should sign.)
I do [ ] do not [ ] expect to attend the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, AND MAY BE
REVOKED BY THE SHAREHOLDER DELIVERING IT PRIOR TO ITS EXERCISE BY FILING WITH
THE CORPORATE SECRETARY OF THE COMPANY AN INSTRUMENT REVOKING THIS PROXY OR A
DULY EXECUTED PROXY BEARING A LATER DATE OR BY APPEARING AND VOTING IN PERSON AT
THE MEETING.
Exhibit A
COMMUNITY WEST BANCSHARES
AUDIT COMMITTEE CHARTER
The audit committee is a committee of the board of directors. Its primary
function is to assist the board in fulfilling its oversight responsibilities by
reviewing the financial information which will be provided to the shareholders
and others, the systems of internal controls which management and the board of
directors have established, and the audit process.
In meeting its responsibilities, the audit committee is expected to:
1. Provide an open avenue of communication between the internal auditors, the
independent accountant, and the board of directors.
2. Review and update the committee's charter annually.
3. Recommend to the board of directors the independent accountants to be
nominated, approve the compensation of the independent accountant, and
review and approve the discharge of the independent accountants.
4. Review and concur the appointment, replacement, reassignment, or dismissal
of the internal audit function.
5. Confirm and assure the independence of the internal auditor and the
independent accountant, including a review of management consulting
services and related fees provided by the independent accountant. This
includes insuring that the independent accountants submit a formal written
statement regarding relationships and services that may effect objectivity
and independence.
6. Inquire of management and the independent accountant about significant
risks or exposures and assess the steps management has taken to minimize
such risks to the company.
7. Consider, in consultation with the independent accountant and management,
the audit scope and plan of the internal auditors and the independent
accountant.
8. Consider with management and the independent accountant the rationale for
employing audit firms other than the principal independent accountant.
9. Review with management and the independent accountant the coordination of
audit effort to assure completeness of coverage, reduction of redundant
efforts, and the effective use of audit resources.
10. Consider and review with the independent accountant and management:
(a) The adequacy of the company's internal controls including computerized
information system controls and security.
(b) Any related significant findings and recommendations of the
independent accountant and internal auditing together with
management's responses thereto.
11. Review with management and the independent accountant at the completion of
the annual examination:
(a) The company's annual financial statements and related footnotes.
(b) The independent accountant's audit of the financial statements and his
or her report thereon.
(c) Any significant changes required in the independent accountant's audit
plan.
(d) Any serious difficulties or disputes with management encountered
during the course of the audit.
(e) Other matters related to the conduct of the audit, which are to be
communicated to the committee under generally accepted auditing
standards.
12. Consider and review with management:
(a) Significant findings during the year and management's responses
thereto.
(b) Any difficulties encountered in the course of their audits, including
any restrictions on the scope of their work or access to required
information.
(c) Any changes required in the planned scope of their audit plan.
(d) The internal auditing department budget and staffing
(e) The internal auditing department charter.
(f) Internal auditing's compliance with The Institute of Internal
Auditor's Standards for the Professional Practice of Internal Auditing
(Standards).
13. Review filings with the SEC and other published documents containing the
company's financial statements and considers whether the information
contained in these documents is consistent with the information contained
in the financial statements.