<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CVB Financial Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
CVB FINANCIAL CORP.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1997
TO THE SHAREHOLDERS OF CVB FINANCIAL CORP.:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the
call of its Board of Directors, the Annual Meeting of Shareholders (the
"Meeting") of CVB Financial Corp. (the "Company") will be held at the Red Lion
Inn, 222 North Vineyard, Ontario, California 91764 on Wednesday, May 21, 1997,
at 7:00 p.m., for the following purposes, all as set forth in the attached
Proxy Statement:
1. ELECTION OF DIRECTORS. To elect seven persons to the
Board of Directors to serve until the 1998 Annual Meeting of Shareholders and
until their successors are elected and have qualified. The following seven
persons are the Board of Directors' nominees:
George A. Borba Charles M. Magistro
John A. Borba James C. Seley
Ronald O. Kruse D. Linn Wiley
John J. LoPorto
2. AMENDMENT OF THE 1991 STOCK OPTION PLAN. To approve
an amendment to the Company's 1991 Stock Option Plan so that, among other
things, stock options awarded under the 1991 Stock Option Plan can qualify for
exclusion under Section 162(m) of the Internal Revenue Code of 1986 as
performance-based compensation.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS. To ratify the appointment of Deloitte & Touche as the Company's
independent public accountants for the year ending December 31, 1997.
4. OTHER BUSINESS. To transact such other business as
may properly come before the Meeting and at any and all adjournments thereof.
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 voting stock of the corporation entitled to vote for the election of
directors. Notice of intention to make any nominations, other than by the
Board of Directors, shall be made in writing and shall be received by the
President of the corporation no more than 60 days prior to any meeting of
shareholders called for the election of directors, and no more than 10 days
after the date the notice of such meeting is sent to shareholders pursuant to
Section 2.2 of these bylaws; provided, however, that if only 10 days' notice of
the meeting is given to shareholders such notice of intention to nominate shall
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
voting stock of the corporation owned by each proposed nominee; (d) the name
and residence address of the notifying shareholder; and (e) the number of
shares of voting stock of the corporation owned by the notifying shareholder.
Nominations not made in accordance herewith shall be disregarded by the then
chairman of the meeting, and the inspectors of election shall then disregard
all votes cast for each nominee."
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Only those shareholders of record at the close of business on April 1,
1997 shall be entitled to notice of and to vote at the Meeting.
IT IS IMPORTANT THAT ALL SHAREHOLDERS VOTE. WE URGE YOU TO SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, REGARDLESS OF WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN
WITHDRAW YOUR PROXY AND VOTE IN PERSON. IN ORDER TO FACILITATE THE PROVIDING
OF ADEQUATE ACCOMMODATIONS, PLEASE INDICATE ON THE PROXY WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING.
By Order of the Board of Directors
/s/ DONNA MARCHESI
-----------------------
DONNA MARCHESI
Corporate Secretary
Dated: April 15, 1997
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<PAGE> 4
CVB FINANCIAL CORP.
701 NORTH HAVEN AVENUE, SUITE 350
ONTARIO, CALIFORNIA 91764
(909) 980-4030
-----------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1997
-----------------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of CVB Financial Corp. (the "Company") for
use at its Annual Meeting of Shareholders (the "Meeting") to be held at the Red
Lion Inn, 222 North Vineyard, Ontario, California 91764 on Wednesday, May 21,
1997, at 7:00 p.m., and at any and all adjournments thereof. It is expected that
this Proxy Statement and enclosed form of proxy will be mailed to shareholders
on or about April 18, 1997.
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Meeting are:
1. ELECTION OF DIRECTORS. To elect seven persons to the Board of
Directors to serve until the 1998 Annual Meeting of Shareholders and until their
successors are elected and have qualified.
2. AMENDMENT OF THE 1991 STOCK OPTION PLAN. To approve an amendment
(the "Option Amendment") to the Company's 1991 Stock Option Plan (the "Option
Plan") so that, among other things, stock options awarded under the Option Plan
can qualify for exclusion under Section 162(m) of the Internal Revenue Code of
1986 as performance-based compensation.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS. To
ratify the appointment of Deloitte & Touche as the Company's independent public
accountants for the year ending December 31, 1997.
4. OTHER BUSINESS. To transact such other business as may properly
come before the Meeting and at any and all adjournments thereof.
COSTS OF SOLICITATION OF PROXIES
The Company will bear the costs of this solicitation, including the
expense of preparing, assembling, printing and mailing this Proxy Statement and
the material used in this solicitation of proxies. It is contemplated that
proxies will be solicited principally through the mails, but directors, officers
and regular employees of the Company may solicit proxies personally or by
telephone. Although there is no formal agreement to do so, the Company may
reimburse banks, brokerage houses and other custodians, nominees and fiduciaries
for their reasonable expense in forwarding these proxy materials to their
principals. In addition, the Company may pay for and utilize the services of
individuals or companies not regularly employed by the Company in connection
with the solicitation of proxies if the Board of Directors of the Company
determines that this is advisable.
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OUTSTANDING SECURITIES, VOTING RIGHTS AND REVOCABILITY OF PROXIES
There were issued and outstanding 10,018,534 shares of the Company's
common stock, no par value per share ("Common Stock"), on April 1, 1997, which
has been set as the record date (the "Record Date") with respect to this
solicitation for the purpose of determining the shareholders entitled to notice
of and to vote at the Meeting. The Company's Articles of Incorporation also
authorize the issuance of up to 20,000,000 shares of Serial Preferred Stock of
which no shares are presently issued and outstanding.
Each holder of Common Stock will be entitled to one vote, in person or
by proxy, for each share of Common Stock standing in his or her name on the
books of the Company as of the Record Date for the Meeting on any matter
submitted to the vote of the shareholders, except that in connection with the
election of directors, the shares are entitled to be voted cumulatively if a
shareholder present at the Meeting has given notice at the Meeting prior to the
voting of his or her intention to vote his or her shares cumulatively. If any
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination. Cumulative voting entitles a shareholder to give one
nominee as many votes as is equal to the number of directors to be elected,
multiplied by the number of shares owned by such shareholder, or to distribute
his or her votes on the same principle between two or more nominees as he or she
sees fit.
In the election of directors, the seven candidates receiving the
highest number of votes are elected. Discretionary authority to cumulate votes
is hereby solicited by the Board of Directors, and the return of an executed
proxy shall grant such authority.
Approval of the Option Amendment requires the affirmative vote of a
majority of the shares of the Company's Common Stock present at the Meeting in
person or by proxy and entitled to vote. Ratification of the appointment of
Deloitte & Touche as the Company's independent public accountants requires the
affirmative vote of the majority of the shares of the Company's Common Stock
present at the Meeting in person or by proxy and entitled to vote.
A proxy for use at the Meeting is enclosed. The proxy must be signed
by you or your authorized agent. Any shareholder who executes and delivers such
proxy has the right to revoke it at any time before it is exercised by filing
with the Corporate Secretary of the Company an instrument revoking it or a duly
executed proxy bearing a later date. It may also be revoked by attendance at the
Meeting and election to vote thereat. Subject to such revocation, all shares
represented by a properly executed proxy received in time for the Meeting will
be voted by the proxy holders in accordance with the instructions on the proxy.
If no instruction is specified in respect to a matter to be acted upon, the
shares represented by the proxy will be voted "FOR" the election of the nominees
for directors set forth herein, "FOR" the Option Amendment, and "FOR" the
ratification of Deloitte & Touche as the Company's independent public
accountants for the year ending December 31, 1997. It is not anticipated that
any matters will be presented at the Meeting other than as set forth in the
accompanying Notice of the Meeting. If, however, any other matters properly are
presented at the Meeting, the proxy will be voted in accordance with the best
judgment and in the discretion of the proxy holders. Abstentions from voting on
any matter other than the election of directors will have the effect of a vote
"AGAINST" the proposal.
If you hold your shares of Company Common Stock in "street name" and
you fail to instruct your broker or nominee as to how to vote such shares of
Common Stock, your broker or nominee may, in its discretion, vote your shares of
Common Stock "FOR" the election of the nominees for director set forth herein,
"FOR" the Option Amendment, and "FOR" ratification of the appointment of
Deloitte & Touche as the Company's independent public accountants for the year
ending December 31, 1997.
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common
Stock as of the Record Date by each person known to the Company to be the
beneficial owner of more than five percent of the outstanding shares of
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<PAGE> 6
Common Stock, by each executive officer, director and nominee for director of
the Company, and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1)
----------------------------------
NUMBER PERCENT
NAME OF SHARES(3) OF CLASS(4)
---- ------------ -------------
<S> <C> <C>
George A. Borba (2) 1,705,446 (5) 16.96%
Chairman of the Board and Nominee
John A. Borba 437,273 (5) 4.35%
Director and Nominee
Ronald O. Kruse (2) 540,484 (5) 5.37%
Director and Nominee
John J. LoPorto 258,043 (5)(6) 2.56%
Director and Nominee
Charles M. Magistro (2) 719,000 (5) 7.15%
Director and Nominee
John Vander Schaaf (2) 754,369 (5) 7.50%
Director
James C. Seley 605 *
Director and Nominee
D. Linn Wiley, President, Chief
Executive Officer, Director and 194,928 (7) 1.93%
Nominee
Frank Basirico, Executive 1,306 (8) *
Vice President
Vincent Breitenberger, Executive Vice 42,098 *
President
Jay W. Coleman, Executive 66,056 (9) *
Vice President
Edward Pomplun, Executive 0 0
Vice President
Robert J. Schurheck, Executive Vice President, 61,105 (10) *
Chief Financial Officer
Directors and Executive Officers 4,780,713 (11) 47.49%
(13 persons)
</TABLE>
* Less than 1%.
1/ In accordance with Rule 13d-3 of the Exchange Act, a person is deemed
to be the beneficial owner of a security if he or she has or shares
voting power or investment power with respect to such security or has
the right to acquire such ownership within 60 days.
2/ The address of each of these persons is care of the Company: 701 North
Haven Avenue, Suite 350, Ontario, California 91764.
3/ Except as otherwise noted below, each nominee directly or indirectly
has sole or shared voting and investment power with respect to the
shares listed.
4/ The percentage for each of these persons or group is based upon the
total number of shares of the Company's (footnotes continued)
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Common Stock outstanding as of the Record Date plus the shares which
the respective individual or group has the right to acquire within 60
days after the Record Date by the exercise of stock options vested
pursuant to the Company's 1991 Stock Option Plan.
5/ Includes 40,265 shares which each individual has the right to acquire
within 60 days after the Record Date by the exercise of stock options
vested pursuant to the Company's 1991 Stock Option Plan.
6/ Includes 1,038 shares held by Mr. LoPorto as Custodian for his
grandchildren.
7/ Includes 82,193 shares which Mr. Wiley has the right to acquire within
60 days after the Record Date by the exercise of options vested
pursuant to the Company's 1991 Stock Option Plan.
8/ Represents 1,306 shares which Mr. Basirico has the right to acquire
within 60 days after the Record Date by the exercise of options vested
pursuant to the Company's 1991 Stock Option Plan.
9/ Includes 66,056 shares which Mr. Coleman has the right to acquire
within 60 days after the Record Date by the exercise of stock options
vested pursuant to the Company's 1991 Stock Option Plan.
10/ Includes 31,955 shares which Mr. Schurheck has the right to acquire
within 60 days after the Record Date by the exercise of stock options
vested pursuant to the Company's 1991 Stock Option Plan.
11/ Includes 423,100 shares which members of the group have the right to
acquire within 60 days after the Record Date by the exercise of stock
options vested pursuant to the Company's 1991 Stock Option Plan.
DIRECTORS AND EXECUTIVE OFFICERS
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors shall
be not less than seven nor more than 13 until changed by a bylaw amending
Section 3.3 of the Company's Bylaws, duly adopted by the vote or written consent
of the Company's shareholders. The Bylaws further provide that the exact number
of directors shall be fixed from time to time, within the foregoing range, by a
bylaw or amendment thereof duly adopted by the vote or written consent of the
Company's Board of Directors. The number of directors currently is fixed at
eight, but will be fixed at seven immediately prior to the Meeting.
The persons named below, all of whom are present members of the Board
of Directors of the Company, will be nominated for election to serve until the
next Annual Meeting of Shareholders and until their successors are elected and
have qualified. John Vander Schaaf, who is a current director of the Company,
will retire as of May 21, 1997, and accordingly is not standing for reelection.
Each of these persons is also a member of the Board of Directors of the
Company's principal subsidiary, Citizens Business Bank (the "Bank"). Votes will
be cast pursuant to the enclosed proxy in such a way as to effect the election
of said seven nominees, or as many thereof as possible, under applicable voting
rules. In the event that any of the nominees should be unable or unwilling to
accept nomination for election as a director, it is intended that the proxy
holders will vote 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 nominee will be unable or unwilling to serve if elected to
office.
The following table sets forth certain information, as of December 31,
1996, with respect to those persons who are to be nominated by the Board of
Directors for election as directors.
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<PAGE> 8
<TABLE>
<CAPTION>
Principal Year First
Occupation Elected or
For Past Appointed
Name and Position Five Years Age a Director
----------------- ---------- --- ----------
<S> <C> <C> <C>
George A. Borba 1/ Dairy Farmer, George Borba & Son 64 1981
Chairman of the Board Dairy
John A. Borba 1/ Dairy Farmer, John Borba & Sons 69 1981
Director
Ronald O. Kruse Chairman, Kruse Investment Co., 58 1981
Vice Chairman of the Board and Inc. 2/
Director
John J. LoPorto Investor 64 1981
Director
Charles M. Magistro Physical Therapy Consultant 72 1981
Vice Chairman of the Board and
Director
James C. Seley Trustee, Seley Family Trust 55 1996
Director
D. Linn Wiley President and Chief Executive 58 1991
President, Chief Executive Officer Officer, CVB Financial Corp. and
and Director Citizens Business Bank
</TABLE>
- ----------
1/ George A. Borba and John A. Borba are brothers.
2/ Prior to joining Kruse Investment Co., Inc., Mr. Kruse was Chairman of
O.H. Kruse Grain & Milling from 1974 through August 31, 1995.
THE BOARD OF DIRECTORS AND COMMITTEES
The Company has seven standing committees including an Audit
Committee, a Personnel Committee and a Stock Option Committee. As the Company
has no nominating committee, the procedures for nominating directors, other than
by the Board of Directors itself, are set forth in the Company's Bylaws and in
the Notice of Annual Meeting of Shareholders.
The Audit Committee of the Company, which held 12 meetings in 1996, is
chaired by Mr. J. Borba, and Messrs. R. Kruse, J. LoPorto, J. Seley (effective
July 1, 1996), and J. Vander Schaaf (through May 21, 1997) are members. The
purpose of the Audit Committee, among other things, is to direct the activities
of the external auditors of the Bank in order to fulfill the legal and technical
requirements necessary to adequately protect the directors, shareholders and
employees of the Company and Bank. It is also the responsibility of this
committee to recommend to the Board of Directors the appointment of independent
accountants and to make certain that the external auditors have the necessary
freedom and independence to freely examine all the Bank records.
The Personnel Committee of the Company, which held three meetings
during 1996, is chaired by Mr. C. Magistro, and Messrs. G. Borba, J. Borba, R.
Kruse, J. Seley (effective July 1, 1996), and D.L. Wiley are
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<PAGE> 9
members. The purpose of the Personnel Committee is to approve issues related to
the compensation of the officers and employees of the Bank.
The Stock Option Committee of the Company, which held two meetings
during 1996, is chaired by Mr. G. Borba, and Messrs. J. Borba, R. Kruse, J.
LoPorto, C. Magistro, J. Seley (effective July 1, 1996), and J. Vander Schaaf
(through May 21, 1997) are members. The purpose of the Stock Option Committee is
to administer the Company's stock option plans, including making all decisions
regarding the grant of options thereunder.
During the year ended December 31, 1996, the Board of Directors of the
Company held a total of 12 meetings, and the Board of Directors of the Bank held
a total of 12 meetings. All of the persons who were directors of the Company and
the Bank during 1996 attended at least 75% of the aggregate of (i) the total
number of such Company and Bank Board meetings and (ii) the total number of
meetings held by all committees of the Board of Directors of the Company or Bank
on which he served during such year.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary of Cash and Certain Other Compensation
The following table sets forth certain summary information
concerning compensation paid or accrued by the Company to or on behalf of the
Company's Chief Executive Officer and each of the five most highly compensated
executive officers of the Company (determined as of the end of the last fiscal
year) whose total annual salary and bonus exceeded $100,000 for the fiscal year
ended December 31, 1996 (the "Named Executives"). Information is provided for
Mr. Vincent Breitenberger who retired from the Company and the Bank on January
31, 1997, and for Mr. Frank Basirico, whose service as an executive officer
commenced in October, 1996, and who has succeeded Mr. Breitenberger.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Awards
----------------------------------------- -------------
Other Annual Options/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) SARs(#)(1) Compensation($)
--------------------------- ---- --------- -------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
D. LINN WILEY 1996 628,179(3) 204,750 -- 0 12,000
President and Chief Executive Officer 1995 516,357(3) 187,680 -- 4,174 11,996
1994 660,775(3) 227,825 -- 0 32,920
FRANK BASIRICO 1996 125,000 7,500 -- 22,000 6,651
Executive Vice President and Senior Loan 1995 83,137 3,088 -- -- 6,651
Officer of the Bank 1994 79,258 2,944 -- -- 6,341
VINCENT T. BREITENBERGER 1996 207,250 63,730 -- 0 12,000
Executive Vice President and Senior Loan 1995 197,400 93,765 -- 8,179 11,996
Officer of the Bank 1994 188,000 83,950 -- 0 28,183
JAY W. COLEMAN 1996 147,500 33,188 -- 0 12,000
Executive Vice President of Sales and 1995 140,000 30,450 -- 8,179 11,996
Service Division of the Bank 1994 132,500 34,020 -- 0 25,130
EDWIN POMPLUN 1996 110,000 20,350 -- 5,500 0
Executive Vice President and Trust Division 1995 N/A N/A N/A N/A N/A
Manager of the Bank 1994 N/A N/A N/A N/A N/A
ROBERT J. SCHURHECK 1996 145,000 40,238 -- 0 12,000
Chief Financial Officer of the Company and 1995 135,000 36,450 -- 8,179 11,996
Executive Vice President/Chief Financial 1994 126,000 33,300 -- 0 21,178
Officer of the Bank
</TABLE>
- ----------
(1) Represents options that were granted, retroactively adjusted for the 10%
stock dividends paid in January 1997 and January 1996, as applicable.
(2) Represents amounts contributed by the Bank to the Profit Sharing Plan and
allocated to the Named Executives vested or unvested account under such
plan.
(3) Includes $278,179 for 1996, $176,357 for 1995 and $335,775 for 1994 that
represents the dollar value of the 14,641 shares of Common Stock, 13,310
shares of Common Stock and 24,200 shares of Common Stock on the date such
stock was granted in 1996, 1995 and 1994, respectively, to Mr. Wiley
pursuant to his employment agreement. See "DIRECTORS AND EXECUTIVE
OFFICERS--Compensation of Executive Officers and Directors--Employment
Agreements and Termination of Employment Arrangements."
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<PAGE> 11
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company and the Bank entered into an agreement with Mr.
Wiley, dated August 8, 1991, which sets forth the compensation Mr. Wiley will
receive for his services as President and Chief Executive Officer of the
Company and the Bank. The agreement provides for an annual base salary of at
least $300,000. The agreement further provides for Mr. Wiley to receive an
annual bonus of up to $200,000 for each year after 1991 depending on the
attainment of certain goals. In addition, as compensation for each full year
of service, the agreement provides that Mr. Wiley will receive an unrestricted,
fully vested and non-forfeitable Common Stock grant, together with certain
additional cash compensation, on August 21 of each year commencing with August
21, 1992. The number of shares to be granted each year is as follows (subject
to standard anti-dilution adjustments including the 10% stock dividends paid by
the Company in January 1993, January 1994, January 1995, January 1996 and
January 1997): 10,000 shares in 1992, 20,000 shares in 1993, 20,000 shares in
1994, 10,000 shares in 1995, 10,000 shares in 1996 and 10,000 shares in 1997.
In the event there is a change in control of the Company, or Mr. Wiley is
terminated for any reason, other than for cause, he shall be entitled to
receive a sum equal to one year's base salary at the rate being paid to him at
the time of such termination, unless Mr. Wiley accepts employment with the
acquiring company. Additionally, the agreement provides for certain other
benefits, including the grant of an option to purchase 50,000 shares of Common
Stock (which grant was made in 1991) at an exercise price equal to the fair
market value of such stock on the date of grant, use of an automobile, a
country club membership, participation in the Bank's Profit Sharing Plan and
medical and life insurance benefits.
In September 1996, the Bank entered into severance
compensation agreements with each of its Named Executive Officers, except for
Mr. Wiley and Mr. Breitenberger. These agreements provide that in the event
that a "Change of Control," as defined below, occurs during the employment of
the executive and (i) the executive's employment is terminated by the Company
or the Bank or any successor thereto, other than for cause, within one year of
the completion of such Change of Control, or (ii) the executive terminates or
resigns employment for Good Reason, as defined below, within one year of the
completion of such Change in Control, the executive shall receive an amount
equal to the executive's annual base compensation for the last calendar year
ended immediately preceding the Change in Control. Such amount shall be paid
in a lump sum within five days after the effective date of termination of the
executive's employment.
"Change in Control" has occurred if:
(i) any one person, or more than one person acting as a group,
acquires (or has acquired during the 12 month period ending on the date of the
most recent acquisition) ownership of stock of the Company or the Bank
possessing more than 50% of the total voting power of the Company's or the
Bank's stock; provided, however, that this is not applicable to any person who
is, as of the date of the severance compensation agreement, a director of the
Company or the Bank;
(ii) a majority of the members of the Company's or the Bank's
directors is replaced during any 12 month period by directors whose appointment
or election is not endorsed by a majority of the members of the Company's or
the Bank's board prior to the date of the appointment or election;
(iii) a merger or consolidation where the holders of the
Bank's or the Company's voting stock immediately prior to the effective date of
such merger or consolidation own less than 50% of the voting stock of the
entity surviving such merger or consolidation; or
(iv) any one person, or more than one person acting as a
group, acquires (or has acquired during the twelve month period ending on the
date of the most recent acquisition by such person or persons) assets from the
Bank that have a total fair market value greater than 50% of the total fair
market value of all of the Bank's assets immediately before the acquisition or
acquisitions; provided, however, transfer of assets which otherwise would
satisfy the
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<PAGE> 12
requirements of this subsection will not be treated as a change in the ownership
of such assets if the assets are transferred to:
(A) an entity, 50% or more of the total value or
voting power of which is owned directly or indirectly by the Company or the
Bank;
(B) a person, or more than one person acting as a
group, that owns, directly or indirectly, 50% or more of the total value or
voting power of all the outstanding stock of the Company or the Bank; or
(C) an entity, at least 50% of the total value or
voting power is owned, directly or indirectly by a person who owns, directly or
indirectly, 50% or more of the total value or voting power of all the
outstanding stock of the Bank.
"Good Reason" means (i) the executive's then current level of
annual base salary is reduced; (ii) there is any reduction in the employee
benefit coverage provided to the executive (including pension, profit sharing,
deferred compensation, life insurance and health insurance, but not including
incentive bonuses) from the coverage levels in effect immediately prior to the
Change in Control, unless that company or the Bank provide substantially
equivalent employee benefits to the Executive; (iii) the executive suffers a
material diminution in executive's title, authority, position, reporting
relationship, responsibilities or offices; (iv) there is a relocation of the
executive's principal business office by more than fifty miles from its
existing location or (v) the Company or the Bank fail to obtain assumption of
any employment relating to executive by any successor or assign of the Bank.
Stock Options
The following table provides information with respect to stock
options to purchase shares of Common Stock or other securities of the Company
granted during the fiscal year ended December 31, 1996 to any of the Named
Executives.
OPTION/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term
----------------- ----------------
(a) (b) (c) (d) (e) (f) (g)
Number of
Securities
Underlying Percent of
Options/ Total Options/ Exercise
SARs SARs Granted or Base
Granted to Employees Price Expiration
Name (#)(1) in 1996 ($/Sh)(1) Date 5%($) 10%($)
---- ------------- ------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
FRANK BASIRICO 22,000 52% 15.00 9-18-06 207,535 525,535
EDWIN POMPLUN 5,500 13% 13.30 4-16-06 46,003 116,582
</TABLE>
(1) Retroactively adjusted for the 10% stock dividend paid in January 1997.
9
<PAGE> 13
Option Exercises and Holdings
The following table provides information with respect to the
Named Executives concerning the exercise of options during the fiscal year
ended December 31, 1996 and unexercised options held by the Named Executives as
of December 31, 1996:
AGGREGATED OPTION(1) EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the-
Options at 12/31/96 Money Options at 12/31/96
(#)(2) ($)(3)
Shares Acquired Value ------------------------------ ----------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
D. Linn Wiley N/A $ N/A 81,361 3,340 $1,275,501 $ 30,478
Frank Basirico N/A $ N/A 1,306 24,566 $ 12,067 $152,999
Vincent T. Breitenberger N/A $ N/A 41,856 6,544 $ 999,657 $ 60,892
Jay W. Coleman N/A $ N/A 66,056 6,544 $1,029,516 $ 60,892
Edwin Pomplun N/A $ N/A 0 5,500 N/A $ 41,633
Robert J. Schurheck 20,000 $ 157,200 31,956 6,544 $ 492,611 $ 60,892
</TABLE>
- ----------
(1) The Company has no plans pursuant to which stock appreciation rights
may be granted.
(2) Retroactively adjusted for the 10% stock dividend paid in January
1997.
(3) Value of unexercised "in-the-money" options is the difference between
the fair market value of the securities underlying the options or SARs
and the exercise or base price of the options or SARs at exercise or
fiscal year-end, respectively.
Board of Directors' Report on Executive Compensation
With the exception of decisions related to stock options,
decisions on the compensation of the Company's executives, including the Named
Executives, during 1996 were approved by the entire Board of Directors.
Decisions with respect to stock options are made by the Stock Option Committee
which is comprised of all of the Company's non-employee directors.
The Report of the Board of Directors and the Stock Option
Committee shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or under the Securities Exchange Act of 1934, except
to the extent that the Company specifically incorporates the information
contained in the report by reference, and shall not otherwise be deemed filed
under such acts.
10
<PAGE> 14
REPORT OF THE BOARD OF DIRECTORS
AND THE STOCK OPTION COMMITTEE
The Company has adopted a basic philosophy and practice of
offering a compensation program designed to attract and retain highly qualified
employees. It is intended to encourage and motivate these individuals to
achieve superior performance. This underlying philosophy pertains specifically
to executive compensation, as well as employee compensation at all other levels
throughout the organization.
There are three principal components of the executive
compensation program. They include base salary compensation, bonus compensation
(performance compensation) and long-term incentive compensation.
For 1996, the base salary compensation for each of the
Company's executive officers, including the Named Executives other than Mr.
Wiley, was determined by first establishing a range of base salary compensation
for each executive. This salary range is predicated on the California Bankers
Association salary survey and other salary information and considerations. The
mid-point of the base salary range was placed at the higher end of the average
base salary range of other California financial institutions of comparable
size. This reflects the Company's willingness to pay a higher base salary than
its competitors to attract and retain highly qualified executives and
employees.
Each executive has a base salary which was established within
this range. It is predicated on the executive's ability, experience and past
and potential performance and contribution to the Company. Furthermore, each
base salary was established in such a manner that the Company will have the
ability to increase these base salaries within the salary ranges in future
years based on the executive's performance. In the event an executive's base
salary for the prior year was above the range, the base salary was held
constant at the same level as the prior year. The full Board of Directors
approved both the range and the actual base salary for each executive officer.
The range of each executive's base salary will be evaluated
and adjusted, if appropriate, in subsequent years, based on future salary
surveys, comparable salary information and other considerations. Base salary
adjustments for each executive will be predicated primarily on performance and
the executive's position in the base salary range. Performance evaluations are
conducted at least annually, and they are based primarily on results achieved.
These results are measured against specific performance standards established
at the beginning or during the course of the year. For example, a branch
manager would have performance objectives and standards based on, among other
things, deposit growth, fee income, expense control and net earnings.
Bonus compensation is based on return on equity for the Bank
and other specific performance criteria. The Bank must achieve a minimum
return on equity for anyone to be eligible for a bonus. This criteria was a
minimum return on average equity of 15% for 1996. The actual return on average
equity for the Bank for the year was 17.14%. Assuming the minimum return on
equity is achieved, for each individual, 50% of the bonus award is based on
return on equity and 50% of the bonus award is based on individual performance
as measured against specific performance objectives and standards established
at the beginning of the year. The individual performance objectives and
standards relate to specific results where the executive has substantial
influence and accountability. All bonuses paid to executive officers,
including the Named Executives, for service during 1996 were approved by the
full Board of Directors.
The Company maintains two compensation plans that are intended
to provide long-term incentives for its executive officers. They include a
Stock Option Plan and a Profit Sharing Plan.
The Stock Option Plan is designed to align the interests of
key employees, including the Named Executives, with those of shareholders. It
is intended to provide these employees with an incentive to achieve superior
performance by granting them long-term options to purchase Company Common Stock
at a fixed exercise price that equals the fair market value of the underlying
stock on the date of the grant. The Stock Option Plan is administered by the
Stock Option Committee, which is comprised of all the Company's non-employee
directors. This committee has the authority to select the key employees to
whom stock options are granted and the number of options granted to such
11
<PAGE> 15
persons. The members of the Stock Option Committee do not utilize any
performance goals in determining the number of options to be granted, nor do
they consider the number of options previously granted to an executive officer.
Rather, the members base the award of stock options on their own analysis of
that employee's contribution to the Company, including an assessment of the
employee's responsibilities, as well as the employee's commitment to the
Company's future. As set forth in "Proposal 2," the Company is having the
shareholders vote on an Amendment to the Stock Option Plan as a result of the
enactment of Section 162(m) of the Internal Revenue Code which limits the
deductibility of compensation paid to certain executive officers in excess of
$1 million dollars per year. See "Proposal 2."
The Profit Sharing Plan is designed primarily to provide
retirement benefits to all eligible employees, including Named Executives. It
also has death and disability features. Employees become eligible upon
completing at least one year of service. Annual contributions are made solely
by the Company. These contributions are entirely discretionary, and they are
approved by the Board of Directors based on the earnings of the Company. For
1996, the Company contributed $888,213, or 8% of total employee base salary and
bonus, to the Profit Sharing Plan. Contributions are allocated proportionately
to the accounts of plan participants based on their base salaries and bonus.
Plan participants become fully vested in these amounts upon reaching seven
years of service.
Mr. Wiley, the President and Chief Executive Officer of the
Company and the Bank, received compensation for his services during 1996 based
primarily upon his rights under his employment agreement with the Company and
the Bank that was entered into on August 8, 1991. See "Employment Contracts
and Termination of Employment and Change-in-Control Arrangements." The
employment agreement provided that Mr. Wiley is eligible to receive a
discretionary annual bonus. This bonus is based on specific performance
achievements as outlined above for other executive officers. Mr. Wiley may
receive a bonus of up to and including 83% of his base salary under this plan.
He received an annual bonus of $204,750, or 70% of base salary, for his
services in 1996. This bonus was predicated on return on average equity,
deposit growth, noninterest expense control, loan delinquencies, net loan
losses and staff turnover. In addition to the benefits provided for under this
employment agreement, Mr. Wiley is an eligible participant in the Company's
Profit Sharing Plan. He received an unvested allocation of $12,000 for 1996.
This represents his proportionate share of the aggregate employer contribution
authorized by the Board of Directors for 1996.
Dated: April 1, 1997
THE BOARD OF DIRECTORS
GEORGE A. BORBA
JOHN A. BORBA
RONALD O. KRUSE
JOHN J. LoPORTO
CHARLES M. MAGISTRO
JAMES C. SELEY
JOHN VANDER SCHAAF
D. LINN WILEY
THE STOCK OPTION COMMITTEE
GEORGE A. BORBA
JOHN A. BORBA
RONALD O. KRUSE
JOHN J. LoPORTO
CHARLES M. MAGISTRO
JAMES C. SELEY
JOHN VANDER SCHAAF
12
<PAGE> 16
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Personnel Committee or
the Stock Option Committee during the 1996 fiscal year has ever been an officer
or employee of the Company or any of its subsidiaries, except Mr. Wiley, the
President and Chief Executive Officer of the Company and the Bank. All
decisions regarding compensation of executive officers during 1996, other than
those related to stock options or the base salary of Mr. Wiley, were made by
the entire Board of Directors. With the exception of Mr. Wiley, the President
and Chief Executive Officer of the Company and the Bank, none of the persons
who served as members of the Company's Board of Directors during the 1996
fiscal year has ever been an officer or employee of the Company or any of its
subsidiaries.
Performance Graph
The following graph compares, for the period from December 31,
1991 through December 31, 1996, the yearly percentage change in the Company's
cumulative total shareholder return on Common Stock with (i) the cumulative
total return of the American Stock Exchange market index (ii) the cumulative
total return of an index comprised of banks and bank holding companies
headquartered in Southern California which were formerly used by Montgomery
Securities in comprising a published index, which published index no longer
exists (the peer group line depicted below) and (iii) a published index
comprised by Media General Financial Services, Inc. of banks and bank holding
companies in the "Pacific States," which are Alaska, California, Hawaii, Oregon
and Washington (the industry group line depicted below). The graph assumes an
initial investment of $100 and reinvestment of dividends. The graph is not
necessarily indicative of future price performance.
The graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
acts.
13
<PAGE> 17
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
CVB Financial Corp. 100 112.36 168.92 221.24 212.98 331.84
AMEX Market Index 100 101.37 120.44 106.39 137.13 144.70
Peer Group Index 100 77.67 93.61 111.94 155.91 238.47
Industry Index 100 98.81 127.36 124.89 151.88 216.02
</TABLE>
Director Compensation
In 1996, directors of the Company and the Bank received $2,922
per month for Board and Committee meetings, except for the Chairman of the
Board and one Vice Chairman of the Board who received $8,346 and $5,565,
respectively, per month for such meetings. Mr. Wiley, the President and Chief
Executive Officer of the Company and the Bank, received no fees for serving as
a director of the Company or the Bank. The aggregate amount of directors' fees
paid in 1996 was $324,720. Each of the Company's non-employee directors is
also entitled to receive up to five annual fixed grants of options to purchase
5,000 shares per grant, subject to standard anti-dilution adjustments, of the
Company's Common Stock under the Company's Option Plan.
CERTAIN TRANSACTIONS
Some of the directors and executive officers of the Company
and its subsidiaries and the companies with which they are associated were
customers of, and had banking transactions with, the Bank in the ordinary
course of its business during 1996, and the Bank expects to have such banking
transactions in the future. All loans and commitments included in such
transactions were made on substantially the same terms, including interest
rates, collateral and repayment terms, as those prevailing at the time for
comparable transactions with other persons of similar creditworthiness and, in
the opinion of the Board of Directors of the Company, did not involve more than
a normal risk of collectibility or present other unfavorable features.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and the American Stock Exchange. Executive officers, directors and
greater than ten-percent shareholders are required by Securities and Exchange
Commission regulation to furnish to the Company copies of all Section 16(a)
forms they file.
Based solely on review of the copies of such forms furnished
to the Company, or written representation that no Form 5 was required, the
Company believes that during the fiscal year ended December 31, 1996 all
executive officers, directors and greater than ten- percent beneficial owners
complied with all Section 16(a) filing requirements applicable to them, except
for Robert J. Schurheck, who filed one late Form 4 covering two sales of
securities.
14
<PAGE> 18
PROPOSAL 2
APPROVAL OF AMENDMENT TO 1991 STOCK OPTION PLAN
The Company's Option Plan was adopted by the Board of
Directors on February 21, 1991 and approved by the shareholders on May 15,
1991. Subsequent to adoption of the Option Plan by the Board of Directors and
approval of the Option Plan by the shareholders, Congress enacted the Omnibus
Budget Reconciliation Act of 1993 ("OBRA 1993"). OBRA 1993 amended the
Internal Revenue Code of 1986 (the "Code") by, among other things, modifying
Section 162(m) of the Code to limit the deductibility of compensation paid by a
publicly held corporation to certain executives to $1,000,000 each for a tax
year.
Section 162(m) applies its limitation on deductions to the
year in which the corporation claims the deduction, which is not necessarily
the year in which the corporation establishes a deferred compensation
arrangement. In the case of stock options, the corporation may be claiming a
deduction with respect to the options several years after the corporation
awarded the options to executives. The corporation's deduction for a
Non-Qualified Stock Option is generally deferred until the optionee exercises
the option and is computed by reference to the fair market value of the
corporation's stock on the exercise date. The corporation's deduction matches
the timing and amount of the optionee's income. Therefore, it is impossible to
determine at the time of option award, what year will be the year for claiming
a deduction, which executives will be covered by Section 162(m) in that later
year, or what their total compensation for a particular optionee will be for
that later year. Section 162(m) of the Code excludes from compensation covered
by the deduction limitation certain performance-based compensation. The
Company believes that it is in the Company's best interests to amend the Option
Plan so that stock options awarded under the Option Plan can qualify for
exclusion under Section 162(m) of the Code as performance-based compensation.
The Company further believes that it is in the Company's best interests to
ensure that the Option Plan is administered in compliance with Rule 16b-3, or
any successor provisions under the Securities Exchange Act of 1934, as amended.
Under Section 162(m), stock options can qualify as
performance-based compensation if certain substantive and procedural
requirements (including shareholder approval of the material terms of the
arrangement) are satisfied. The Amendment is intended primarily to comply with
these requirements. The Amendment does not increase the benefits to any person
eligible to receive stock options. The Company is seeking shareholder approval
of this Proposal 2 in compliance with the procedural requirements of Section
162(m).
The description of the Option Plan and the proposed amendment
is qualified in its entirety to the Option Plan and the related Option
Amendment, copies of which are attached as Exhibit A to the Proxy Statement.
The Option Plan.
The Option Plan provides for the grant of options for purchase
of shares of Common Stock to the employees ("Employees"), employee directors
("Employee Directors") and non-employee directors ("Non-Employee Directors") of
the Company and its subsidiaries. The Company originally reserved 850,000
shares of Common Stock for grant under the Plan, which, after adjustment for
changes in the Company's outstanding stock because of stock dividends, is, as
of the Record Date, 1,368,934. Options granted under the Plan are intended to
qualify as Incentive Stock Options as that term is used in Section 422 of the
Code, or Non-Qualified Stock Options. All Employees and Employee-Directors are
eligible to receive incentive stock options. All Employees, Employee Directors
and Non-Employee Directors are eligible to receive Non- Qualified Options.
Of the option shares originally provided for under the Option
Plan (as adjusted for stock dividends) there are options outstanding on 636,668
shares and options on 559,657 shares remain available for issuance under the
Option Plan, as of the Record Date.
15
<PAGE> 19
The Option Plan provides for the grant of Options in order to
provide incentives for high levels of performance and to encourage stock
ownership in the Company. The Option Plan provides that it shall be
administered by the Board of Directors of the Company unless delegated to a
committee. Currently, the Option Plan is administered by a Stock Option
Committee (the "Committee") of the Board consisting of six of the seven
directors of the Company. The Committee has full power and authority in the
administration of the Option Plan, including the designation of participants
and the determination of the respective option agreements. Unpurchased shares
subject to an option that lapse or terminate are available for future options.
Pursuant to the Option Plan, each Non-Employee Director, without any further
action on the part of the Board or the Committee, automatically receives or has
already received, a grant of 5,000 options for each 12 month period of
continuous service. Based on their length of service, all of the current
Non-Employee Directors of the Company, except for Mr. Seley, have already
received their grants of options pursuant to this provision of the Option Plan.
Such options are immediately exercisable as to one hundred percent of the
shares underlying the grant, and expire ten years from the date the option was
granted.
The purchase price of each share of stock upon exercise of a
Non-Qualified Option is not less than 100% of the fair market value of the
stock subject to the option on the date the option is granted; provided,
however, that the purchase price of common stock subject to an Incentive Stock
Option may not be less than one hundred ten percent (110%) of such fair market
value (without regard to any restriction other than a restriction which, by its
terms, will never lapse) where the optionee owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company. The
fair market value of such stock is determined by the Committee.
Each option granted pursuant to the Option Plan is governed by
its own terms except that each option shall contain in substance each of the
following provisions. Each option must expire no later than 10 years from the
date of grant, except for Incentive Stock Options granted to holders of more
than 10% of the outstanding voting stock of the Company, which must expire not
later than five (5) years from the date of grant. Each option is exercisable
in such installments, which need not be equal, and upon such contingencies as
the Committee determines. If an Employee or Employee Director optionee ceases
to be employed by the Company or its subsidiaries or a Non-Employee Director
optionee ceases to serve as a director of the Company or its subsidiaries, then
such optionee's option terminates three months thereafter, and during such
three month period, such options shall be exercisable only as to those shares
with respect to which installments were vested; provided, however, that if
termination is due to any of the following circumstances, the exercise period
for such options may vary from the three month period: (i) such person's
permanent and total disability; (ii) the optionee dies while serving as an
employee or director of the Company or its subsidiaries or within not more than
three months thereafter; (iii) the option by its terms specifies either that it
will terminate sooner than three (3) months thereafter, or, in the case of a
Non-Qualified Option, that it may be exercised more than three (3) months after
termination of employment, or (iv) the Employee or Employee Director is
terminated for cause.
If the outstanding shares of stock of the Company are
increased, decreased, or changed into, or exchanged for a different number or
kind of shares or securities of the Company, without receipt of consideration
by the Company through reorganization, merger, recapitalization,
reclassification, stock split, stock dividend, stock consolidation or
otherwise, an appropriate and proportionate adjustment shall be made in the
number and kind of shares as to which options may be granted.
Not less than thirty (30) days prior to the dissolution or
liquidation of the Company, or a reorganization, merger, or consolidation of
the Company with one or more corporations as a result of which the Company will
not be the surviving or resulting corporation, or a sale of substantially all
the assets of the Company to another person, or a reverse merger in which the
Company is the surviving corporation but the shares of the Company's stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, any option granted prior to such occurrence shall
be exercisable in full for the thirty day period following the delivery of
notice to each such person of the occurrence of any such event, notwithstanding
any provisions above.
The Board of Directors of the Company may amend the Option
Plan at any time, except that any of the following amendments must be approved
by the Company's shareholders: (i) amendments which materially increase
16
<PAGE> 20
the number of shares reserved for options under the Option Plan; (ii)
amendments which materially modify the requirements as to eligibility for
participation in the Option Plan; (iii) or amendments which materially increase
the benefits accruing to participants under the Option Plan.
The Board may suspend or terminate the 1991 Plan at any time.
Unless sooner terminated, the 1991 Plan will terminate on February 21, 2001.
Federal Income Tax Consequences
The following discussion is only a summary of the principal
federal income tax consequences of the options and rights granted under the
Option Plan, and is based on existing federal law (including administrative
regulations and rulings) which is subject to change, in some cases
retroactively. This discussion is also qualified by the particular
circumstances of individual optionees, which may substantially alter or modify
the federal income tax consequences herein discussed.
Restriction on Deductions. Not every amount paid as compensation for
services is currently deductible. For example, depending upon the services
rendered, some compensation payments must be capitalized or added to inventory
costs. Two other restrictions potentially applicable to deductions for
executive compensation payments are the restriction on deduction of so-called
"excess parachute payments" and the deduction limit of $1,000,000 per year for
certain executive compensation. Whether any such restrictions will apply to
specific future payments of compensation by the Company cannot be predicted at
this time.
Incentive Stock Options. Generally under present law, when an option
qualifies as an incentive stock option under Section 422 of the Code: (i) an
optionee will not realize taxable income either upon the grant or the exercise
of the option, (ii) any gain or loss upon a qualifying disposition of the
shares acquired by the exercise of the option will be treated as capital gain
or loss, and (iii) no deduction will be allowed to the Company for federal
income tax purposes in connection with the grant or exercise of an incentive
stock option or a qualifying disposition of the shares underlying the option.
A disposition by an optionee of stock acquired upon exercise of an Incentive
Stock Option will constitute a qualifying disposition if it occurs more than
two years after the grant of the option, and one year after the transfer of the
shares to the optionee. If such stock is disposed of by the optionee before
the expiration of those time limits, the transfer would be a "disqualifying
disposition" and the optionee, in general, will recognize ordinary income equal
to the lesser of (i) the aggregate fair market value of the shares as of the
date of exercise less the option price, or (ii) the amount realized on the
disqualifying disposition less the option price. The Company would become
entitled to a corresponding deduction. Ordinary income from a disqualifying
disposition will constitute ordinary compensation income. Any gain in addition
to the amount reportable as ordinary income on a "disqualifying disposition"
generally will be capital gain.
Upon the exercise of an Incentive Stock Option, the difference between
the fair market value of stock on the date of exercise and the option price
generally is treated as an adjustment to taxable income in that taxable year
for alternative minimum tax purposes, as are a number of other items specified
by the Code. Such adjustments (along with tax preference items) form the basis
for the alternative minimum tax (presently at a graduated rate for
individuals), which may apply depending on the amount of the computed "regular
tax" of the employee for that year. Under certain circumstances the amount of
alternative minimum tax is allowed as a carryforward credit against regular tax
liability in subsequent years. The Company does not obtain a deduction as a
result of an optionee incurring the alternative minimum tax.
Non-Qualified Stock Options. In the case of Non-Qualified Stock
Options, no income generally is recognized by the optionee at the time of the
grant of the option. Under present law the optionee generally will recognize
ordinary income at the time the Non-Qualified Stock Option is exercised equal
to the aggregate fair market value of the shares underlying the option acquired
less the option price. Ordinary income from a Non-Qualified Stock Option will
constitute compensation for which withholding may be required under federal and
state law.
17
<PAGE> 21
Subject to special rules applicable when an optionee uses stock of the
Company to exercise an option, shares acquired upon exercise of a Non-Qualified
Stock Option will have a tax basis equal to their fair market value on the
exercise date or other relevant date on which ordinary income is recognized and
the holding period for the shares generally will begin on the date of exercise
or such other relevant date. Upon subsequent disposition of the shares, the
optionee generally will recognize capital gain or loss. Provided the shares
are held by the optionee for more than one year prior to disposition, such gain
or loss will be long-term capital gain or loss.
The Company will generally be entitled to a deduction equal to the
ordinary income (i.e., compensation) portion of the gain recognized by the
optionee in connection with the exercise of a Non-Qualified Stock Option
provided the Company complies with any withholding or reporting requirements of
federal and state law.
Options to Non-Employee Directors. These options would be
Non-Qualified Stock Options for tax purposes, and the tax rules applicable to
them would generally be the same as the rules for Non-Qualified Stock Options
described above. However, since the optionees are not employees, income tax
withholding would not be required in order for the Company to qualify for its
income tax deduction.
PROPOSED AMENDMENT TO THE OPTION PLAN
Under the proposed Option Amendment, the Board specifically
provides that the Option Plan shall be administered by a Committee, although
the Board retains the right to administer the Option Plan itself in accordance
with its terms. In addition, the proposed Option Amendment specifically
appoints to the Committee individuals who are "outside directors" within the
meaning of Section 162(m) of the Code and treasury regulations and individuals
who are "nonemployee directors" under Rule 16b-3 of the Securities Exchange Act
of 1934. The Committee shall always be composed of not fewer than two (2)
members of the Board. Any attempted appointment to the Committee of a person
who does not qualify as an Outside Director and Nonemployee Director shall be
null and void. Any Committee member who loses the status of an Outside
Director and Nonemployee Director shall automatically cease to be a member of
the Committee as soon as such status is lost.
"Outside directors" shall not include any individual who:
(a) is a current employee of the Company;
(b) is a former employee of the Company who receives
compensation for prior services (other than benefits under a tax- qualified
retirement plan) during the taxable year;
(c) has been an officer of the Company; or
(d) receives remuneration, as defined in the Code, from
the Company either directly or indirectly, in any capacity other than as a
director.
"Nonemployee Director" is a director who:
(a) is not currently an officer of the Company or a
parent or subsidiary thereof, or otherwise currently employed by the Company,
parent or subsidiary;
(b) does not receive compensation in excess of $60,000,
either directly or indirectly, from the Company or a parent or subsidiary, for
services rendered as a consultant other than as a director;
(c) does not possess an interest in any transaction for
which disclosure is required in the Company's proxy materials; and
18
<PAGE> 22
(d) is not engaged in a business relationship for which
disclosure would be required in the Company's proxy materials.
The Option Amendment clarifies that options are granted for
achieving performance goals, and the performance goal is an increase in the
value of the Company's shares over the option exercise price. In addition, the
Option Amendment states that the Committee has the power to establish and
administer performance goals under the Option Plan, and, to the extent required
by the Code and Treasury Regulations, ensure that performance goals have been
obtained, provided, however, that the Committee has no authority to change the
performance goals of the Option Plan after the shareholders of the Company have
approved the Option Plan, and any amendments thereto.
Furthermore, the Option Amendment provides that during any
calendar year, the Committee shall not award any participant under the Option
Plan options to acquire more than 100,000 shares of stock (subject to
adjustment under the Option Plan and subject to any other limits on option
awards in effect under the Option Plan from time to time), and that no more
than 400,000 shares may be granted to any person under the Option Plan
cumulatively.
Approval of Proposal 2 requires the affirmative vote of a
majority of the outstanding shares of the Company's Stock represented and
entitled to vote at the Meeting.
The Company hereby solicits shareholder approval of the Option
Amendment to the Option Plan with respect to each of the foregoing items, by an
affirmative vote for Proposal 2. Upon shareholder approval of the Option
Amendment to the Option Plan, it shall be effective retroactively to the date
such Option Amendment was approved by the Board and the Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche as its
independent public accountants for the year ending December 31, 1997, and
shareholders are being asked to ratify the appointment. The appointment was
recommended by the Audit Committee. Deloitte & Touche, the Company's
accountants for the year ended December 31, 1996, performed audit services for
1996 which included the examination of the consolidated financial statements
and services related to filings with the Securities and Exchange Commission.
All professional services rendered by Deloitte & Touche during 1996 were
furnished at customary rates and terms. Representatives of Deloitte & Touche
will be present at the Meeting and will be available to respond to appropriate
questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3.
ANNUAL REPORT
Together with this Proxy Statement, CVB Financial Corporation
has distributed to each of its shareholders an annual report, including the
Company's Form 10-K, for the year ended December 31, 1996. The Company's Form
10-K contains consolidated financial statements of the Company and its
subsidiaries and the report thereon of Deloitte & Touche, the Company's
independent public accountants.
UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE
MEETING, ADDRESSED TO DONNA MARCHESI, SECRETARY OF THE COMPANY, AT 701 NORTH
HAVEN AVENUE, SUITE 350, ONTARIO, CALIFORNIA 91764, THE COMPANY WILL PROVIDE,
WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR 1996, INCLUDING
THE FINANCIAL STATEMENTS AND THE
19
<PAGE> 23
SCHEDULES THERETO, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT
TO THE SECURITIES EXCHANGE ACT OF 1934.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to
present proposals at shareholder meetings. Any such proposal to be included in
the Proxy Statement for the Company's 1998 Annual Meeting of Shareholders must
be submitted by a shareholder prior to December 20, 1997, in a form that
complies with applicable regulations.
OTHER BUSINESS
The Board of Directors knows of no other business which will
be presented for consideration at the Meeting other than as stated in the
Notice of Meeting. If, however, other matters are properly brought before the
Meeting, it is the intention of the persons named in the accompanying form of
Proxy to vote the shares represented thereby in accordance with their best
judgment and in their discretion, and authority to do so is included in the
proxy.
Dated: April 15, 1997 CVB FINANCIAL CORP.
By /s/ D. LINN WILEY
-------------------------------------
D. Linn Wiley
President and Chief Executive Officer
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<PAGE> 24
EXHIBIT A
OPTION AMENDMENT
SECTION 1 OF THE 1991 PLAN IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO
READ AS FOLLOWS:
1. PURPOSE.
(a) The purpose of the CVB Financial Corp. 1991
Stock Option Plan (the "1991 Plan") is to strengthen CVB Financial Corp. (the
"Company") by providing to participating employees (the "Employees"), employee
directors (the "Employee Directors") and non-employee directors (the
"Non-Employee Directors") added incentives for high levels of performance and
to encourage stock ownership in the Company. The 1991 Plan seeks to accomplish
these performance goals by providing a means whereby such Employees, Employee
Directors and Non-Employee Directors of the Company and its subsidiaries may be
given an opportunity to purchase by way of option common stock of the Company.
The performance goal for those eligible to participate in the 1991 Plan is an
increase in the value of the Company's shares over the option exercise price.
(b) The Company, by means of the 1991 Plan, seeks
to secure and retain the services of such Employees, Employee Directors and
Non-Employee Directors of the Company or any of its subsidiaries, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its subsidiaries.
(c) The Company intends that the options issued
under the 1991 Plan shall, in the discretion of the Board of Directors of the
Company (the "Board") or any committee to which responsibility for
administration of the 1991 Plan has been delegated pursuant to subparagraph 2,
be either incentive stock options as that term is used in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or any successor thereto
("incentive stock options"), or options which do not qualify as incentive stock
options ("nonqualified stock options"). All options shall be separately
designated as incentive stock options or nonqualified stock options at the time
of grant, and a separate certificate or certificates shall be issued for shares
purchased on the exercise of each type of option.
SECTION 2 OF THE 1991 PLAN IS HEREBY AMENDED AND RESTATED IN ITS ENTIRETY TO
READ AS FOLLOWS:
2. ADMINISTRATION.
(a) The 1991 Plan shall be administered by a
committee of the Board (the "Committee"). Notwithstanding the foregoing, the
Board retains the right to administer the 1991 Plan itself in accordance with
the provisions of this Section 2. Board and Committee action shall be taken
pursuant to a majority vote or the unanimous written consent of its members.
The Board and the Committee have evidenced their adoption of the 1991 Plan by
their signatures at the end of the 1991 Plan.
(b) The Committee shall have the power, subject
to, and within the limitations of, the express provisions of the 1991 Plan:
(i) To determine from time to time which
of the persons eligible under the 1991 Plan shall be granted an option; when
and how the option shall be granted; whether the option will be an incentive
stock option or a nonqualified stock option; the provisions of each option
granted (which need not be identical), including, without limitation, the time
or times during the term of each option within which all or portions of such
option may be exercised; the duration of and purposes of leaves of absence
which may be granted to participants without constituting a termination of
their employment for purposes of the 1991 Plan; and the number of shares for
which an option shall be granted to each such person.
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(ii) To determine any conditions or
restrictions imposed on stock acquired pursuant to the exercise of an option
(including, but not limited to, repurchase rights, forfeiture restrictions and
restrictions on transferability).
(iii) To construe and interpret the 1991
Plan and the options granted under it, to construe and interpret any conditions
or restrictions imposed on stock acquired pursuant to the exercise of an
option, to define the terms used herein, to establish, amend and revoke rules
and regulations for its administration. to establish and administer performance
goals under the 1991 Plan, and to the extent required by the Code and Treasury
Regulations, ensure that performance goals have been obtained, provided,
however, that the Committee has no authority to change the performance goals of
the 1991 Plan after the shareholders of the Company have approved the 1991
Plan, and any amendments thereto. The Committee, in the exercise of this
power, may correct any defect, omission or inconsistency in the 1991 Plan or in
any option agreement in a manner and to the extent it shall deem necessary or
expedient to make the 1991 Plan fully effective.
(iv) To cancel, at any time and from time
to time, with the consent of the affected optionee or optionees, any or all
outstanding options granted under the 1991 Plan and the grant and substitution
therefor of new options under the 1991 Plan (subject to limitations hereof)
covering the same or different number of shares of stock at an option price per
share in all events not less than the fair market value on the new grant date.
(v) Generally, to exercise such powers
and to perform such acts as it deems necessary or expedient to promote the best
interests of the Company.
(c) The Committee shall be composed of not fewer
than two (2) members of the Board. All of the members of the Committee shall
be "nonemployee directors" as such term is defined in Securities and Exchange
Commission Rule 16b-3 under the 1934 Act ("Nonemployee Directors") and shall
qualify as "outside directors" within the meaning of Section 162(m)(4)(C)(i) of
the Code and Treasury Regulations 1.162-27(c)(3) ("Outside Director"). The
Board shall have the authority to appoint and remove Committee Members,
provided, however, that any attempted appointment to the Committee of a person
who does not qualify as an Outside Director and Nonemployee Director shall be
null and void. Any Committee member who loses the status of an Outside
Director and Nonemployee Director shall automatically and without further
action cease to be a member of the Committee as soon as such status is lost.
(d) The determinations of the Board or the
Committee on matters referred to in this paragraph 2 shall be final and
conclusive.
SECTION 4(D) IS HEREBY ADDED TO THE 1991 PLAN AND SHALL READ AS FOLLOWS:
4. ELIGIBILITY.
(d) Options for no more than 100,000 shares may be
granted to any person under the 1991 Plan in any calendar year. Options for no
more than 400,000 shares may be granted to any person under the 1991 Plan
cumulatively. Further, such numbers of shares specified in the foregoing two
sentences shall be subject to adjustment under Section 9. The amount of
compensation any eligible person could receive under an option grant is based
solely on an increase in value of the Company stock after the date of the grant
of the option.
ALL OTHER PROVISIONS OF THE 1991 PLAN UNAFFECTED BY THE FOREGOING AMENDMENTS
SHALL REMAIN IN FULL FORCE AND EFFECT.
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CVB FINANCIAL CORP.
1991 STOCK OPTION PLAN
Adopted February 21, 1991
Approved by the Shareholders on May 15, 1991
1. PURPOSE.
(a) The purpose of the CVB Financial Corp. 1991
Stock Option Plan (the "1991 Plan") is to strengthen CVB Financial Corp. (the
"Company") by providing to participating employees (the "Employees"), employee
directors (the "Employee Directors") and non-employee directors (the
"Non-Employee Directors") added incentives for high levels of performance and
to encourage stock ownership in the Company. The 1991 Plan seeks to accomplish
these goals by providing a means whereby such Employees, Employee Directors and
Non-Employee Directors of the Company and its subsidiaries may be given an
opportunity to purchase by way of option common stock of the Company.
(b) The Company, by means of the 1991 Plan, seeks
to secure and retain the services of such Employees, Employee Directors and
Non-Employee Directors of the Company or any of its subsidiaries, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its subsidiaries.
(c) The Company intends that the options issued
under the 1991 Plan shall, in the discretion of the Board of Directors of the
Company (the "Board") or any committee to which responsibility for
administration of the 1991 Plan has been delegated pursuant to subparagraph
2(d), be either incentive stock options as that term is used in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code") or any successor
thereto ("incentive stock options"), or options which do not qualify as
incentive stock options ("nonqualified stock options"). All options shall be
separately designated as incentive stock options or nonqualified stock options
at the time of grant, and a separate certificate or certificates shall be
issued for shares purchased on the exercise of each type of option.
2. ADMINISTRATION.
(a) The 1991 Plan shall be administered by the
Board unless and until the Board delegates administration to a committee
("Committee"), as provided in subparagraph 2(d). Board action shall be taken
pursuant to a majority vote or the unanimous written consent of its members.
(b) The Board shall have the power, subject to,
and within the limitations of, the express provisions of the 1991 Plan:
(i) To determine from time to time which
of the persons eligible under the 1991 Plan shall be granted an option; when
and how the option shall be granted; whether the option will be an incentive
stock option or a nonqualified stock option; the provisions of each option
granted (which need not be identical), including, without limitation, the time
or times during the term of each option within which all or portions of such
option may be exercised; the duration of and purposes of leaves of absence
which may be granted to participants without constituting a termination of
their employment for purposes of the 1991 Plan; and the number of shares for
which an option shall be granted to each such person.
(ii) To determine any conditions or
restrictions imposed on stock acquired pursuant to the exercise of an option
(including, but not limited to, repurchase rights, forfeiture restrictions and
restrictions on transferability).
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(iii) To construe and interpret the 1991
Plan and the options granted under it, to construe and interpret any conditions
or restrictions imposed on stock acquired pursuant to the exercise of an
option, to define the terms used herein, and to establish, amend and revoke
rules and regulations for its administration. The Board, in the exercise of
this power, may correct any defect, omission or inconsistency in the 1991 Plan
or in any option agreement in a manner and to the extent it shall deem
necessary or expedient to make the 1991 Plan fully effective.
(iv) To cancel, at any time and from time
to time, with the consent of the affected optionee or optionees, any or all
outstanding options granted under the 1991 Plan and the grant and substitution
therefor of new options under the 1991 Plan (subject to limitations hereof)
covering the same or different number of shares of stock at an option price per
share in all events not less than the fair market value on the new grant date.
(v) Generally, to exercise such powers
and to perform such acts as it deems necessary or expedient to promote the best
interests of the Company.
(c) The Board shall comply with the provisions of
Rule 16b-3 promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "1934 Act") as in effect from time to time, to the extent
applicable to the 1991 Plan.
(d) The Board may delegate administration of the
1991 Plan to a Committee composed of not fewer than two (2) members of the
Board. All of the members of the Committee shall be "disinterested persons" as
provided in Rule 16b-3(c)(2)(i) promulgated pursuant to the 1934 Act. The
Committee shall have, in connection with the administration of the 1991 Plan,
the powers theretofore possessed by the Board as set forth in subparagraph
2(b), subject, however, to such resolutions, not inconsistent with the
provisions of the 1991 Plan, as may be adopted from time to time by the Board.
Any action of the Committee with respect to administration of the 1991 Plan
shall be taken pursuant to a majority vote or to the unanimous written consent
of its members. The Board may abolish the Committee at any time and revest in
the Board the administration of the 1991 Plan.
(e) The determinations of the Board or the
Committee on matters referred to in this paragraph 2 shall be final and
conclusive.
3. SHARES SUBJECT TO THE 1991 PLAN.
Subject to the provisions of paragraph 9 relating to
adjustments upon changes in stock, the stock that may be offered pursuant to
options granted under the 1991 Plan shall not exceed the aggregate of 850,000
shares of the Company's common stock. If any option granted under the 1991
Plan shall for any reason expire, be canceled or otherwise terminate without
having been exercised in full, the stock not purchased under such option shall
again become available for the 1991 Plan.
4. ELIGIBILITY.
(a) All Employees and Employee Directors of the
Company or its subsidiaries shall be eligible to receive incentive stock
options. Non-Employee Directors of the Company or its subsidiaries shall not
be eligible to receive incentive stock options.
(b) All Employees, Employee Directors and
Non-Employee Directors of the Company or its subsidiaries shall be eligible to
receive nonqualified stock options.
(c) The Company may issue incentive stock options
provided that the aggregate fair market value (determined at the time the
incentive stock option is granted) of the stock with respect to which incentive
stock options are exercisable for the first time by the optionee during any
calendar year (under all incentive stock option plans of the Company) shall not
exceed One Hundred Thousand Dollars ($100,000). Should it be determined that
any
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incentive stock option granted pursuant to the 1991 Plan exceeds such maximum,
such incentive stock option shall be considered to be a nonqualified option and
not to qualify for treatment as an incentive stock option under Section 422 of
the Code to the extent, but only to the extent, of such excess.
5. OPTION PROVISIONS.
Each option shall be in such form and shall contain such terms
and conditions as the Board or the Committee shall deem appropriate. The
provisions of separate options need not be identical, but each option shall
include (through incorporation of provisions hereof by reference in the option
or otherwise) the substance of each of the following provisions:
(a) Each option granted and all rights or
obligations thereunder by its terms shall expire on such date as the Board or
the Committee may determine as set forth in such stock option agreement, but
not later than ten (10) years from the date the option was granted and shall be
subject to earlier termination as provided elsewhere in the 1991 Plan.
Notwithstanding the foregoing, any incentive stock option granted to an
optionee who owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any of its affiliates shall expire
not later than five (5) years from the date of grant. For purposes of the 1991
Plan, the date of grant of an option shall be the date on which the Board or
the Committee (as the case may be) takes final action approving the award of
the option, notwithstanding the date the optionee accepts the option, the date
of execution of the option agreement, or any other date with respect to such
option.
(b) The exercise price of each option shall be
determined by the Board or the Committee and shall be not less than one hundred
percent (100%) of the fair market value of the stock subject to the option on
the date the option is granted; provided, however, that the purchase price of
common stock subject to an incentive stock option may not be less than one
hundred ten percent (110%) of such fair market value (without regard to any
restriction other than a restriction which, by its terms, will never lapse)
where the optionee owns (or is deemed to own pursuant to Section 424(d) of the
Code) stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company. The fair market value of such
stock shall be determined by the Board or the Committee in accordance with any
reasonable valuation method, including the valuation method described in
Treasury Regulation Section 20.2031-2.
(c) The purchase price of stock acquired pursuant
to an option shall be paid at the time the option is exercised in cash or check
payable to the order of the Company in an amount equal to the option price for
the shares being purchased, in whole shares of stock of the Company owned by
the optionee having a fair market value on the exercise date (determined by the
Board or the Committee in accordance with any reasonable evaluation method
including the evaluation method described in Treasury Regulation Section
20.2031-2) equal to the option price for the shares being purchased, or a
combination of stock and cash or check payable to the order of the Company,
equal in the aggregate to the option price for the shares being purchased.
Payments of stock shall be made by delivery of stock certificates properly
endorsed for transfer in negotiable form. If other than the optionee, the
person or persons exercising the option shall be required to furnish the
Company appropriate documentation that such person or persons have the full
legal right and power to exercise the option on behalf of and for the optionee.
(d) An option by its terms may only be
transferred by will or by the laws of descent and distribution upon the death
of the optionee, shall not be transferable during the optionee's lifetime, and
shall be exercisable during the lifetime of the person to whom the option is
granted only by such person.
(e) Subject to subparagraph 5(f) and except as
provided in paragraph 10, each option shall be exercisable in such
installments, which need not be equal, and upon such contingencies as the Board
shall determine.
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(f) From time to time during each of such
installment periods, the option may be exercised with respect to some or all of
the shares allotted to that period, and/or with respect to some or all of the
shares allotted to any prior period as to which the option was not fully
exercised. During the remainder of the term of the option (if its term extends
beyond the end of the installment periods), the option may be exercised from
time to time with respect to any shares then remaining subject to the option.
The provisions of this subparagraph 5(f) are subject to any option provisions
governing the minimum number of shares as to which an option may be exercised.
(g) The Company may require any optionee, or any
person to whom an option is transferred under subparagraph 5(d), as a condition
of exercising any such option, to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The requirement of providing written
assurances, and any assurances given pursuant to the requirement, shall be
inoperative if (i) the shares to be issued upon the exercise of the option have
been registered under a then currently effective registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a
determination is made by counsel for the Company that such written assurances
are not required in the circumstances under the then applicable federal or
state securities laws.
(h) If an Employee or Employee Director optionee
ceases to be employed by the Company or its subsidiaries or a Non-Employee
Director optionee ceases to serve as a director of the Company or its
subsidiaries, then such optionee's option shall terminate three (3) months
thereafter, and during such three month period, such option shall be
exercisable only as to those shares with respect to which installments, if any,
had accrued as of the date on which the optionee ceased to be employed by the
Company or its subsidiaries or ceased to serve as a director of the Company or
its subsidiaries, unless:
(i) Such termination is due to such
person's permanent and total disability, within the meaning of Section 22(e)(3)
of the Code, in which case the stock option agreement may, but need not,
provide that it may be exercised at any time within one (1) year following such
termination of employment or cessation of directorship, and provided further
that if such optionee dies during such specified period following such
termination of employment or cessation of directorship, then the stock option
agreement may, but need not, provide that such option may be exercised at any
specified time up to one (1) year following the death of the optionee by the
person or persons to whom the optionee's rights under such option pass by will
or by the laws of descent and distribution, but only to the extent that the
optionee was entitled to exercise said option immediately prior to the
termination of the optionee's employment or cessation of the optionee's
directorship;
(ii) The optionee dies while in the
employ of the Company or its subsidiaries or while serving as a director of the
Company or its subsidiaries (which shall constitute termination of employment
or cessation of directorship), or within not more than three (3) months after
termination of such employment or cessation of directorship, in which case the
option may, but need not, provide that it may be exercised at any time within
one (1) year following the death of the optionee by the person or persons to
whom the optionee's rights under such option pass by will or by the laws of
descent and distribution, but only to the extent that the optionee was entitled
to exercise said option immediately prior to the termination of optionee's
employment or cessation of optionee's directorship;
(iii) The option by its terms specifies
either (a) that it shall terminate sooner than three (3) months after
termination of the optionee's employment or cessation of the optionee's
directorship, or (b) that in the case of nonqualified stock options it may be
exercised more than three (3) months after termination of the optionee's
employment or cessation of the optionee's directorship, but only to the extent
that the optionee was entitled to exercise said option immediately prior to the
termination of optionee's employment or cessation of optionee's directorship;
(iv) The Employee or Employee Director
optionee's employment is terminated for cause, whereupon the option terminates
immediately unless such termination is waived by the Board or Committee.
Termination for cause shall include termination for malfeasance or gross
misfeasance in the performance of duties, or
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conviction of illegal activity in connection therewith, conviction for a
felony, or any conduct detrimental to the interests of the Company or any of
its subsidiaries, and the determination of the Board or Committee with respect
thereto shall be final and conclusive; or
(v) The Employee Director or
Non-Employee Director optionee is removed from the Board of Directors of the
Company or any of its subsidiaries for cause, whereupon the option terminates
immediately on the date of such removal. Removal for cause shall include
removal of a director who has been declared of unsound mind by an order of
court or convicted of a felony.
This subparagraph 5(h) shall not be construed to extend the
term of any option or to permit anyone to exercise the option after expiration
of its term, nor shall it be construed to increase the number of shares as to
which any option is exercisable from the amount exercisable on the date of
termination of the optionee's employment.
(i) Options may be exercised by ten (10) days
written notice delivered to the Company stating the number of shares with
respect to which the option is being exercised together with payment for such
shares. Not less than ten (10) shares may be purchased at any one time unless
the number purchased is the total number of shares which may be purchased under
the option.
(j) Any option granted hereunder shall provide as
determined by the Board or the Committee for appropriate arrangements for the
satisfaction by the Company or its subsidiaries and the optionee of all
federal, state, local or other income, excise or employment taxes or tax
withholding requirements applicable to the exercise of the option or the later
disposition of the shares of stock thereby acquired. Such arrangements shall
include, without limitation, the right of the Company or any subsidiary thereof
to deduct or withhold in the form of cash or, if permitted by law, shares of
stock from any transfer or payment to an optionee or, if permitted by law, to
receive transfers of shares of stock or other property from the optionee, in
such amount or amounts deemed required or appropriate by the Board or the
Committee in its discretion. Any shares of stock issued pursuant to the
exercise of an option and transferred by the optionee to the Company for
purposes of satisfying any withholding obligation shall not again be available
for purposes of the Plan.
6. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under
the 1991 Plan, the Company shall keep available at all times the number of
shares of stock required to satisfy such options.
(b) The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the 1991 Plan or the
Company such authority as may be required to issue and sell shares of stock
upon exercise of the options granted under the 1991 Plan; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the 1991 Plan, any option granted under the 1991 Plan or
any stock issued or issuable pursuant to any such option or grant. If the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the 1991 Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon grant or upon exercise of
such options unless and until such authority is obtained.
(c) The Company shall indemnify and hold harmless
the members of the Board and the Committee in any action brought against any
member in connection with the administration of the 1991 Plan to the maximum
extent permitted by then applicable law, except in the case of willful
misconduct or gross misfeasance by such member in connection with the 1991 Plan
and its administration.
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7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted
under the 1991 Plan shall constitute general funds of the Company.
8. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an
option is transferred under subparagraph 5(d) shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares
subject to such option unless and until such person has satisfied all
requirements for exercise of the option pursuant to its terms.
(b) Nothing contained in the 1991 Plan, or in any
option granted pursuant to the 1991 Plan, shall obligate the Company or any of
its subsidiaries to employ any employee for any period or interfere in any way
with the right of the Company or any of its subsidiaries to reduce the
compensation of any employee.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
If the outstanding shares of the stock of the Company are
increased, decreased, or changed into, or exchanged for a different number or
kind of shares or securities of the Company, without receipt of consideration
by the Company, through reorganization, merger, recapitalization,
reclassification, stock split, stock dividend, stock consolidation, or
otherwise, an appropriate and proportionate adjustment shall be made in the
number and kind of shares as to which options may be granted. A corresponding
adjustment changing the number or kind of shares and the exercise price per
share allocated to unexercised options, or portions thereof, which shall have
been granted prior to any such change shall likewise be made. Any such
adjustment, however, in an outstanding option shall be made without change in
the total price applicable to the unexercised portion of the option but with a
corresponding adjustment in the price for each share subject to the option.
Adjustments under this section shall be made by the Board or the Committee
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final and conclusive. No fractional shares of stock shall be
issued under the 1991 Plan on account of any such adjustment.
10. TERMINATING EVENTS.
Not less than thirty (30) days prior to the dissolution or
liquidation of the Company, or a reorganization, merger, or consolidation of
the Company with one or more corporations as a result of which the Company will
not be the surviving or resulting corporation, or a sale of substantially all
the assets of the Company to another person, or a reverse merger in which the
Company is the surviving corporation but the shares of the Company's stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property (a "Terminating Event"), the Board or the Committee
shall notify each optionee of the pendency of the Terminating Event. Upon
delivery of said notice, any option granted prior to the Terminating Event
shall be, notwithstanding the provisions of paragraph 5 hereof, exercisable in
full and not only as to those shares with respect to which installments, if
any, have then accrued, subject, however, to earlier expiration or termination
as provided elsewhere in the 1991 Plan. Upon the date thirty (30) days after
delivery of said notice, any option or portion thereof not exercised shall
terminate, and upon the effective date of the Terminating Event, the 1991 Plan
shall terminate, unless provision is made in connection with the Terminating
Event for assumption of options theretofore granted, or substitution for such
options of new options covering stock of a successor employer corporation, or a
parent or subsidiary corporation thereof, solely at the option of such
successor corporation or parent or subsidiary corporation, with appropriate
adjustments as to number and kind of shares and prices.
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11. AMENDMENT OF THE 1991 PLAN.
(a) The Board at any time, and from time to time,
except as otherwise provided in subparagraph 11(c), may amend the 1991 Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the outstanding shares of the Company entitled to vote or by the
unanimous written consent of the holders of all outstanding shares of the
Company entitled to vote, within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
(i) Materially increase the number of shares
reserved for options under the 1991 Plan;
(ii) Materially modify the requirements as to
eligibility for participation in the 1991 Plan; or
(iii) Materially increase the benefits accruing
to participants under the 1991 Plan;
provided, however, that approval at a meeting or by written consent may be
obtained by a lesser degree of shareholder approval if the Board determines, in
its discretion after consultation with the Company's legal counsel, that such
lesser degree of shareholder approval will comply with all applicable laws and
will not adversely affect the qualification of the 1991 Plan under Section 422A
of the Code.
It is expressly contemplated that the Board, in its sole discretion, may amend
the 1991 Plan in any respect the Board deems necessary or advisable to provide
optionees with the maximum benefits provided or to be provided under the
provisions of the Code and the regulations promulgated thereunder relating to
incentive stock options and/or to bring the 1991 Plan and/or options granted
under it into compliance therewith.
(b) Rights and obligations under any option
granted pursuant to the 1991 Plan, while the 1991 Plan is in effect, shall not
be altered or impaired by suspension or termination of the 1991 Plan, except
with the consent of the person to whom the stock or option was granted.
(c) The provisions of paragraph 14 may not be
amended more than once every six (6) months other than to comply with changes
in the Code, the Employee Retirement Income Securities Act, or the rules
thereunder.
12. TERMINATION OR SUSPENSION OF THE 1991 PLAN.
(a) The Board may suspend or terminate the 1991
Plan at any time. Unless sooner terminated, the 1991 Plan shall terminate ten
years from the Effective Date (as defined in paragraph 13) of the 1991 Plan.
No options may be granted under the 1991 Plan while the 1991 Plan is suspended
or after it is terminated.
(b) Rights and obligations under any option
granted pursuant to the 1991 Plan, while the 1991 Plan is in effect, shall not
be altered or impaired by suspension or termination of the 1991 Plan, except
with the consent of the person to whom the stock or option was granted.
A-9
<PAGE> 33
13. EFFECTIVE DATE OF PLAN.
The 1991 Plan shall become effective on February 21, 1991 (the
"Effective Date") but no options granted under the 1991 Plan shall be exercised
unless and until the 1991 Plan has been approved by the vote of the holders of
a majority of the outstanding shares of the Company entitled to vote or by the
unanimous written consent of the holders of all of the outstanding shares of
the Company entitled to vote, and, if required, an appropriate permit has been
issued by the appropriate state securities authorities and approval has been
obtained from the appropriate federal or state and/or federal regulatory
authorities.
14. OPTIONS TO NON-EMPLOYEE DIRECTORS.
Notwithstanding anything to the contrary stated in this 1991
Plan, Options to Non-Employee Directors shall be granted, without any further
action on the part of the Board or the Committee, only upon the following terms
and conditions:
(a) Each such person who is a director of the
Company on the Effective Date of the 1991 Plan shall receive non-qualified
options to acquire (i) 5,000 shares of stock of the Company, subject to
adjustment as provided in paragraph 9 hereof, on the Effective Date of the 1991
Plan and (ii) after each 12 month period of continuous service as a director of
the Company thereafter, 5,000 shares of stock of the Company, subject to
adjustment as provided in paragraph 9 hereof, on the last day of each such
period for up to a maximum of four (4) such periods (each such date shall be
deemed a date of grant of the options).
(b) Each such person who is not a director of the
Company on the Effective Date of the 1991 Plan shall, after each 12 month
period of continuous service as a director of the Company, receive
non-qualified options to acquire 5,000 shares of stock of the Company, subject
to adjustment as provided in paragraph 9 hereof, on the last day of each such
period for up to a maximum of five (5) such periods (each such date shall be
deemed a date of grant of the options).
(c) Each option shall be exercisable as to one
hundred percent (100%) of the shares of stock of the Company subject to the
option immediately on the date of the grant.
(d) Subject to earlier termination as provided
elsewhere in the 1991 Plan, each option shall expire ten (10) years from the
date the option was granted.
(e) The exercise price of each option shall be
equal to one hundred percent (100%) of the fair market value of the stock
subject to the option on the date the option is granted, which shall be the
closing price for the stock of the Company on the date of such grant or if the
date of such grant is not a trading day, the first immediately preceding
trading day. The closing price for any day shall be the last reported sale
price regular way or, in case no such reported sale takes place on such date,
the average of the last reported bid and asked prices regular way, in either
case on the principal national securities exchange registered under the 1934
Act on which the stock of the Company is admitted to trading or listed, or if
not listed or admitted to trading on any national securities exchange, the last
sale price of the stock of the Company on the National Association of
Securities Dealers National Market System ("NMS") or, if not quoted in the NMS,
the average of the closing bid and asked prices of the stock of the Company on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or any comparable system, or if the stock of the Company is not
listed on NASDAQ or any comparable system, the closing bid and asked prices as
furnished by any member of the National Association of Securities Dealers, Inc.
selected from time to time by the Company for that purpose.
(f) Each option shall be subject to the other
provisions of the 1991 Plan.
A-10
<PAGE> 34
(Side 1 of Card)
CVB FINANCIAL CORP.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder(s) hereby nominate(s),
constitute(s) and appoint(s) John A. Borba, John J. LoPorto and James C.
Seley, and each of them, the attorneys, agents and proxies of the undersigned,
with full powers of substitution to each, to attend and act as proxy or proxies
of the undersigned at the Annual Meeting of Shareholders (the "Meeting") of CVB
FINANCIAL CORP. (the "Company") to be held at the Red Lion Inn, 222 North
Vineyard, Ontario, California 91764, on Wednesday, May 21, 1997, at 7:00 p.m.,
and at any and all adjournments thereof, and to vote as specified herein the
number of shares which the undersigned, if personally present, would be
entitled to vote.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below (except as
indicated to the contrary below).
Discretionary authority to cumulate votes is
granted.
[ ] WITHHOLD AUTHORITY to vote for all nominees
listed below
Nominees: George A. Borba, John A. Borba, Ronald O. Kruse,
John J. LoPorto, Charles M. Magistro, James C. Seley, and D. Linn Wiley.
INSTRUCTION: TO WITHHOLD AUTHORITY to vote for any individual
nominee(s) write that nominee's(s') name in the space below.
-------------------------------------------------------
2. APPROVAL OF THE AMENDMENT OF THE 1991 STOCK OPTION
PLAN so that, among other things, stock options awarded under the 1991 Stock
Option Plan can qualify for exclusion under Section 162(m) of the Internal
Revenue Code as performance-based compensation.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE as
independent public accountants of the Company for the year ending December 31,
1997.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. OTHER BUSINESS. In their discretion, the Proxies are
authorized to vote upon such other business as may properly come before the
Meeting and at any and all adjournments thereof. The Board of Directors at
present knows of no other business to be presented by or on behalf of the
Company or the Board of Directors at the Meeting.
PLEASE SIGN AND DATE ON REVERSE SIDE
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<PAGE> 35
(Side 2 of Card)
PLEASE SIGN AND DATE BELOW
The undersigned hereby ratifies and confirms all that said
attorneys and proxies, or any of them, or their substitutes, shall lawfully do
or cause to be done by virtue hereof, and hereby revokes any and all proxies
heretofore given by the undersigned to vote at said Meeting. The undersigned
acknowledges receipt of the notice of said Annual Meeting and the Proxy
Statement accompanying said notice.
Dated: _________________, 1997
Signed: ______________________________
Signed: ______________________________
Please date this Proxy and sign above as your name(s)
appear(s) on this card. Joint owners should each sign personally. Corporate
proxies should be signed by an authorized officer. Executors, administrators,
trustees, etc., should give their full titles.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, "FOR" THE AMENDMENT TO THE 1991
STOCK OPTION PLAN, AND "FOR" RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS
MADE, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD
OF DIRECTORS, "FOR" APPROVAL OF THE AMENDMENT TO THE 1991 STOCK OPTION PLAN,
AND "FOR" RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE.
I (WE) WILL ____ WILL NOT ____ ATTEND THE MEETING IN PERSON.
2
