SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
NORTH BAY BANCORP
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NOTICE OF THE FOURTH ANNUAL MEETING
OF SHAREHOLDERS OF
NORTH BAY BANCORP
TO THE SHAREHOLDERS OF NORTH BAY BANCORP:
NOTICE IS HEREBY GIVEN that the Fourth Annual Meeting of the Shareholders of
North Bay Bancorp will be held at North Bay's Offices at 1190 Airport Road,
Napa, California, 94558, on Thursday, May 8, 2003, at 7:00 p.m. to consider and
act on:
(1) Election of Directors. The Board of Directors intends at this time to
present the following nominees for election:
Thomas N. Gavin David B. Gaw
Fred J. Hearn Conrad W. Hewitt
Thomas H. Lowenstein Richard S. Long
Thomas F. Malloy Terry L. Robinson
James E. Tidgewell
Nominations for election of members of the Board of Directors may be made by the
Board of Directors or by any shareholder of any outstanding class of capital
stock of the corporation entitled to vote for the election of directors. Notice
of intention to make any nominations will be made in writing and will be
delivered or mailed to the President of the corporation not less than 21 days
nor more than 60 days prior to any meeting of shareholders called for the
election of directors; provided however, that if less than 21 days' notice of
the meeting is given to shareholders, the notice of intention to nominate will
be mailed or delivered to the President of the corporation not later than the
close of business on the tenth day following the day on which the notice of
meeting was mailed; provided further, that if notice of the meeting is sent by
third class mail as permitted by Section 6 of the Company's Bylaws, no notice of
intention to make nominations will be required. The notification will contain
the following information to the extent known to the notifying shareholder: (a)
the name and address of each proposed nominee; (b) the principal occupation of
each proposed nominee; (c) the number of shares of capital stock of the
corporation owned by each proposed nominee; (d) the name and residence address
of the notifying shareholder; and (e) the number of shares of capital stock of
the corporation owned by the notifying shareholder. Nominations not made in
accordance herewith may, in the discretion of the Chairman of the meeting, be
disregarded and upon the Chairman's instructions, the inspectors of election can
disregard all votes cast for that nominee. A copy of this paragraph will be set
forth in a notice to shareholders of any meeting at which directors are to be
elected.
(2) Approval of Amendments to Bylaws. The shareholders will be asked to approve
amendments to North Bay's Bylaws creating a classified Board of Directors and
eliminating cumulative voting.
(3) Ratification of the Selection of KPMG LLP. The shareholders will be asked to
ratify the Company's selection of KPMG LLP, independent certified public
accountants, as the independent auditors of North Bay Bancorp for the year
ending December 31, 2003.
Other Business. The shareholders will consider and act on any other business as
may properly be brought before the meeting.
Shareholders of record at the close of business on March 10, 2003 are entitled
to notice of, and to vote at, the Annual Meeting. Every shareholder is invited
to attend the Annual Meeting in person or by proxy. If you do not expect to be
present at the Meeting, you are requested to complete and return the
accompanying proxy form in the envelope provided. Any shareholder present at the
Annual Meeting may vote personally on all matters brought before the Meeting,
and in that event your proxy will not be used.
Dated: March __, 2003
____________________________
Wyman G. Smith
Corporate Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE PAID ENVELOPE
PROXY STATEMENT
FOR THE
FOURTH ANNUAL MEETING OF SHAREHOLDERS
OF
NORTH BAY BANCORP
1500 SOSCOL AVENUE
NAPA, CALIFORNIA 94559
(707) 257-8585
To Be Held May 8, 2003 at 7:00 p.m.
at North Bay's Offices at 1190 Airport Road, Napa, California, 94558,
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TABLE OF CONTENTS [TO BE UPDATED]
GENERAL INFORMATION FOR SHAREHOLDERS..........................................1
PRINCIPAL SHAREHOLDERS........................................................3
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING................................4
1. ELECTION OF DIRECTORS....................................................4
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS.............................8
Audit Committee......................................................8
Compensation Committee..............................................10
SECURITY OWNERSHIP OF MANAGEMENT.............................................13
EXECUTIVE COMPENSATION.......................................................17
OTHER INFORMATION REGARDING MANAGEMENT.......................................27
Management Indebtedness.............................................27
Certain Business Relationships......................................28
Reports of Changes in Beneficial Ownership.........................28
2. APPROVAL OF AMENDMENTS TO BYLAWS CREATING A CLASSIFIED
BOARD OF DIRECTORS AND ELIMINATING CUMULATIVE VOTING....................29
Required Vote and Recommendation....................................33
3. RATIFICATION OF INDEPENDENT AUDITORS....................................33
Required Vote and Recommendation....................................36
AVAILABILITY OF FORM 10-K....................................................36
SHAREHOLDER PROPOSALS........................................................36
OTHER MATTERS................................................................36
GENERAL INFORMATION FOR SHAREHOLDERS
The following information is furnished in connection with the solicitation of
the accompanying proxy by and on behalf of the Board of Directors of North Bay
Bancorp ("the Company" or "North Bay") for use at the Fourth Annual Meeting of
Shareholders to be held at North Bay's Offices at 1190 Airport Road, Napa,
California, 94558, on Thursday, May 8, 2003, at 7:00 p.m. Only shareholders of
record at the close of business on March 10, 2003, (the "Record Date") will be
entitled to notice of and to vote at the Annual Meeting. On the Record Date, the
Company had outstanding _____________________ shares of its Common Stock, all of
which will be entitled to vote at the Annual Meeting and any adjournments
thereof. This proxy statement will be first mailed to shareholders on or about
March __ , 2003.
As many of the Company's shareholders are not expected to personally attend the
Annual Meeting, the Company solicits proxies so that each shareholder is given
an opportunity to vote. Shares represented by a duly executed proxy in the
accompanying form, received by the Board of Directors prior to the Annual
Meeting, will be voted at the Annual Meeting. A shareholder executing and
delivering the enclosed proxy may revoke the proxy at any time prior to exercise
of the authority granted by the proxy by:
o filing with the secretary of the Company an instrument
revoking it or a duly executed proxy bearing a later date; or
o attending the meeting and voting in person.
A proxy is also revoked when written notice of the death or incapacity of the
maker of the proxy is received by the Company before the vote is counted.
If a shareholder specifies a choice with respect to any matter on the
accompanying form of proxy, the shares will be voted accordingly. If no
specification is made, the shares represented by this proxy will be voted in
favor of election of the nominees specified and in favor of the specified
proposals.
Each shareholder of record is entitled to one vote for each share held on all
matters to come before the Annual Meeting, except that shareholders may have
cumulative voting rights with respect to the election of directors. If
cumulative voting is utilized, each shareholder may give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which the shareholder's shares are entitled, or may distribute the
same number of votes among as many candidates as the shareholder desires.
Pursuant to California law and the Company's bylaws, no shareholder may cumulate
votes unless the name of any candidate for which votes would be cast has been
placed in nomination prior to the voting in accordance with the Company's bylaws
and, also prior to the voting at the Annual Meeting, any shareholder has given
notice of that shareholder's intention to cumulate that shareholder's votes at
the meeting. If any shareholder has given notice, all shareholders may cumulate
their votes for candidates in nomination. The Board of Directors does not, at
this time, intend to give notice or to cumulate the votes it may hold by the
proxies solicited by this Proxy Statement unless the required notice by a
shareholder is given in proper form at the Annual Meeting, in which instance the
Board of Directors intends to cumulatively vote all the proxies held by it in
favor of
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the nominees for office as described in this Proxy Statement. Therefore,
discretionary authority to cumulate votes under these circumstances is solicited
in this Proxy Statement.
The proxy committee is composed of two officers of the Company, Terry L.
Robinson and Wyman G. Smith, who will vote all shares of Common Stock
represented by the proxies. However, the proxy committee cannot vote the shares
of the shareholder unless the shareholder signs and returns a proxy card. Proxy
cards also confer upon the proxy committee discretionary authority to vote the
shares represented the proxy cards on any matter that was not known at the time
this Proxy Statement was mailed, which may properly be presented for action at
the Annual Meeting including a motion to adjourn, and with respect to procedural
matters pertaining to the conduct of the Annual Meeting. The total expense of
management soliciting proxies will be borne by the Company. While proxies are
normally solicited by mail, proxies may also be directly solicited by officers,
directors and employees of the Company. The officers, directors and employees
will not be compensated for this service beyond normal compensation to them.
The voting of proxies will be tabulated by a representative of Registrar and
Transfer Company, which has been appointed as the Company's independent
inspector of election. The inspector of election will be present at the meeting
in order to tabulate the voting of any proxies returned and ballots cast at that
time. Except as required by law, the vote indicated on each individual proxy
card and ballot will be held confidential.
Abstentions and broker non-votes are each included in the determination of the
number of shares present and voting for the purpose of determining whether a
quorum is present, and each is tabulated separately. In determining whether a
proposal has been approved, abstentions are counted in tabulations of the votes
cast on proposals presented to shareholders and broker non-votes are not counted
as votes for or against a proposal or as votes present and voting on the
proposal.
A copy of the Annual Report of the Company for the fiscal year ended December
31, 2002, accompanies this Proxy Statement. Additional copies of the Annual
Report are available upon request to Pansy F. Smith, Assistant Corporate
Secretary of the Company.
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PRINCIPAL SHAREHOLDERS
As of March 10, 2003, the following persons were known by the Company to
beneficially own more than five percent (5%) of the outstanding Common Stock:
Relationship Number of Shares Percent of Class(1)
Name and Address with Company Beneficially Owned Beneficially Owned
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Houghton Gifford, M.D. Director Emeritus(2) 124,854 _______%
3219 Vichy Avenue of The Vintage Bank
Napa, CA 94558
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1 In computing the percentage of outstanding Common Stock owned beneficially
the number of shares beneficially owned has been divided by the number of
outstanding shares on the Record Date after (i) giving effect to stock dividends
paid through March 28, 2003 and (ii) assuming options exercisable by the named
person within 60 days have been exercised.
2 Included in the total for Dr. Gifford are 709 shares held as custodian for
a minor under the California Uniform Transfers to Minors Act and 124,145 shares
held in the name of the Gifford Family Trust dated April 8, 1985, of which Dr.
Gifford is trustee.
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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
1. ELECTION OF DIRECTORS
It is intended to elect nine (9) Directors of the Company, pursuant to a
resolution of the Board of Directors fixing the authorized number of Directors
at nine (9). The Directors who are elected will hold office for a term
continuing until the next Annual Meeting and until their successors are duly
elected and qualified. All of the nominees are at present members of the Board
of Directors of the Company. If any nominee should refuse or be unable to serve,
the proxies will be voted for any person the Board of Directors may designate to
replace that nominee. The Board presently has no knowledge that any of the
nominees will refuse or be unable to serve. The nominees (up to the number of
directors to be elected) receiving the highest number of votes are elected.
Votes against a director and votes withheld have no legal effect.
Information is provided below regarding the individual nominees, as well as
regarding the executive officers of the Company, each of whom serves on an
annual basis and must be selected by the Board of Directors annually pursuant to
the Bylaws of the Company.(3) The ages stated are as of March 10, 2003.
Lee-Ann Cimino, age 39, is Senior Vice President and Chief Financial Officer of
North Bay, Solano Bank and The Vintage Bank. Ms. Cimino joined The Vintage Bank
in 1987. Prior to becoming employed by The Vintage Bank, Ms. Cimino served as
Operations Manager for Lamorinda National Bank. Ms. Cimino is past treasurer of
the Napa Valley D.A.R.E. Foundation and a member of the board of directors of
Napa Valley Safe School Foundation. Ms. Cimino holds a Professional Masters of
Banking graduate degree from the Graduated School of Banking at Louisiana State
University.
Susan C. Fonseca, age 48, is Senior Vice President, Human Resources of North
Bay. From 1990 until joining North Bay in 2002, Ms. Fonseca was employed by
Wells Fargo Bank, serving as Vice President and Human Resources Manager from
1995 to 2002 and as Personnel Officer from 1990 to 1995. From 1988-1990, she was
Employee Benefits Coordinator for Buffums Department Stores. Ms. Fonesca
graduated from Kent State University with a B.A. degree in Spanish and Latin
American Studies.
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3 As used throughout the Proxy Statement, the term "Executive Officer" means
the President, Executive Vice President/Credit Administrator, Senior Vice
President/Chief Financial Officer, Corporate Secretary, and Senior Vice
President/Human Resources of North Bay; the President and Chief Executive
Officer of Solano Bank; and the President, Chief Executive Officer and Chief
Credit Officer of The Vintage Bank.
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Thomas N. Gavin, age 50, is a Director of North Bay and a director and Chairman
of the Board of Solano Bank, since 2000. Mr. Gavin is the owner of Gavin &
Schreiner, a benefit planning company started in 1985. He is also an insurance
agent for New York Life, where he has been affiliated for over twenty five
years. Mr. Gavin earned his Associate of Arts degree from Solano Community
College and a B.A. in sociology from the University of California at Davis. He
completed his insurance agent education and was awarded his CLU from American
College. Mr. Gavin has been active in professional and local civic and social
organizations, including the Benicia Rotary Club (President 1994-1995), the
Benicia Chamber of Commerce (President 1987); St. Patrick -St. Vincent High
School Board of Regents (President 1996); and the Benicia Mainstreet Program
Board of Directors (President 1988). He is also a member of the Sutter-Solano
Hospital Foundation Board and the Board of Directors for St. Dominic's Church in
Benicia, where he has also coached basketball and softball for PAL.
David B. Gaw, age 57, has served as a director of The Vintage Bank since 1984
and served as Chairman of the Board of Directors from 1992 to 1994. He is also a
Director of North Bay and Solano Bank. Mr. Gaw has been engaged in the practice
of law in Napa and Solano Counties for more than thirty years and is one of the
founding members of Gaw, Van Male, Smith, Myers & Miroglio, a professional law
corporation with offices in Napa, Fairfield, Vacaville and Redlands. Mr. Gaw is
certified by the California State Board of Legal Specialization in Probate,
Estate Planning, and Trust Law, and a Certified Elder Law Attorney by the
National Elder Law Foundation. Mr. Gaw has served as President of the Napa
County Bar Association. He is a member of The Queen of the Valley Hospital
Foundation Board of Trustees, and is a member of Boards of Directors of North
Bay Hospital Foundation, the Solano Community Foundation, and the North Bay
Health Care Group. North Bay, Solano Bank and The Vintage Bank have retained the
legal services of Mr. Gaw's law firm since their organization and expect to
retain the firm's services in 2003.
Fred J. Hearn, Jr., age 49, has served as a Director of North Bay and Solano
Bank since 2000. Mr. Hearn is President of Hearn Pacific Construction, a real
estate general contracting company headquartered in Vacaville for more than
twenty-five years. He is also a member in Pacific Valley Development Company and
President of Pacific Concrete Construction Company Inc. Mr. Hearn is an active
member of both the Fairfield and Vacaville Chambers of Commerce, the Solano
Commercial Brokers and is a member of the founders club of the Solano Community
Foundation.. He has also served on the Notre Dame Parochial School Board as
secretary and vice president for two terms and is a member of the Green Valley
Country Club where he served on the Building and Grounds Committee. Mr. Hearn is
presently serving on the council of major companies for the Vacaville Chamber of
Commerce.
Conrad W. Hewitt, age 66, joined the Board of North Bay in November, 1999 and is
a consultant. He is a member of the Board of Directors of Global Intermodal
Systems, Inc., where he serves as Chairman of the Audit Committee and as a
member of the Compensation Committee. Also, he is a member of the Board of
Directors of ADPAC, Inc. and Click Books.com, Inc. Mr. Hewitt is a Trustee of
the Kalmanovitz Charitable Foundation. Also, he is a director of S&P Company and
a director of Pabst Brewing Company. He also serves as Chairman of the Pabst
Brewing Company Audit and Compensation Committees. Additionally, he is a
director of Spectrum Organic Products, Inc and is Chairman of the Audit
Committee and
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a member of the Compensation Committee. He is also an advisory director for
Clark/Bardes Consulting and Private Capital Corporation. Mr. Hewitt served as
Superintendent of Banks and Commissioner, Department of Financial Institutions,
State of California from 1995 to 1998. Prior to 1995, Mr. Hewitt was the
Managing Partner, North Bay Area, Ernst & Young and was employed by Ernst &
Young for thirty-three years until his retirement. Mr. Hewitt is a Certified
Public Accountant. Mr. Hewitt received a B.S. in Finance and Economics from the
University of Illinois and did post-graduate work at the University of Southern
California.
Richard S. Long, age 59, is a director of North Bay since 1999 and presently
serves as Chief Executive Officer of Regulus Group, LLC. He became a director of
North Bay in November, 1999. Mr. Long has over twenty-eight years of
entrepreneurial and executive management experience. Regulus is a remittance
processor for major banks and corporations with over twenty locations in the
United States and Canada. In 1998 Mr. Long sold his company, Quantum Information
Corporation, to Regulus. Quantum, which has now been merged into Regulus, is an
information distribution management company that outsources the processing,
printing and distribution of time critical financial documents. Prior to
Quantum, Mr. Long spent seventeen years in the industrial gas and equipment
business. Starting in sales and moving through management to CEO and owner of
Bayox, Inc., which he sold to Union Carbide Corporation in 1983. Mr. Long then
bought out the investment group that started Boboli and subsequently sold the
United States and Canadian segments of this business to General Foods in 1988.
The international segment of this business was sold in 1995.
Thomas H. Lowenstein, age 60, is a director of North Bay and Chairman of the
Board of The Vintage Bank and has served as a Director of The Vintage Bank since
1988. He is President of North Bay Plywood, a company engaged in the manufacture
and sale of building materials. Mr. Lowenstein has been active in the affairs of
St. Apollinaris School, Product Services Incorporated (PSI) and the Justin High
Foundation, having served on the boards of St. Apollinaris School and PSI and as
a Past President of St. Apollinaris School Board.
Thomas F. Malloy, age 60, is Chairman of the Board of Directors of North Bay and
former Chairman of the Board of The Vintage Bank, where he has served as a
director since 1984. He is an insurance broker and a Member in Malloy Imrie &
Vasconi Insurance Services LLC with offices in Napa and St. Helena. He is also a
member of MMV Building LLC. Mr. Malloy is a member and Past President of the
Napa County Independent Insurance Agents Association and Past President of the
Napa Active 20-30 Club. Mr. Malloy received a B.S. degree in business from Santa
Clara University.
Kathi Metro, age 48, is the Executive Vice President and Credit Administrator of
North Bay and Executive Vice President and Credit Administrator of Solano Bank.
She was employed by The Vintage Bank from 1985 to 2000. Prior to becoming
employed by The Vintage Bank, Ms. Metro was an Assistant Vice President and
Branch Manager of Napa Valley Bank. She is an alumnus of Leadership Napa Valley
and is a former member of the Leadership Napa Valley Foundation Committee. In
addition, Ms. Metro is a former Director of C.O.P.E. and former member of the
Napa County Commission on the Status of Women and the Professional Business
Services Committee of the Napa Chamber of Commerce. She is currently a member of
the North Napa Rotary Club, serves on the Board of Directors of the Napa Valley
College
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Foundation, and is a member of the California Bankers Association Real Estate
Legislation Committee. Ms. Metro is also a Director of SAFE BIDCO, a state
assisted fund for enterprise, business, and industrial development corporation.
John A. Nerland, age 38, is President, Chief Executive Officer, Credit
Administrator, and a Director of Solano Bank. Prior to his employment with
Solano Bank, Mr. Nerland was a Region Manager at Civic Bank of Commerce. Mr.
Nerland also held various positions with WestAmerica Bank, including, Regional
Vice President of WestAmerica's San Rafael Region. Mr. Nerland currently sits on
the boards of Sutter-Solano Hospital Foundation, Vacaville Museum, and Solano
Economic Development Corporation. He is currently a member of the Vacaville Noon
Rotary Club. Mr. Nerland received his B.S. in Finance from Arizona State
University and an M.B.A. from San Francisco State University.
Terry L. Robinson, age 55, is President and Chief Executive Officer and a
Director of North Bay. Until April 1, 2002 he was also President and Chief
Executive Officer of The Vintage Bank. He is also a Director of Solano Bank and
was employed by The Vintage Bank beginning in 1988. Mr. Robinson is a past
president of the Western Independent Bankers. Prior to joining the Bank, Mr.
Robinson served as Executive Vice President and a member of the Board of
Directors of American Bank of Commerce in Boise, Idaho. Mr. Robinson is a Past
President of the Napa Valley Symphony Association, a past founding director the
Community Foundation of Napa Valley and was Co-Chair of the Napa Boys and Girls
Club capital campaign. He currently serves as a member of the Queen of the
Valley Hospital Foundation Board of Trustees, and is a member of the Napa Rotary
Club. Mr. Robinson holds a B.S. of Business in Accounting from the University of
Idaho and a M.B.A. in finance from U.C. Berkeley.
Wyman G. Smith, age 52, is Corporate Secretary of North Bay Bancorp, The Vintage
Bank and Solano Bank and has served as such since the organization of each
entity. Mr. Smith has been engaged in the practice of law in Napa and Solano
Counties for more than twenty-five years and is one of the senior members of
Gaw, Van Male, Smith, Myers & Miroglio, a professional law corporation, with
offices in Napa, Fairfield, Vacaville and Redlands. Mr. Smith chairs the firm's
business and real estate department and is a member of the American Bar
Association business and banking law section and the State Bar of California
business law section. Mr. Smith served as president of the Napa County Bar
Association. He is a member of the Queen of the Valley Hospital Board of
Trustees and currently serves as Chairman of the Board of Trustees. Mr. Smith is
a former Trustee and President of the Queen of the Valley Hospital Foundation.
He is a member and vice president of the Board of Directors of the Napa Valley
Economic Development Corporation, in the past he served as a member of the Board
of Directors of the Solano County Economic Development Corporation, and he is a
member of the Rotary Club of Napa. North Bay Bancorp, The Vintage Bank and
Solano Bank have retained the legal services of Mr. Smith's law firm since their
organization and expect to retain the firm's services in 2003.
Glen C. Terry, age 51, is the President, Chief Executive Officer, Chief Credit
Officer, and a Director of The Vintage Bank. Until April 1, 2002 he was
President, Chief Executive Officer, Credit Officer, and a Director of Solano
Bank. Prior to the opening of Solano Bank, he served as the Senior Vice
President and Solano Region Manager of The Vintage Bank beginning in 1999. Prior
to being employed by The Vintage Bank, Mr. Terry was President of the Solano
Region of
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Sierra West Bank, President & CEO of Napa Valley Bank, and previously held other
positions at WestAmerica Bank. Mr. Terry has also worked with First Interstate
Bank and Zions First National Bank. Mr. Terry is an alumnus of Leadership Santa
Rosa, has served on the Santa Rosa Design Review Board, the Santa Rosa Chamber
of Commerce, the Napa Chamber of Commerce and Clinic Ole. Mr. Terry received a
B.S. in Political Science from Utah State University and an M.B.A. from the
University of Utah.
James E. Tidgewell, age 57, is a Director of North Bay and Vice Chairman of the
Board of The Vintage Bank and has served as a Director of The Vintage Bank since
1988. He is a certified public accountant and partner in the accounting firm of
G & J Seiberlich & Co LLP, with which he has been associated since 1975. Mr.
Tidgewell received a B.S. degree in accounting from the University of Notre Dame
in 1968 and thereafter spent approximately five years as an accountant with
Price Waterhouse & Co. Mr. Tidgewell is a member of the American Institute of
Certified Public Accountants and the California Society of Certified Public
Accountants. He is a past president of the Napa Active 20-30 Club, a member of
the Napa Rotary Club and an honorary member and past president of The Queen of
the Valley Hospital Foundation Board of Trustees.
During 2002, the Company's Board of Directors met eleven (11) times. All of the
Directors of the Company standing for reelection attended more than 75% of the
aggregate of (1) the total number of meetings of the Board and (2) the total
number of meetings held by all committees of the Board on which she or he
served, except for Directors David Gaw and Richard Long, who each attended 73%
of such meetings.
No director of the Company holds a directorship in any other company with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended, or subject to the requirements of Section 15(d) of that
Act or any company registered as an investment company under the Investment
Company Act of 1940, except for Conrad W. Hewitt who is also a director of
Spectrum Organic Products, Inc. No director or executive officer of the Company
has any family relations with any other director or executive officer of the
Company.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company has standing Audit and Compensation Committees. The Company does not
currently have a nominating committee; the Board of Directors in its entirety
acts upon nominations.
Audit Committee
The Audit Committee, which, during 2002, consisted of Conrad W. Hewitt as
chairman, Jack Anthony, William L. Kastner, Denise Suihkonen and James E.
Tidgewell, met eight (8) times during the fiscal year ended December 31, 2002.
The functions of the Audit Committee are to recommend the appointment of and to
oversee a firm of independent public accountants who audit the books and records
of the Company for the fiscal year for which they are appointed, to approve each
professional service rendered by the accountants and to evaluate the possible
effect
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of each the service on the independence of the Company's accountants. The Audit
Committee also reviews internal controls and reporting procedures of the Bank's
branch offices and periodically consults with the independent auditors with
regard to the adequacy of internal controls.
Each member of the audit committee is independent as defined by current rules of
the National Association of Securities Dealers.
REPORT OF AUDIT COMMITTEE
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934,
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE WILL NOT BE INCORPORATED BY
REFERENCE INTO ANY FILINGS AND WILL NOT OTHERWISE BE DEEMED FILED UNDER THOSE
ACTS.
North Bay Bancorp (March 20 , 2003)
The Audit Committee of the North Bay Bancorp Board of Directors (the "Audit
Committee") is composed of three independent directors and operates under a
written charter adopted by the Board of Directors. A copy of the charter as
approved on January 24, 2003 is attached to this Proxy Statement as Appendix A.
The members of the Audit Committee for 2003 are Conrad W. Hewitt (Chairman),
Thomas H. Lowenstein and James E. Tidgewell. The Audit Committee recommends to
the Board of Directors, subject to shareholder ratification, the selection of
the Company's independent accountants.
Management is responsible for the Company's internal controls and the financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
In this context, the Audit Committee has met and held discussions with
management and KPMG LLP. Management represented to the Audit Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Audit Committee has reviewed
and discussed the consolidated financial statements with management and KPMG
LLP. The Audit Committee discussed with KPMG LLP matters required to be
discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees).
KPMG LLP also provided to the Audit Committee the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with KPMG LLP that firm's
independence.
Based on the Audit Committee's discussion with management and KPMG LLP and the
Audit Committee's review of the representation of management and the report of
KPMG LLP to the Audit Committee, the Audit Committee recommended that the Board
of Directors include the
-9-
audited consolidated financial statements in the Company's Annual Report on Form
10-K for the year ended December 31, 2002 filed with the Securities and Exchange
Commission.
The Audit Committee has also considered whether the provision of services by
KPMG LLP not related to the audit of the financial statements referred to above
and to the reviews of interim financial statements included in the Company's
10-Q for the quarters ended March 31, June 30 and September 30, 2002, is
compatible with maintaining KPMG LLP's independence.
Respectfully submitted by the Audit Committee,
Conrad W. Hewitt, (Chair), Thomas H. Lowenstein, and James E. Tidgewell
Compensation Committee
The Compensation Committee which during 2002 consisted of Richard S. Long, as
chair, Fred W. Hearn, Conrad W. Hewitt, Thomas H. Lowenstein, and Thomas F.
Malloy met seven (7) times during the fiscal year ended December 31, 2002. The
principal functions of the Compensation Committee are, subject to approval of
the Board of Directors, to establish personnel policies, set compensation for
senior officers, establish employee benefit programs and review the performance
of senior officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors establishes and administers
the Company's executive compensation programs. The goals of the Company's
executive compensation programs are to:
1. Align executive compensation with shareholder interests;
2. Attract, retain, and motivate a highly competent executive
team;
3. Link compensation to Company, Bank and individual performance;
and
4. Achieve a balance between incentives for short-term and
long-term performance.
The Compensation Committee reviews and approves the recommendations of the
Company's President for all elements of executive compensation. No officer of
the Company is present during discussion or deliberations of his or her own
compensation. In addition to periodically reviewing executive compensation in
light of Company and individual performance, the Compensation Committee
periodically compares all elements of compensation of Company executive officers
with compensation for comparable positions within the community banking
industry.
Approximately 25% to 40% of executive officer cash compensation is contingent
upon Company performance and adjusted as appropriate for individual performance.
Grants under the Company's stock option plans are designed to further strengthen
the linkage between shareholder return and executive compensation. The Board of
Directors annually determines targets for Company revenues, earnings, return on
assets and return on equity to be used as the
-10-
measurement points for decisions regarding executive compensation. Executive
officer salary adjustments are determined by a subjective evaluation of
performance by comparisons to peers within the community banking industry.
Bonuses are awarded in amounts determined by the Board of Directors in
accordance with an incentive plan adopted annually by the Board, which relates
the amount of bonuses paid to the performance of the Company.
The Board of Directors determined the CEO's compensation for 2002 based in part
on the incentive compensation plan mentioned above. This plan allows the
Directors to determine bonus compensation as it relates to Company performance.
The CEO's salary is determined by comparisons with CEO salaries of peer groups
within the banking industry. Twenty-two percent (22%) of the CEO's compensation
for 2002 was a result of bonus awarded in accordance with the Company's
performance.
Respectfully submitted by the Compensation Committee,
Richard S. Long as Chair, Fred W. Hearn, Conrad W. Hewitt, Thomas H. Lowenstein,
and Thomas F. Malloy.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
There were no interlocking relationships where (a) an executive officer of North
Bay or the Banks served as a member of the compensation committee of another
entity, one of whose executive officers served on the Compensation Committee of
North Bay or the Banks; (b) an executive officer served as a director of another
entity, one of whose executive officers served on the Compensation Committee of
North Bay or the Banks; or (c) an executive officer of North Bay or the Banks
served as a member of the compensation committee of another entity, one of whose
executive officers served as a director of North Bay or the Banks.
Shareholder Return on Performance Graph
The following graph compares changes in the value of $100 invested at year end
1999 in the Company's Common Stock, in the Standard & Poors 500 Composite Stock
Price Index (the "S&P 500"), and in an industry index, assuming that all
dividends were reinvested. The Company's industry index is the NASDAQ BANK Index
(the "NASDAQ BANK"), which is a composite of all NASDAQ companies with a SIC
code of #6022.
-11-
[The following table was depicted as a line graph in the printed material.]
Cumulative Total Return
---------------------------------------------------
11/4/99 12/99 12/00 12/01 12/02
------- ------- ------- ------- -------
NORTH BAY BANCORP 100.00 92.80 72.92 83.58 117.27
S & P 500 100.00 108.04 98.21 86.53 67.41
NASDAQ STOCK MARKET (U.S.) 100.00 136.77 82.34 65.32 45.15
NASDAQ BANK 100.00 94.97 108.33 117.30 119.92
-12-
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information as of March 10, 2003, pertaining to
beneficial ownership of the Company's Common Stock by those persons nominated
for election as directors and the Named Executive Officers listed in the Summary
Executive Compensation Table, as well as with respect to all directors and
executive officers as a group. The information contained in this table has been
obtained from the Company's records or from information furnished directly by
the individuals to the Company. The numbers in the column entitled "Number of
Shares Beneficially Owned" reflect stock dividends paid through March 28,
2003.(4) The table should be read with the understanding that more than one
person may be the beneficial owner of, or possess certain attributes of
beneficial ownership with respect to, the same shares.
- ------------------------
4 Upon the payment of a stock dividend, all unexercised stock options are
automatically adjusted so that the aggregate purchase price and the fractional
proportion of outstanding stock represented by the options remain unchanged.
-13-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(5)
- ---- ------------------ ----- --------- ----------
Dale A. Brain Executive Vice President 3,473 6 %
and Chief Operating
Officer of North Bay(6)
Lee-Ann Cimino Senior Vice President 7,832 7,8 %
and Chief Financial
Officer of North Bay,
Solano Bank, and The
Vintage Bank
Thomas N. Gavin Director of North Bay 5,404 7,9 %
and Chairman of the
Board and Director of
Solano Bank
David B. Gaw Director of North Bay, 25,960 10 %
Solano Bank and The
Vintage Bank
Fred J. Hearn Director of North Bay 8,083 7,11 %
and Solano Bank
Conrad W. Hewitt Director of North Bay 7,247 12 %
Richard S. Long Director of North Bay 15,952 7,13 %
- ------------------------
5 In computing the percentage of outstanding Common Stock owned beneficially
by each director and executive officer, the number of shares beneficially owned
has been divided by the number of outstanding shares on the Record Date after
(i) giving effect to stock dividends paid through March 28, 2003, and (ii)
assuming options exercisable by the director and executive officer within 60
days have been exercised.
-14-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(5)
- ---- ------------------ ----- --------- ----------
Thomas H. Lowenstein Director of North Bay 32,608 7,14 %
and Chairman of the
Board of The Vintage Bank
Thomas F. Malloy Chairman of the Board of 67,725 7,15 %
North Bay and Director
of The Vintage Bank
Kathi Metro Executive V.P. and 16,147 7,16 %
Credit Administrator of
North Bay and of Solano
Bank
John A. Nerland President, Chief 3,150 7,17 %
Executive Officer, and a
Director of Solano Bank
Terry L. Robinson Director, President, and 81,594 18 %
CEO of North Bay and
Director of Solano Bank
and The Vintage Bank
Glen C. Terry President, CEO, Chief 11,576 7,19 %
Credit Officer, and a
Director of The Vintage
Bank
James E. Tidgewell Director of North Bay 14,076 7,20 %
and The Vintage Bank
All Current Executive 330,011 21 %
Officers and Directors as a
group (total of 16)
-15-
- ------------------------
6 Included in the total for Mr. Brain are 3,473 shares as to which Brain
holds an option exercisable as of May 10, 2003. As of February 28, 2003, Mr.
Brain is no longer an employee of North Bay.
7 Pursuant to California law, personal property held in the name of a married
person may be community property as to which either spouse has the power and
ability to manage and control in its entirety.
8 Included in the total for Ms. Cimino are 729 shares as to which Ms. Cimino
holds options exercisable as of May 10, 2003.
9 Included in the total for Mr. Gavin is 787 shares held by Edward Jones &
Co. as custodian FBO Patrice M. Gavin as to which he may indirectly have shared
voting power. Also included in the total for Mr. Gavin are 2,778 shares as to
which Mr. Gavin holds an option exercisable as of May 10, 2003.
10 Included in the total for Mr. Gaw are 17,022 shares held in the name of the
Gaw Family Trust dated September 22, 1999, of which he is the trustee; 173
shares as custodian for a minor under the California Uniform Transfers to Minors
Act. Also included in the total for Mr. Gaw are 6,443 shares as to which Mr. Gaw
holds an option exercisable as of May 10, 2003.
11 Included in the total for Mr. Hearn are 5,260 shares held in the name of
the Hearn Family Trust dated December 31, 1996 of which Mr. Hearn is a trustee
and as to which he has shared voting power. Also included in the total for Mr.
Hearn are 2,778 shares as to which Mr. Hearn holds an option exercisable as of
May 10, 2003.
12 Included in the total for Mr. Hewitt are 2,871 shares held in the name of
the Conrad W. Hewitt 2001 Trust. Also included in the total for Mr. Hewitt are
4,376 shares as to which Mr. Hewitt holds an option exercisable as of May 10,
2003.
13 Included in the total for Mr. Long are 11,576 shares held in the Richard S.
Long and Cynthia A. Long Trust dated September 15, 1993, of which Mr. Long is
trustee and 4,376 shares as to which Mr. Long holds an option exercisable as of
May 10, 2003.
14 Included in the total for Mr. Lowenstein are 26,192 shares held in the name
of the Lowenstein Family Trust dated October 8, 1992, of which he is a trustee
and as to which he has shared voting power; 3,755 shares held in the name of
North Bay Plywood Profit Sharing Trust, of which he is a trustee and as to which
he has shared voting power. Also included in the total for Mr. Lowenstein are
2,661 shares as to which Mr. Lowenstein holds an option exercisable as of May
10, 2003.
15 Included in the total for Mr. Malloy are 44,829 shares held in the name of
the Malloy Family Trust dated August 31, 1990, of which he is a trustee and as
to which he has shared voting power; and 19,302 shares held in the name of the
Malloy Imrie & Vasconi Insurance Services LLC 401(k) Profit Sharing Plan of
which he is not a trustee but as to which he may indirectly have shared voting
power. Also included in the total for Mr. Malloy are 1,622 shares as to which
Mr. Malloy holds an option exercisable as of May 10, 2003.
16 Included in the total for Ms. Metro are 1,823 shares as to which Ms. Metro
holds options exercisable as of May 10, 2003.
17 Included in the total for Mr. Nerland are 1,050 shares held in the name of
the Nerland Trust dated October 5, 2000, of which Mr. Nerland is the trustee.
18 Included in the total for Mr. Robinson are 37,701 shares held in the name
of Snake River Honey Co., Inc., of which he is a director and as to which he has
shared voting power; and 10,210 shares as to which Mr. Robinson holds an option
exercisable as of May 10, 2003.
19 Included in the total for Mr. Terry are 1,653 shares held by DLJ Investment
Services Group FBO Shawna Terry IRA as to which he may indirectly have shared
voting power. Also included in the total for Mr. Terry are 7,293 shares as to
which Mr. Terry holds an option exercisable as of May 10, 2003.
20 Included in the total for Mr. Tidgewell are 2,243 shares as to which Mr.
Tidgewell holds an option exercisable as of May 10, 2003.
21 In computing the percentage of outstanding Common Stock owned beneficially
by all Current Executive Officers and Directors as a group, it is assumed that
those options granted to any member of the group which are exercisable within 60
days have been exercised and that therefore, the total number of outstanding
shares of the class has been increased by ______ the number of shares subject to
the exercisable options by all members of the group.
-16-
EXECUTIVE COMPENSATION
Summary Executive Compensation Table
The following table provides a summary of the compensation paid during each of
the Company's last three completed fiscal years for services rendered in all
capacities to Terry Robinson, the President and Chief Executive Officer of the
Company and to Dale A. Brain, Lee-Ann Cimino, Kathi Metro, John A. Nerland, and
Glen C. Terry, the only other executive officers of the Company whose annual
compensation exceeded $100,000 during 2002. (Mr. Robinson, Mr. Brain, Ms.
Cimino, Ms. Metro, Mr. Nerland, and Mr. Terry are sometimes collectively
referred to as the "Named Executive Officers").
-17-
Summary Executive Compensation Table
Long Term
Compensation
Annual Compensation Awards
- ------------------------------------------------------------------------------------------------------------------------------------
Securities All Other
Name and Principal Other Annual Underlying Compensation
Position Year Salary ($) Bonus ($) Compensation Options (#) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Terry L. Robinson, 2002 198,125 55,000 -0- -0- -0- 26,755
President and Chief 2001 191,000 60,000 -0- -0- -0- 25,909
Executive Officer 2000 183,917 68,850 -0- -0- -0- 25,488
Dale A. Brain Executive 2002 120,542 30,000 -0- -0- -0- 15,729
V. P. and Chief Operating 2001 110,833 33,000 -0- -0- -0- 8,683
Officer(22) 2000 22,500 8,750 -0- -0- 8,269 1,500
Lee-Ann Cimino 2002 85,167 21,000 -0- -0- -0- 7,478
Sr. V.P. and Chief 2001 80,667 19,000 -0- -0- -0- 6,816
Financial Officer 2000 72,000 19,800 -0- -0- 1,158 5,287
Kathi Metro, Executive 2002 113,333 28,000 -0- -0- -0- 16,169
Vice President and 2001 105,833 33,000 -0- -0- -0- 15,147
Credit Administrator 2000 99,000 31,250 -0- -0- 8,269 13,613
John A. Nerland, 2002 81,458 24,000 -0- -0- 10,500(23) 4,339
President and CEO, of 2001 -0- -0- -0- -0- -0- -0-
Solano Bank 2000 -0- -0- -0- -0- -0- -0-
Glen C. Terry, 2002 137,917 39,000 -0- -0- -0- 18,544
President, CEO, and 2001 128,333 42,000 -0- -0- -0- 16,756
Chief Credit Officer of 2000 109,167 39,480 -0- -0- 11,025 8,124
The Vintage Bank
- ------------------------
22 As of February 28, 2003, Mr. Brain is no longer an employee of North Bay.
23 As adjusted for the 5% stock dividend paid March 28, 2003.
-18-
The value of perquisites and other personal benefits are disclosed in other
annual compensation if they exceed, in the aggregate, the lesser of $50,000 or
10% of salary and bonus. No amounts are reported in this column for Mr.
Robinson, Mr. Brain, Ms. Cimino, Ms. Metro, Mr. Nerland or Mr. Terry since the
value of perquisites and other personal benefits did not exceed the reporting
threshold.
All Other Compensation for each year includes contributions to The Vintage
Bank's Profit Sharing and Salary Deferral 401(k) Plan. Contributions to the
401(k) Plan for Mr. Robinson were $15,139 in 2002, $15,758 in 2001, and $13,334
in 2000. Contributions to the 401(k) Plan for Mr. Brain were $8,458 in 2002,
$-0- in 2001, and $-0- in 2000. Contributions to the 401(k) Plan for Ms. Cimino
were $7,040 in 2002, $6,655 in 2001, and $5,220 in 2000. Contributions to the
401(k) Plan for Ms. Metro were $9,378 in 2002, $8,814 in 2001, and $7,431 in
2000. Contributions to the 401(k) Plan for Mr. Nerland were $-0- in 2002, $-0-
in 2002, and $-0- in 2000. Contributions to the Bank's 401(k) Plan for Mr. Terry
were $ 11,412 in 2002, $10,140 in 2001, and $1,800 in 2000.
All Other Compensation for 2002 includes the economic value to Terry L.
Robinson, Dale A. Brain, Lee-Ann Cimino, Kathi Metro, and Glen C. Terry of split
dollar life insurance death benefits provided by The Vintage Bank and Solano
Bank pursuant to Endorsement Method Split Dollar Agreements entered into with
these executive officers on October 1, 2001. By the terms of the Endorsement
Method Split Dollar Agreements a portion of the death benefit of single premium
life insurance policies purchased on the lives of the covered executive
officers, depending on the age of the executive officer at the time of death, is
paid to the executive officers' designated beneficiaries. At all times the banks
are entitled to an amount equal to the cash value of the life insurance policies
which are the subject of the Endorsement Method Split Dollar Agreements. The
economic benefit included in All Other Compensation for the covered executive
officers is as follows: $1,326 in 2002 and $495 in 2001 for Terry L. Robinson;
$585 in 2002 and $339 in 2001 for Dale A. Brain; $353 in 2002 and $82 in 2001
for Lee-Ann Cimino; $570 in 2002 and $133 in 2001 for Kathi Metro; and $690 in
2002 and $ 215 in 2001 for Glen C. Terry.
The Vintage Bank and Solano Bank paid an aggregate single premium of $2,025,000
to purchase the life insurance policies that are the subject of the Endorsement
Method Split Dollar Agreements. Management believes that the premium investment,
after consideration of the non-taxable nature of earnings on certain insurance
investments, produces a higher return than other taxable investments made in the
normal course of business. Therefore, the net cost of the split dollar plan is
believed to be nominal.
All Other Compensation for each year includes the economic benefit of group life
insurance coverage in excess of $50,000 for the Name Executive Officers. The
amounts included for Mr. Robinson were $1,290 in 2002, $654 in 2001, and $654 in
2000. The amounts included for Mr. Brain were $686 in 2002, $339 in 2001 and $
- -0- in 2000. The amounts included for Ms. Cimino were $85 in 2002, $79 in 2001,
and $67 in 2000. The amounts included for Ms. Metro were $221 in 2002, $200 in
2001, and $182 in 2000. The amounts included from Mr. Nerland were $89 in 2002,
$-0- in 2001, and $-0- in 2000. The amounts included from Mr. Terry were $442 in
2002, $400 in 2001, and $234 in 2000.
-19-
All Other Compensation for Mr. Robinson for 2000 includes the full amount of The
Vintage Bank's share of life insurance premiums paid pursuant to a split dollar
life insurance plan and agreement with Mr. Robinson. By the terms of the Split
Dollar Agreement dated November 21, 1994, The Vintage Bank agreed to pay $23,312
of the policy's total annual premium of $24,9222 for a period of ten years.
Effective as of November 21, 2001, the Split Dollar Agreement was amended and
Mr. Robinson assumed responsibility for the full amount of the premium. The
Vintage Bank did not pay any share of the premium in 2002 or 2001 and,
accordingly, no amount of the premium has been included in All Other
Compensation for 2002 or 2001. The Split Dollar Agreement provides that Mr.
Robinson must repay all of the premiums paid by The Vintage Bank on or before
November 21, 2004, and the policy continues to be collaterally assigned to the
bank.
Director fees for 2000, 2001 and 2002 of $2,500, $-0-, and $-0-, respectively,
were deferred by Mr. Robinson pursuant to the Deferred Fee Plan described in the
section of this proxy statement entitled "Compensation of Directors" and are not
included in All Other Compensation for the years 2000, 2002, and 2002. All Other
Compensation for 2000, 2001, and 2002 includes $654 $496, and $____,
respectively, which is the taxable benefit of Mr. Robinson's benefits under the
Director Supplemental Retirement Program described in the section of this proxy
statement entitled "Compensation of Directors."
Option Grants and Exercises
The following table sets forth information concerning individual grants of stock
options during fiscal year 2002 to each of the Named Executive Officers, as
adjusted for the 5% stock dividends paid through March 28, 2003:
-20-
Number of Securities % of Total Options
Underlying Options Granted to Employees in Exercise or Expiration Grant Date
Name Granted (#) Fiscal Year Base Price ($/Sh) Date Value(24)
- ---- ----------- ----------- ----------------- ---- ---------
Terry L. Robinson, -0- N/A N/A N/A N/A
President and Chief
Executive Officer
Dale A. Brain, Executive -0- N/A N/A N/A N/A
Vice President and Chief
Operating Officer
Lee-Ann Cimino, Senior -0- N/A N/A N/A N/A
Vice President and Chief
Financial Officer
Kathi Metro, Executive -0- N/A N/A N/A N/A
Vice President and Credit
Administrator
John A. Nerland, 10,500 34% $28.286 7/1/2012 $69,000
President and Chief
Executive Officer of
Solano Bank
Glen C. Terry, President, -0- N/A N/A N/A N/A
Chief Executive Officer,
and Chief Credit Officer
of The Vintage Bank
- ------------------------
24 Present value at date of grant using the Black-Scholes model.
The following table shows exercises of stock options during fiscal year 2002 by
the Named Executive Officers and the value at December 31, 2002 of unexercised
options on an aggregated basis held by each of those persons:
-21-
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money Options
Shares Acquired Realized Options At Fiscal Year-End at Fiscal Year-End
on Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------------------------------------------------------------------------------------------------------------
Terry Robinson, -0- -- Exercisable for 10,210 Exercisable - $81,707
President and CEO Unexercisable for 2,553 Unexercisable - $20,427
Dale Brain, Executive -0- -- Exercisable for 3,473 Exercisable - $26,155
Vice President and Unexercisable for 5,209 Unexercisable - $39,233
Chief Operating Officer
Lee-Ann Cimino, Senior 5,105 $61,842 Exercisable for 729 Exercisable - $ 3,780
Vice President and Unexercisable for 486 Unexercisable - $ 2,520
Chief Financial Officer
Kathi Metro, 6,381 $84,064 Exercisable for 1,823 Exercisable - $ 9,449
Executive Vice Unexercisable for 1,216 Unexercisable - $ 6,299
President and Credit
Administrator
John A. Nerland, -0- -- Exercisable for -0- Exercisable - $ --
President, CEO of Unexercisable for 10,500 Unexercisable $10,020
Solano Bank
Glen C. Terry, -0- -- Exercisable for 1,544 Exercisable - $10,958
President, CEO, and Unexercisable for 6,174 Unexercisable - $25,198
Chief Credit Officer
of The Vintage Bank
For purposes of calculating the value of unexercised stock options as of
December 31, 2002, it is assumed that the fair market value of the shares as of
December 31, 2002 was $25.24 per share, as determined by the last reported trade
on the Nasdaq National Market System in North Bay common stock on that date, as
adjusted for the 5% stock dividend paid March 28, 2003.
Long Term Incentive Plans - Awards in Last Fiscal Year
There were no transactions in 2002 which require disclosure in a table for
long-term incentive plan awards.
-22-
Employment Agreement and Termination of Employment and Change of Control
Arrangements
Terry L. Robinson. Effective May 1, 2001, North Bay Bancorp entered into an
Amended and Restated Employment Agreement with Mr. Robinson as President and
Chief Executive Officer of the Company (the "Robinson Agreement"). The Robinson
Agreement amends and restates the 1999 Agreement by and between Mr. Robinson and
The Vintage Bank (the "1999 Agreement"). The initial term of the Robinson
Agreement continues until the fifth anniversary after the effective date of the
1999 Agreement (March 1, 1999). Unless terminated by Mr. Robinson or the
Company, at the end of the fifth year, or any subsequent year, the agreement
will continue on a year to year basis. The agreement provides for a base salary
of $191,000, which will be adjusted annually as determined by the Board of
Directors in its sole discretion. Mr. Robinson is also eligible to receive
additional compensation under the terms of an incentive compensation plan
adopted annually by the Board of Directors, participation in the Company's
401(k) Plan, 20 days annual vacation, reimbursement of reasonable business
expenses, and automobile allowance of $750 per month.
If Mr. Robinson's employment is terminated by reason of his (i) death, (ii)
termination by the Company for cause, or (iii) resignation, he will be entitled
to be paid his salary then in effect through the effective date of termination.
If he is terminated without cause, he will be entitled to six months salary.
The agreement provides that if within one year of the effective date of certain
specified corporate changes, including a merger, sale, transfer of the company's
assets or an effective change in control of the company, Mr. Robinson's
employment is terminated by the Company, without cause, he will be entitled to
be paid an amount equal to three (3) times his annual salary then in effect plus
the average of his incentive compensation for the two most recently completed
fiscal years of the Company. This amount is payable for a period of thirty-six
(36) months following the effective date of the termination of his employment.
The maximum amount payable under Mr. Robinson's employment agreement in
connection with any corporate change for the years 2000, 2001, and 2002 was
$367,834, $634,132, and $_____ respectively.
Kathi Metro. Effective May 1, 2001, North Bay Bancorp entered into an Employment
Agreement with Ms. Metro as Executive Vice President and Credit Administrator of
the Company. The initial term of the Metro Agreement continues until the third
anniversary after the effective date of the agreement. Unless terminated by Ms.
Metro or the Company, at the end of the third year, or any subsequent year, the
agreement will continue on a year to year basis. The agreement provides for a
base salary of $107,000, which will be adjusted annually as determined by the
Board of Directors in its sole discretion. Ms. Metro is also eligible to receive
additional compensation under the terms of an incentive compensation plan
adopted annually by the Board of Directors, participation in the Company's
401(k) Plan, 20 days annual vacation, reimbursement of reasonable business
expenses, and automobile allowance of $500 per month.
-23-
John A. Nerland. Effective April 15, 2002, Solano Bank entered into an
Employment Agreement with Mr. Nerland as President and Chief Executive Officer
of the Bank. The initial term of the Nerland Agreement continues until the third
anniversary after the effective date of the agreement. Unless terminated by Mr.
Nerland or Solano Bank, at the end of the third year, or any subsequent year,
the agreement will continue on a year to year basis. The agreement provides for
a base salary of $115,000, which will be adjusted annually as determined by the
Board of Directors in its sole discretion. Mr. Nerland is also eligible to
receive additional compensation under the terms of an incentive compensation
plan adopted annually by the Board of Directors, participation in the Company's
401(k) Plan, 20 days annual vacation, reimbursement of reasonable business
expenses, and automobile allowance of $500 per month.
Glen C. Terry. Effective May 1, 2001, Solano Bank entered into an Employment
Agreement with Mr. Terry as President and Chief Executive Officer of the bank.
Mr. Terry's agreement was assigned to The Vintage Bank on April 1, 2002. The
initial term of the Terry Agreement continues until the third anniversary after
the effective date of the agreement. Unless terminated by Mr. Terry or The
Vintage Bank, at the end of the third year, or any subsequent year, the
agreement will continue on a year to year basis. The agreement provides for a
base salary of $130,000, which will be adjusted annually as determined by the
Board of Directors in its sole discretion. Mr. Terry is also eligible to receive
additional compensation under the terms of an incentive compensation plan
adopted annually by the Board of Directors, participation in the Company's
401(k) Plan, 20 days annual vacation, reimbursement of reasonable business
expenses, and automobile allowance of $500 per month.
The agreement for each of Ms. Metro, Mr. Nerland, and Mr. Terry provides that if
their employment is terminated by reason of his or her death, termination by the
Company for cause or by his or her resignation, he or she will be entitled to be
paid his or her salary then in effect through the effective date of termination.
If he or she is terminated without cause, he or she will be entitled to six
months salary.
The agreement for each of Ms. Metro and Mr. Terry also provides that if within
one year of the effective date of certain specified corporate changes, including
a merger, sale, transfer of the company's assets or an effective change in
control of the company, his or her employment is terminated by the Company,
without cause, he or she will be entitled to be paid an amount equal to his or
her annual salary then in effect plus the average of his or her incentive
compensation for the two most recently completed fiscal years of the Company. If
the executive has completed five or more years of service at the time of
termination, he or she will be entitled n amount equal to two times his or her
annual salary then in effect plus the average of his or her incentive
compensation for the two most recently completed fiscal years.
The maximum amount payable under Mr. Terry's employment agreement in connection
with any corporate change for 2002 was $178,417. The maximum amount payable
under Ms. Metro's current employment agreement in connection with any corporate
change for 2002 was $257,166.
The agreement for each of Mr. Robinson, Ms. Metro, and Mr. Terry also provides
that in the event the compensation payable to the executive by reason of a
change in control (including without limitation, accelerated vesting of stock
options and other compensation payable outside
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of the agreement) constitute excess parachute payments within the meaning of
Section 280G of the Internal Revenue Code and the executive will be subject to
the excise tax imposed by Section 4999 of the Code, then the aggregate
compensation payable to the executive will be increased by an additional amount
so that the net amount retained by the executive, after deduction of any excise
tax and any federal, state and local income tax, excise taxes and FICA Medicare
withholding taxes will equal to the total benefits contemplated by the
agreement.
Executive Officer Supplemental Executive Retirement Plan
Effective October 1, 2001, The Vintage Bank and Solano Bank entered into
Executive Supplemental Compensation Agreements with Terry L. Robinson, Lee-Ann
Cimino, Kathi Metro, and Glen C. Terry. By the terms of these Agreements the
covered executive officers will receive a defined cash benefit payable monthly
upon retirement upon reaching age 65 (or upon or after age 62 with a reduced
benefit), subject to the terms set forth in the executive officer's individual
agreement. Benefits under these Agreements vest over five year periods at the
rate of 20% per year after five years' of service with credit for up to five
years of prior service. The defined cash benefit per year for the covered
executive officers assuming 100% vesting is as follows: Terry L. Robinson,
$120,000; Lee-Ann Cimino, $75,000; Kathi Metro, $75,000; and Glen C. Terry,
$75,000.
Compensation of Directors
The Board of Directors of North Bay has adopted a plan for the payment of fees
to directors. Under the plan, Directors of North Bay are eligible to be paid a
monthly fee of $1,400 for attendance at regular Board meetings and meetings of
the committees on which they sit; provided, however, that Directors of North Bay
also serving as directors of The Vintage Bank or Solano Bank are eligible to be
paid an aggregate monthly fee of $1,550 for attendance at regular Board meetings
and meetings of the committees on which they sit. Also, the Chairman of the
North Bay Board of Directors is eligible to be paid an additional $200 per
month. Directors serving only on the Board of Directors of The Vintage Bank are
eligible to be paid a monthly fee of $1,000 for attendance at regular Board
meetings and meetings of the committees on which the sit. Directors serving only
on the Board of Directors of Solano Bank are eligible to be paid a monthly fee
of $500 for attendance at regular Board meetings and meetings of the committees
on which they sit. Also, the Chairman of the Board of The Vintage Bank and
Solano Bank are each eligible to be paid an additional $100 per month.
In all instances, the payment of fees to directors is subject to reduction for
failure to attend the minimum number of meetings of the board and committees as
specified in the North Bay Plan. Each of Terry L. Robinson, President and Chief
Executive Officer of North Bay and a director of North Bay, The Vintage Bank and
Solano Bank; John Nerland, President and Chief Executive Officer and a Director
of Solano Bank, and Glen C. Terry, President, Chief Executive Officer, and Chief
Credit Officer and a Director of The Vintage Bank is not eligible to be paid any
fees for attendance at regular Board meetings and committees on which he sits.
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Director Stock Options
No stock options were granted to directors of North Bay Bancorp in 2002.
After giving effect to the stock split effective October 1, 1997, and stock
dividends paid through March 28, 2003, the aggregate number of shares subject to
directors' options outstanding as of March 10, 2003 is _________.
Directors' Deferred Fee Plan
In August 1995, The Vintage Bank established a Deferred Fee Plan for the
directors of The Vintage Bank including Mr. Robinson. The Deferred Fee Plan has
been adopted by North Bay, and is now available to directors of North Bay,
Solano Bank, and The Vintage Bank. The deferral program, provides for deferral,
at the election of each director, of up to $15,000 of annual director fees. The
deferral program commences at the time the director elects to participate and
continues for a period which continues until the director completes ten years of
service and attains retirement age. At the end of the deferral program or
earlier in the event of disability, the deferred compensation, including accrued
interest, is paid to the director in a lump sum or periodic payments over a
specified period of time as selected by the director upon enrollment in the
Deferred Fee Plan. If the director terminates his or her relationship with North
Bay, Solano Bank and/or The Vintage Bank during the Deferred Fee Plan period for
reasons other than death or disability, all amounts deferred, including accrued
interest, will be paid in the manner selected by the director but accrued
interest on the deferred compensation will be calculated at an interest rate
that is two-hundred basis points lower than the rate established by North Bay's
Board of Directors in accordance with the Deferred Fee Plan.
In the event of death while a member of the Board of Directors, the director's
beneficiary will receive the amount that would have been paid to the director
had he or she remained in the program and attained his or her specified
retirement age.
In 1995 The Vintage Bank paid an aggregate single premium of $1,040,000 to
purchase life insurance policies on each director participating in the Deferred
Fee Plan to fund its liability for the death benefit. The Vintage Bank owns and
is the beneficiary of the policies and earns a rate of return on the invested
premiums which is reflected by an increase in the cash value of the policies.
The directors participating in the deferred program have no rights in the
policies. It is the current policy of the Board of Directors not to purchase
additional life insurance policies to fund the death benefit of new directors
who subsequently become eligible to participate in the Deferred Fee Plan.
Management of North Bay believes that the premium investment, after
consideration of the non-taxable nature of earnings on certain insurance
investments, produces a higher return than other taxable investments made in the
normal course of business. Therefore, the net cost of this deferred compensation
program to North Bay is believed to be nominal.
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Director Supplemental Retirement Program
Effective January 1, 1999, The Vintage Bank established a Director Supplemental
Retirement Program for the directors of The Vintage Bank including Mr. Robinson
and The Vintage Bank's corporate secretary, Wyman G. Smith. Under the program
and a retirement policy adopted by The Vintage Bank's Board of Directors,
non-employee directors attaining age sixty-five are no longer eligible for
re-election to the Board of Directors. Upon attaining retirement age and
provided the participant has served on The Vintage Bank's Board of Directors or
as an officer of The Vintage Bank for not less than ten years, participants are
entitled to receive a defined benefit of $8,500 per year under the program in
annual or monthly installments commencing thirty days following their
retirement. The benefit is subject to an annual 2% cost of living increase on
each anniversary of the commencement of a participant's benefit.
In order to fund its liability under the program and minimize the impact of the
program on The Vintage Bank's earnings, in 1998 The Vintage Bank paid an
aggregate single premium of $2,462,000 to purchase life insurance policies to
fund the retirement and death benefits. The Vintage Bank owns and is the
beneficiary of the policies and earns a rate of return on the invested premiums
which is reflected by an increase to the cash value of the policies. The
directors participating in the program have no rights in the policies other than
an endorsement for a portion of the death benefit.
The program also provides that a deceased participant's named beneficiaries will
receive a death benefit. On the death of a participant, The Vintage Bank
receives a tax-free death benefit sufficient to fully recover all premiums paid
on the deceased participant's specific life insurance policy.
In February 2002, the Board of Directors of North Bay approved discontinuation
of this program for North Bay, The Vintage Bank and Solano Bank. Discontinuation
of the program does not affect the retirement and death benefits of existing
program participants.
Management believes that the premium investment, after consideration of the
non-taxable nature of earnings on certain insurance investments, produces a
higher return than other taxable investments made in the normal course of
business. Therefore, the net cost of the program to The Vintage Bank is believed
to be nominal.
OTHER INFORMATION REGARDING MANAGEMENT
Management Indebtedness
Certain provisions of the California Financial Code and federal regulations
enable state chartered banks to make loans to officers, directors and employees
up to certain specified limits. From time to time Solano Bank and The Vintage
Bank have made loans to officers, directors and employees in the ordinary course
of business. These loans were made on substantially the same terms, including
interest rates and collateral requirements, as those prevailing for comparable
transactions with other nonaffiliated persons at the time each loan was made,
subject to the
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limitations and other provisions in California and Federal law. These loans do
not involve more than the normal risk of collectibility or present other
unfavorable features.
Certain Business Relationships
Mr. Gaw, a Director of the Company, Solano Bank, and of The Vintage Bank and
nominee for election to the Board of Directors, and Wyman G. Smith, Corporate
Secretary of North Bay, Solano Bank, and The Vintage Bank are members and
shareholders of the law firm of Gaw, Van Male, Smith, Myers & Miroglio, a
professional law corporation which North Bay, Solano Bank and The Vintage Bank
have retained since their organization and propose to retain for specific
matters during 2003. During 2002, fees received by the firm for these services
totaled $164,644, of which $119,001 were billed to North Bay, $8,328 to Solano
Bank, and $37,315 to The Vintage Bank.
Reports of Changes in Beneficial Ownership
Based upon a review of Forms 3 and 4 and amendments thereto furnished to the
Company during the fiscal year ending December 31, 2002, Form 5 and amendments
thereto furnished to the Company with respect to the fiscal year ending December
31, 2002, and written representations from all reporting persons, all statements
required by rules promulgated by the Securities and Exchange Commission under
Section 16 of the Securities Exchange Act of 1934 were timely filed.
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2. APPROVAL OF AMENDMENTS TO BYLAWS CREATING A CLASSIFIED BOARD OF
DIRECTORS AND ELIMINATING CUMULATIVE VOTING
Proposed Amendments
The Company's Bylaws presently provide that all directors are elected at each
annual meeting and hold office until their respective successors have been
elected and qualified. The proposed amendments to the Company's Bylaws provide
that:
o the Board of Directors will be classified into three classes
and that directors will be elected for staggered terms; and
o the election of directors by the shareholders by cumulative
voting will not be permitted.
The amendments will become effective commencing with the Company's 2004 annual
meeting of shareholders.
If the proposed amendments are adopted, it is anticipated that at the 2004
annual meeting, the shareholders will be asked to elect nine directors, three
for an initial term of one year, three for an initial term of two years, and
three for an initial term of three years.
At each subsequent annual meeting of shareholders, commencing with the 2005
annual meeting, directors elected to succeed those directors whose terms then
expire will be elected for a term of office to expire at the third succeeding
annual meeting of shareholders after their election, with each director to hold
office until his or her successor has been duly elected and qualified. The Board
of Directors will increase or decrease the number of directors in one or more
classes as may be appropriate whenever it increases or decreases the number of
directors to constitute the full Board of Directors in order to ensure that the
three classes shall be as nearly equal in number of directors as practicable.
Assuming Proposal No. 2 is approved by the shareholders, effective commencing
with the Company's 2004 annual meeting of shareholders, Section 11 and Section
17 of the Company's Bylaws will be amended to read as follows:
"Section 11. Voting Rights. Only persons in whose names shares entitled
to vote stand on the stock records of the Company at the close of
business on the record date fixed by the Board of Directors as provided
in Section 41 of these Bylaws for the determination of shareholders of
record are entitled to notice of and to vote at a meeting of
shareholders.
Except as may be provided in the Articles of Incorporation or in these
Bylaws, each shareholder entitled to vote is entitled to one vote for
each share held on each matter submitted to a vote of shareholders.
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In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them, up to the
number of directors to be elected by such shares, are elected.
Voting may be by voice or ballot, provided that any election of
directors must be by ballot upon the demand of any shareholder made at
the meeting and before the voting begins.
Cumulative voting to elect directors shall not be permitted."
"Section 17. Election and Term of Office. The Board of Directors is
classified into three (3) classes, the members of each class to serve
for a term of three (3) years. At the 2004 annual meeting of
shareholders, nominees elected as directors will be classified
according to the recommendations of the Board of Directors. The
directors will be divided, with respect to the time for which each will
hold office, into three classes, as nearly equal in number of directors
as practicable. The term of office of the first class ("Class A") will
expire at the 2005 annual meeting of shareholders, the term of the
second class ("Class B") will expire at the 2006 annual meeting of
shareholders, and the term of office of the third class ("Class C")
will expire at the 2007 annual meeting of shareholders.
At subsequent annual meetings of shareholders, the number of directors
to be elected will equal the number of directors with terms expiring at
that annual meeting. At each subsequent annual meeting the directors
elected will be elected for a term of three (3) years.
The Board of Directors shall increase or decrease the number of
directors in one or more classes as may be appropriate whenever it
increases or decreases the number of directors to constitute the full
Board of Directors in order to ensure that the three classes shall be
as nearly equal in number of directors as practicable.
A director will hold office until the annual meeting for the year in
which his or her term expires and until his or her successor is be
elected and qualified, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
Board of Directors, no matter how created, may be filled by a majority
of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy shall
hold office for a term that will coincide with the term of the class to
which that director will have been elected."
Additional conforming amendments may be made to other sections of the Company's
Bylaws.
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Analysis of Proposed Amendments
The proposed amendment to Section 11 of the Company's Bylaws provides that,
commencing with the Company's 2004 annual meeting of shareholders, shareholders
will not be able to elect directors by cumulative voting. Cumulative voting
entitles shareholders to give one nominee as many votes as are equal to the
number of directors to be elected, multiplied by the number of shares owned, or
to distribute his or her votes on the same principle between two or more
nominees as he or she sees fit. With cumulative voting, therefore, it is
possible for a minority shareholder or group of shareholders to obtain
representation on the Board of Directors even if a majority of shareholders
prefer other candidates. To this extent, cumulative voting may permit a more
representative board of directors in a company in which there are distinctly
differing interests among different shareholders or shareholder groups. Without
cumulative voting, directors will be elected by a simple majority vote of shares
voting. Each shareholder entitled to vote may vote all the shares held by that
shareholder for each of several nominees for director up to the number of
directors to be elected. The shareholder may not cast more votes for any single
nominee than the number of shares held by that shareholder. The elimination of
cumulative voting will eliminate the possibility of the election of one or more
directors by a small group of shareholders having less than a majority of the
shares voting.
Section 17, by providing for the classification of directors, provides that the
Board will be divided into three classes of directors serving staggered
three-year terms, with each class being as nearly equal in number as possible.
As a result, approximately one-third of the Board of Directors would be elected
each year. Section 17 further provides that at the 2004 annual meeting of
shareholders, nominees elected as directors will be classified according to the
recommendations of the Board of Directors. Thus, there will be three classes of
directors, with one class serving until the 2005 annual meeting of shareholders,
the second class serving until the 2006 annual meeting of shareholders, and the
third until the 2007 annual meeting of shareholders. Commencing with the 2005
annual meeting of shareholders, the number of directors to be elected will equal
the number of directors with terms expiring at that annual meeting, and the
directors elected will be elected for a term of three (3) years. In the event of
a vacancy on the Board, any director elected by the shareholders or the Board to
fill the vacancy would hold office for the balance of the term of the class in
which the vacancy occurred.
Reasons For the Proposal and Possible Disadvantages
The Board of Directors believes that the classification of directors will reduce
the possibility that a third party could effect a sudden or surprise change in
the composition of the Board of Directors without the support of the incumbent
Board. Thus, the classification of directors will affect the ability of
shareholders of the Company to effect immediate changes in the composition of
the Board of Directors.
Because the classification of directors will make it more difficult or deter a
proxy contest or the assumption of control of the Board by a holder of a
substantial block of the Company's common stock, it will increase the likelihood
that incumbent members of management will retain their positions. The
classification of directors will apply to every election of directors
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whether or not a change in the composition of the Board would be beneficial and
whether or not the holders of a majority of the Company's common stock believe
that such a change would be desirable. As a result of the classification of
directors it may require shareholders who do not favor the policies of the Board
at least two annual meetings of shareholders to replace a majority of the Board.
In addition, the classification of directors could have the effect of deterring
a third party from making a tender offer for or otherwise acquiring significant
blocks of the Company's shares, even though such an action might increase, at
least temporarily, market prices for the Company's shares, and even though a
number of shareholders of the Company might be willing to sell their shares at
the price offered. Because the deterrence of these acquisitions could tend to
reduce these temporary fluctuations in the market price of the Company's shares,
shareholders could be denied certain opportunities to sell their shares at
temporarily higher market prices. However, the Board believes that the benefits
in protecting the ability of a Board of Directors to negotiate with a proponent
of an unfriendly or unsolicited proposal to take over or restructure a
corporation outweigh the disadvantage of discouraging such proposals.
In recent years, accumulations by third parties of substantial stock positions
in publicly held corporations frequently have been preludes to hostile attempts
to take over or restructure such corporations or to sell all or part of such
corporations' assets or to take other similar extraordinary corporate actions.
These actions are often undertaken by third parties without advance notice to or
consultation with management. In many cases, these third parties position
themselves through stock ownership to seek representation on boards of directors
in order to increase the likelihood that they will be able to implement proposed
transactions opposed by the corporation's management. If a corporation resists
the efforts of a third party to obtain representation on its board, the third
party may commence a proxy contest to have its nominees elected to the board in
place of certain directors or the entire board. In some cases, a third party may
not truly be interested in taking over the corporation, but uses the threat of a
proxy fight or a bid to take over the corporation, or both, as a means of
obtaining for itself a special benefit which might not be available to all of
the corporation's shareholders. Cumulative voting could allow a minority
shareholder or group to elect a member to the Company's Board of Directors.
The Board believes that the imminent threat of removal of the Company's
management in such a situation, through a change in the composition of the
Board, could severally curtail management's ability to negotiate effectively
with such a party. Management could be deprived of the time and information
necessary to evaluate a particular takeover or other proposal, to seek and study
alternative proposals that may better serve the interests of the Company's
shareholders and, in an appropriate case, to help achieve a better price in any
transaction involving the Company that may ultimately be undertaken.
Takeovers or changes in management of a corporation which are proposed and
effected without prior consultation and negotiation with its Board of Directors
are not necessarily detrimental to the corporation and its shareholders.
However, the Board believes that the benefits in protecting the ability of a
Board of Directors to negotiate with a proponent of an unfriendly or unsolicited
proposal to take over or restructure a corporation outweigh the disadvantages of
discouraging such proposals.
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The Board of Directors believes that elimination of cumulative voting is
desirable in order to preclude the election of a director or small group of
directors representing a special interest group of shareholders because of the
potential for dissension on the Board of Directors. Members of the Board are
aware of situations in other corporations where differing factions, through the
use of cumulative voting, have been able to put persons on the board of
directors who appeared to be more interested in the interests of their
sponsoring shareholders than those of the corporation as a whole. The Board
believes that those situations have been injurious to the interests of the
corporations involved and that the affairs of the Company can be better handled
in the absence of such dissension. At present, no individual shareholder or
group of shareholders, which is known to the Board of Directors, controls a
large enough number of shares of the Company to be able to elect a director
through the use of cumulative voting. Therefore, this change will only affect
actions of individuals or groups which might occur in the future.
The proposed amendments to Section 11 and Section 17, are designed, in part, to
encourage a third party seeking to acquire control of the Company to consult
first with the Company's Board of Directors regarding any proposed business
combination or other transaction involving the Company, so that it may be
studied by the Board and so that the Company's shareholders can have the benefit
of the Board's recommendations in cases where shareholder approval is required.
Although a takeover bid may be made at prices representing premiums over the
then current market price of the shares being sought, the Board believes that,
in a situation where a third party seeks management's cooperation, the Company's
Board of Directors will be in a better position to promote consideration of a
broader range of relevant factors, such as the structuring of a proposed
transaction and its tax consequences and the underlying value and prospects of
the Company. These issues may not otherwise adequately be addressed by such a
third party.
Required Vote and Recommendation
The affirmative vote of a majority of outstanding shares of North Bay is
required to approve the amendments to Bylaws creating a classified Board of
Directors and eliminating cumulative voting. An abstention or failure to vote
shares represented and entitled to vote at the meeting will be treated as a
negative vote. The Board of Directors recommends that shareholders vote FOR this
proposal.
3. RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Company, based upon the approval of the Audit
Committee, has selected and appointed KPMG LLP, independent certified public
accountants, to examine the financial statements of the Company for the year
ending December 31, 2003. In recognition of the important role of the
independent auditor, the Board of Directors has determined that its selection of
the independent auditor should be submitted to the shareholders for review and
ratification on an annual basis. The Board of Directors expects that a
representative of KPMG LLP, will be in attendance at the Annual Meeting and will
be provided the opportunity to make a
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statement if he or she so desires and will be available to respond to
appropriate questions of shareholders.
KPMG LLP's engagement by North Bay commenced on April 8, 2002. During the fiscal
year ended December 31, 2002, KPMG LLP provided professional services in
connection with the review of Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30, and September 30, 2002, preparation for the audit of
financial statements of North Bay for the fiscal year ended December 31, 2002,
and consulted with North Bay's management regarding year end tax planning.
Audit Fees
The aggregate fees billed by KPMG LLP for professional services rendered for the
audit of the Company's annual financial statements for fiscal year 2002 and the
reviews of the financial statements included in the Company's Forms 10-Q for
such fiscal year were $100,785.
Financial Information Systems Design And Implementation Fees
There were no fees billed by KPMG LLP for professional services rendered for
information technology services relating to financial information systems design
and implementation for fiscal year 2002.
All Other Fees
The aggregate fees billed by KPMG LLP for services rendered to the Company other
than the services described above under the captions "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", were $6,000.
Changes in Accountants
On April 8, 2002, the Audit Committee of the Board of Directors of North Bay
Bancorp dismissed Arthur Andersen LLP, San Francisco, California, as the
independent accountant chosen to audit the Company's consolidated financial
statements.
Arthur Andersen's report on the consolidated financial statements of North Bay
for either of the years ended December 31, 2001 or 2000 did not contain an
adverse opinion or a disclaimer of opinion, and was not qualified or modified as
to uncertainty, audit scope, or accounting principles.
During North Bay's two most recent fiscal years, and during the subsequent
interim period preceding the date of Arthur Andersen's dismissal, there was no
disagreement with Arthur Andersen on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Arthur Andersen, would have
caused Arthur Andersen to make a reference to the subject matter of the
disagreement in connection with its report.
-34-
During North Bay's two most recent fiscal years, and during the subsequent
interim period preceding the date of Arthur Andersen 's dismissal, Arthur
Andersen did not advise North Bay:
o that the internal controls necessary for North Bay to develop
reliable financial information do not exist;
o that information had come to Arthur Andersen's attention that
has led it to no longer rely on management's representations
or that has made it unwilling to be associated with the
financial statements prepared by management;
o of the need to significantly expand the scope of Arthur
Andersen's audit or that information has come to Arthur
Andersen's attention during North Bay's two most current
fiscal years, and during the subsequent interim period
preceding the date of Arthur Andersen's dismissal, that if
further investigated may:
o materially impact the fairness or reliability of
either a previously issued audit report or the
underlying financial statements, or the financial
statements to be issued covering the fiscal period(s)
subsequent to the date of the most recent statements
covered by an audit report (including information
that may prevent it from rendering an unqualified
audit report on those financial statements), or
o cause Arthur Andersen to be unwilling to rely on
management's representations or be associated with
North Bay's financial statement;
o and, due to the Arthur Andersen's dismissal, or for
any other reason, Arthur Andersen did not so expand
the scope of its audit or conduct a further
investigation; or,
o that information has come to Arthur Andersen's attention that
it has concluded materially impacts the fairness or
reliability of either:
o a previously issued audit report or the underlying
financial statements, or
o the financial statements to be issued covering the
fiscal period(s) subsequent to the date of the most
recent statements covered by an audit report
(including information that may prevent it from
rendering an unqualified audit report on those
financial statements);
o due to Arthur Andersen's dismissal, or for any other
reason, the issue has not been resolved to Arthur
Andersen's satisfaction prior to the dismissal.
In connection with a Current Report on Form 8-K filed by North Bay in April 2002
reporting the change of accountants, North Bay provided Arthur Andersen with a
copy of the Current Report
-35-
and requested that Arthur Andersen furnish North Bay a letter addressed to the
Securities and Exchange Commission stating whether or not Arthur Andersen agreed
with the above statements. By letter dated April 11, 2002, Arthur Andersen
agreed with the above statements.
Required Vote and Recommendation
The affirmative vote of a majority of the shares voting at the meeting, assuming
a quorum is present, is required to ratify the appointment of KPMG LLP to audit
the financial statements of North Bay for the fiscal year ending December 31,
2003. An abstention or failure to vote shares represented and entitled to vote
at the meeting will be treated as a negative vote. The Board of Directors
recommends that shareholders vote FOR this proposal.
AVAILABILITY OF FORM 10-K
A copy of the Company's 2002 Annual Report on Form 10-K, including financial
statements and financial statement schedules required to be filed with the
Securities Exchange Commission pursuant to Section 13 of the Securities Exchange
Act of 1934, will be furnished without charge to any shareholder upon written
request. A copy may be requested by writing Pansy F. Smith, Assistant Corporate
Secretary, North Bay Bancorp, P.O. Box 2200, Napa, California 94558.
SHAREHOLDER PROPOSALS
The 2004 Annual Meeting of Shareholders will be held on April 27, 2004. November
__, 2003, is the date by which shareholder proposals intended to be presented at
the 2004 Annual Meeting must be received by management of the Company at its
principal executive office for inclusion in the Company's 2004 proxy statement
and form of proxy relating to that meeting. Additionally, with respect to any
proposal by shareholders not submitted for inclusion in the Bank's Proxy
Statement, if notice of the proposal is not received by February __, 2004, the
notice will be considered untimely, and the Company's proxy holders will have
discretionary authority to vote on the proposal.
OTHER MATTERS
The Board of Directors is not aware of any other matters to come before the
Annual Meeting. If any other matter not mentioned in this Proxy Statement is
brought before the Annual Meeting, the persons named in the enclosed form of
proxy will have discretionary authority to vote all proxies with respect thereto
and in accordance with their judgment.
Dated: March __, 2003. For the Board of Directors
Napa, California
___________________________
Wyman G. Smith
Corporate Secretary
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[North Bay Bancorp Logo]
APPENDIX A
AUDIT COMMITTEE CHARTER
ORGANIZATION
The Audit Committee of the Board of Directors shall be comprised of at
least three outside Directors who are independent of Management and the Company.
Members of the Audit Committee shall be considered independent if they have no
relationship to the Company that may interfere with the exercise of their
independence from Management and the Company. All Audit Committee members will
be financially literate, and at least one member will have accounting or related
financial management expertise.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Directors in
fulfilling their responsibility to the shareholders, potential shareholders,
regulators and investment community relating to corporate accounting, reporting
practices of the company and the quality and integrity of financial reports of
the Company. Thus, the Audit Committee has the responsibility to maintain free
and open communication among the Directors, the independent auditors, the
regulators, the internal auditors and the financial management of the Company
and its subsidiaries
RESPONSIBILITIES
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible. Flexibility is needed to best
react to changing conditions and to ensure to the Directors, shareholders and
regulators that the corporate accounting and reporting practices of the Company
are in accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
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>> Obtain the full Board of Directors' approval of this Charter and review
and reassess this Charter as conditions dictate (at least annually).
>> Review and recommend to the Directors the independent auditors to be
selected to audit the financial statements of the Company and its
subsidiaries. The Audit Committee has sole authority to hire and fire
outside auditors.
>> Have a clear understanding with the independent auditors that they are
ultimately accountable to the Board of Directors and the Audit
Committee as the shareholders' representatives, who have the ultimate
authority in deciding to engage, evaluate and, if appropriate,
terminate their services.
>> Review and concur with Management's appointment, termination or
replacement of the internal audit, compliance review, credit
administration and credit review outsourcing firms. The Audit Committee
has the authorized responsibility to appoint, terminate or replace
these firms and personnel.
>> Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year along with the procedures to be utilized
and the adequacy of the independent auditors' compensation. At the
conclusion of each review or audit, the Committee should review the
report, including any comments or recommendations of the independent
auditors.
>> Review with the independent auditors the Company's internal auditor or
outsourcing representative and financial and accounting personnel, the
adequacy and effectiveness of the accounting and financial controls of
the Company and its subsidiaries and the risks involved in the various
operational areas. Also, the Committee should elicit any
recommendations for the improvement of such internal controls or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of
internal controls to expose any payments, transactions or procedures
that might be deemed illegal or otherwise improper. Further, the
Committee periodically should review Company policy statements to
determine their adherence to the Code of Conduct and Ethics.
>> Review reports received from regulators concerning legal and regulatory
matters that may have a material effect on the financial statements and
related Company compliance policies.
>> Review with the Company's counsel any legal matters that could have a
significant impact on the Company's financial statements.
>> Review the internal audit, credit administration and credit review
functions of the Company and its subsidiaries, including the
independence and authority of its reporting obligations, the proposed
audit plans for the coming year and the coordination of such plans with
the independent auditors. Additionally, all credit review outsourcing
reports will be reviewed by the Committee. The internal audit,
compliance review, credit administration and credit review functions
shall report directly to the Audit Committee. For operational purposes,
on a daily basis these functions shall report to the CEO or his
designated officer.
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>> Review the policies and procedures in effect for considering officers'
expenses and perquisites for the Company and its subsidiaries.
>> Inquire of Management, the internal audit and credit administration
review firms and the independent auditors about significant risks or
exposures and assess the steps Management has taken to minimize such
risks to the Company and its subsidiaries.
>> Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit
plan, with explanations for any deviations from the original plan,
including management responses and time frame for corrective action. A
matrix of such audits and examinations will be reviewed at each
meeting.
>> Review the quarterly financial statements with financial management and
the independent auditors prior to the filing of the Form 10-Q (or prior
to the press release of results,) to determine that the independent
auditors do not take exception to the disclosure and content of the
financial statements, and discuss any other matter required to be
communicated to the Committee by the auditors. The Chair of the
Committee may act on behalf of the Committee for the purpose of this
review.
>> Review the financial statements contained in the Annual Report to
Shareholders with Management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the
shareholders. Review with financial management and the independent
auditors the results of their timely analysis of significant financial
reporting issues and practices, including changes in or adoptions of
accounting principles and disclosure practices, and discuss any other
matters required to be communicated to the Committee by the auditors.
Also review with financial management and the independent auditors
their judgments about the quality, not just acceptability, of
accounting principals and the clarity of the financial disclosure
practices used or proposed to be used and, particularity, the degree of
aggressiveness or conservatism of the Company's accounting principles
and underlying estimates, and other significant decisions made in
preparing the financial statements.
>> It is the responsibility of the Chairman of the Audit Committee to
communicate and interact with other Committees of the Board and the
Board itself on all matters of importance.
>> The Committee Chairperson will be authorized to meet with the
independent auditors and financial management of the Company to review
their reports on behalf of the Committee.
>> Provide sufficient opportunity for the independent auditors to meet
with the members of the Audit Committee without members of Management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the Company's financial, accounting
and auditing personnel and the cooperation that the independent
auditors received during the course of the audit. Provide executive
sessions without management present for all outsourcing vendors
(internal audits, compliance, credit and Information System audits)
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>> Review accounting and financial human resources and succession planning
within the Company and its subsidiaries.
>> Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the
full Board of Directors meeting to assist in reporting the results of
the annual audit or to answer other director questions (alternatively,
the other Directors, particularly the other independent Directors shall
be invited to attend the Audit Committee meeting during which the
results of the annual audit are reviewed.)
>> Review the nature, scope and fees of other professional services
provided to the Company by the independent auditors and consider the
relationship to the auditors' independence. Advance approval of the
Committee is required for non-audit services.
>> On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional
services as required by Independence Standards Board No. 1,
Independence Discussions with Audit Committees. In addition, review
with the independent auditors the nature and scope of any disclosed
relationships or professional services and take, or recommend that the
Board of Directors take, appropriate action to ensure the continuing
independence of the auditors.
>> Determine that the external auditors had a peer review and the results
of such review.
>> Review the report of the Audit Committee in the Proxy Statement
disclosing whether or not the Committee has reviewed and discussed with
Management and the independent auditors, as well as discussed within
the Committee (without Management or the independent auditors present),
the financial statements and the quality of accounting principles and
significant judgments affecting the financial statements. In addition,
disclose the Committee's conclusion on the fairness of presentation of
the financial statements as to their conformity with GAAP based on
those discussions. After such review, the Audit Committee should
recommend to the Board that the audited financial statements be
included in the Company's Annual Report on Form -K.
>> Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each Committee meeting with, the Board
of Directors.
>> Review any major changes to the Company's accounting principles and
practices as may be suggested by Management.
>> Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if,
in its judgment, that is appropriate. Also, when necessary, the
Committee should review and assess conflict of interests, related party
transactions and customer complaints.
>> Review the Company's disclosure in the Proxy Statement for its Annual
Meeting of Shareholders that states that the Committee has satisfied
its responsibilities under this Charter
-40-
for the prior year. In addition, include a copy of this Charter in the
Annual Report to Shareholders or the Proxy Statement at least
triennially or the year after any significant amendment to the Charter.
>> The Committee should conduct a self-assessment of its performances in
the interest of continuous improvement. This self-assessment should
occur at least every two years. An outside facilitator may be used to
conduct this self-evaluation.
FREQUENCY OF MEETINGS
The Audit Committee should meet as a minimum quarterly.
COMMITTEE EDUCATION AND ORIENTATION
Whenever possible, members of the Committee are expected to attend
association conferences, meetings and classes for continuing education and
exposure to the financial institution business and environment in which the
Company operates.
AUDIT COMMITTEE PLAN
The Committee should develop an annual Audit Committee Plan which is
responsive to the primary Audit Committee responsibilities for the review and
approval of the Plan by the full Board.
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APPENDICES TO EDGARIZED FILING
-i-
APPENDIX A
NORTH BAY BANCORP PROXY CARD
X PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE
This proxy is solicited on behalf of the Board of Directors and may be
revoked prior to the meeting.
NORTH BAY BANCORP
The undersigned hereby appoints Terry L. Robinson and Wyman G. Smith, as
Proxies, each with full power of substitution, and hereby authorizes them to
represent and to vote all the shares of common stock of North Bay Bancorp held
of record by the undersigned on March 10, 2003, at the annual meeting of
shareholders to be held on May 8, 2003 or any adjournment thereof. The
undersigned hereby further confers upon the Proxies, and each of them, or there
substitute or substitutes, discretionary authority to vote in respect to all
other matters which may properly come before the meeting or any adjournment
thereof, including discretionary authority to cumulate votes in the election of
directors.
The undersigned acknowledges receipt (a) the Notice of Annual Meeting and
accompanying Proxy Statement and (b) an Annual Report of the Company for the
fiscal year ended December 31, 2002, and hereby expressly revokes any and all
proxies heretofore given or executed by the undersigned with respect to the
shares of stock represented by this Proxy, and by filing this Proxy with the
Secretary of the Company, gives notice of revocation.
Please be sure to sign and date Date _________
this Proxy in the box below.
_______________________ _________________________
Stockholder sign above Co-holder (if any) sign above
1. ELECTION OF DIRECTORS
NOMINEES:
Thomas N. Gavin; David B. Gaw; Fred J. Hearn; Conrad W. Hewitt; Richard S. Long;
Thomas H. Lowenstein; Thomas F. Malloy; Terry L. Robinson; James E. Tidgewell
For : ____ Withhold:___ For All Except ____
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below:
2. PROPOSAL TO APPROVE AMENDMENTS TO BYLAWS CREATING A CLASSIFIED BOARD OF
DIRECTORS. AND ELIMINATING CUMULATIVE VOTING.
For ___ Against ___ Abstain ____
3. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY.
For ___ Against ___ Abstain ____
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
This Proxy, when properly executed, will be voted in the manner directed on this
proxy card by the undersigned shareholder. If no direction is made, this Proxy
will be voted for all of the nominees named on this Proxy Card and for Proposal
Nos .2 and 3.
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Detach above card, sign, date and mail in postage paid envelope provided.
North Bay Bancorp
1500 Soscol Avenue
Napa, California 94559
Please sign exactly as your name appears hereon. If shares are held jointly by
two or more persons, whether as a community property, joint tenancy or
otherwise, both or all of the persons should sign. If shares are held by a
corporation, this Proxy should be signed in full corporate name by the President
or other authorized officer. If shares are held by a partnership, this Proxy
should be signed in partnership name by an authorized person. Executor,
administrators or other fiduciaries who execute this Proxy for a shareholder of
record should give their full title.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
Has your address changed?
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