SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (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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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing
1) Amount Previously Paid:
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NOTICE OF THE FIFTH ANNUAL MEETING
OF SHAREHOLDERS OF
NORTH BAY BANCORP
TO THE SHAREHOLDERS OF NORTH BAY BANCORP:
NOTICE IS HEREBY GIVEN that the Fifth Annual Meeting of the Shareholders of
North Bay Bancorp will be held at North Bay's Offices at Copia, 500 First
Street, Napa, California, 94559, on Thursday, May 6, 2004, 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:
________ David B. Gaw
________ Conrad W. Hewitt
________ Richard S. Long
________ Terry L. Robinson
________
________
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.
1
(2) Approval of Amendment to Bylaws Increasing the Range of Directors. The
shareholders will be asked to approve an amendment to North Bay's Bylaws
increasing the range of authorized directors from six (6) to eleven (11) to nine
(9) to seventeen (17).
(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, 2004.
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 12, 2004 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: April 9, 2004
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
2
PROXY STATEMENT
FOR THE
FIFTH ANNUAL MEETING OF SHAREHOLDERS
OF
NORTH BAY BANCORP
1190 Airport Road, Suite 101
NAPA, CALIFORNIA 94558
(707) 257-8585
To Be Held May 6, 2004 at 7:00 p.m.
at Copia, 500 First Street, Napa, California, 94559
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TABLE OF CONTENTS
GENERAL INFORMATION FOR SHAREHOLDERS..............................................................................5
PRINCIPAL SHAREHOLDERS............................................................................................7
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING....................................................................8
PROPOSAL No. 1. - ELECTION OF DIRECTORS...........................................................................8
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS................................................................12
Audit Committee................................................................................12
Compensation Committee.........................................................................13
Nominating/Governance Committee................................................................15
EXECUTIVE COMPENSATION...........................................................................................23
Option Grants and Exercises....................................................................25
Options Granted in Last Fiscal Year............................................................26
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values......................27
Long Term Incentive Plans - Awards in Last Fiscal Year.........................................27
Employment Agreement and Termination of Employment and Change of Control Arrangements..........28
Executive Officer Supplemental Executive Retirement Plan.......................................30
Compensation of Directors......................................................................30
OTHER INFORMATION REGARDING MANAGEMENT...........................................................................32
Management Indebtedness........................................................................32
Certain Business Relationships.................................................................33
Reports of Changes in Beneficial Ownership.....................................................33
PROPOSAL NO. 2 - AMENDMENT TO BYLAWS INCREASING THE AUTHORIZED RANGE OF DIRECTORS...............................34
Required Vote and Recommendation for Proposal No. 2...........................................34
PROPOSAL NO. 3 - RATIFICATION OF INDEPENDENT AUDITORS...........................................................35
Required Vote and Recommendation...............................................................37
Availability of Form 10-K........................................................................................38
Shareholder Proposals............................................................................................38
OTHER MATTERS....................................................................................................38
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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 Fifth Annual Meeting of
Shareholders to be held at Copia, 500 First Street, Napa, California, 94559, on
Thursday, May 6, 2004, at 7:00 p.m. Only shareholders of record at the close of
business on March 12, 2004, (the "Record Date") will be entitled to notice of
and to vote at the Annual Meeting. On the Record Date, the Company had
outstanding 2,290,174 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 April 9, 2004.
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. As a result of an amendment to Bylaws
approved at the Company's 2003 Annual Meeting of Shareholders, cumulative voting
on the election of directors has been eliminated
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.
5
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, 2003, 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 12, 2004, 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
- -------------------------------------------------------------------------------------------------
Houghton Gifford, M.D. Director Emeritus (2) %
3219 Vichy Avenue of The Vintage Bank
Napa, CA 94558
- -----------------
(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 giving effect to stock dividends
paid through March 29, 2004, and assuming options exercisable by the named
person within 60 days have been exercised.
(2) Included in the total for Dr. Gifford are ___ shares held as custodian for a
minor under the California Uniform Transfers to Minors Act and ________ 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
PROPOSAL No. 1. -ELECTION OF DIRECTORS
It is intended to elect ten (10) Directors of the Company, pursuant to a
resolution of the Board of Directors fixing the authorized number of Directors
at ten (10). All of the nominees, except for _____________, are 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.
As the result of a Bylaw amendment approved at the 2003 Annual Meeting of
Shareholders, the Board of Directors has been classified into three (3) classes.
At the 2004 Annual Meeting of Shareholders, the Company's shareholders will
approve all ten (10) directors and the classes in to which they have been
placed. 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 and the directors elected will be elected for a term of
three (3) years.
The Nominees have been divided into the following classes:
Class A: ____________, ______________, and __________________.
Class B: ____________, ______________, and __________________.
Class C: David B. Gaw, Conrad W. Hewitt, Richard S. Long, and Terry L. Robinson.
Except for Director Terry Robinson, who is President and CEO of the Company, all
nominees are independent directors as defined by the Rules of the National
Association of Securities Dealers, Inc. and is a non-management director.
The Board of Directors may 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.
Information is provided below regarding the individual nominees, as well as
regarding the executive officers of the Company. Executive Officers serve on an
annual basis and must be
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selected by the Board of Directors annually pursuant to the Bylaws of the
Company.(3) The ages stated are as of March 12, 2004. [ADD INFORMATION ON NEW
NOMINEES]
Lee-Ann Cimino, age 40, 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 49, 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.
David B. Gaw, age 58, 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
Chairman of the Board of North Bay and a director of Solano Bank. Mr. Gaw has
been engaged in the practice of law in Napa and Solano Counties for more than
thirty-one years and is one of the founding members of Gaw, Van Male, Smith,
Myers & Miroglio, a professional law corporation with offices in Napa, St.
Helena, 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
2004.
Conrad W. Hewitt, age 69, joined the Board of North Bay in November, 1999 and is
a consultant. He is a director for Varian, Inc. and is Chairman of the Audit
Committee and a member of the Compensation and Nominating/Governance Committees.
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
- ------------------------
(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.
9
and Compensation Committees. Additionally, he is a director of Spectrum Organic
Products, Inc and is Chairman of the Audit Committee and 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-nine 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.
Kathi Metro, age 49, 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 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 39, is President, Chief Executive Officer, 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.
10
Terry L. Robinson, age 56, 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
the Vintage Bank. He was employed by The Vintage Bank beginning in 1988. Mr.
Robinson is a past president of the Western Independent Bankers. Prior to
joining The Vintage 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 54, 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-seven years and is one of the senior members of
Gaw, Van Male, Smith, Myers & Miroglio, a professional law corporation, with
offices in Napa, St. Helena, 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 has served as president of the Napa County Bar
Association. He is a member of the Queen of the Valley Hospital Board of
Trustees and past 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 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 2004.
Glen C. Terry, age 52, 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 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.
During 2003, the Company's Board of Directors met twelve (12) 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.
11
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 and of Varian, 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, Compensation, and Nominating/Governance
Committees.
Audit Committee
The Audit Committee, which, during 2003, consisted of Conrad W. Hewitt as
chairman, Thomas H. Lowenstein and James E. Tidgewell, met seven (7) times
during the fiscal year ended December 31, 2003. 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 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.
Financial Expert
The Board of Directors has determined that it has a financial expert serving on
the Company's audit committee. The audit committee's financial expert is
Director Conrad W. Hewitt. As mentioned above, as with all members of the audit
committee, Mr. Hewitt is independent as defined by current rules of the National
Association of Securities Dealers, Inc.
REPORT OF AUDIT COMMITTEE [TO BE REVISED AS APPROPRIATE]
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 __ , 2004)
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
12
Board of Directors. A copy of the charter as approved on _________ __, 2004 and
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. The Audit Committee also approves all non-audit services provided to
the Company by its independent accountants.
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 audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2003 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, 2003, 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 2003 consisted of Richard S. Long, as
chair, Fred W. Hearn, Conrad W. Hewitt, Thomas H. Lowenstein, and Thomas F.
Malloy met five (5) times during the fiscal year ended December 31, 2003. 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.
13
Each member of the compensation committee is independent as defined by current
rules of the National Association of Securities Dealers, Inc.
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 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 2003 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. ____________ percent (__%) of the CEO's
compensation for 2003 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.
14
Nominating/Governance Committee
The Nominating/Governance Committee was established in January 2004 and consists
of David B. Gaw, as chair, Fred W. Hearn, James E. Tidgewell, Thomas F. Malloy,
and Richard S. Long. The principal functions of the Nominating/Governance
Committee are to identify and review the qualifications of nominees for director
and to recommend nominees to the Company's Board of Directors. Each member of
the Nominating/Governance Committee is independent as defined by current rules
of the National Association of Securities Dealers, Inc.
For the 2004 annual election of directors the Nominating/Governance Committee
recommended the ten nominees listed in this Proxy Statement under PROPOSAL No. 1
- - ELECTION OF DIRECTORS for election by the shareholders and six additional
nominees for appointment by the Company's Board of Directors provided Proposal
No. 2 relating to amendment of the Company's bylaws to increase the range of
directors is approved by the shareholders. The six additional nominees for
appointment to the Company's Board of Directors subsequent to the Annual Meeting
are ____________,____________, and ___________ each of whom is a director of The
Vintage Bank and ____________, __________, and _________ each of whom is a
director of Solano Bank.
The Nominating/Governance Committee has a charter, a current copy of which is
available to shareholders on the Company's web-site. The Company's web-site is
located at www.northbaybancorp.com.
The Nominating/Governance Committee will consider director candidates
recommended by securities holders if the procedures contained in the Company's
Bylaws are followed. These procedures are described in the NOTICE OF ANNUAL
MEETING included with this Proxy Statement.
The Nominating/Governance Committee Charter contains a description of the
minimum qualifications for Nominating/Governance Committee recommended-nominees.
The minimum qualifications are:
o high personal and professional integrity,
o demonstrated exceptional analytical ability and judgment with an
emphasis on strategic thinking,
o ability to read and understand fundamental financial statements,
o genuine interest in serving the Company and willingness to commit
sufficient time, and
o share ownership.
The Nominating/Governance Committee conducts an annual review of the skills and
characteristics that should be reflected in the composition of the Board as a
whole. As a result of the review the Nominating/Governance Committee will
identify the desired skills and characteristics that are not presently reflected
in the composition of the Board as a whole recognizing that the skills and
characteristics of the members of the Board will change from time to time. The
Nominating/Governance Committee will take into consideration any evaluation of
the performance of the incumbent directors. The Nominating/Governance Committee
will survey the Board and management of the Company for potential nominee
recommendations and
15
consider any shareholder-recommended nominees. Shareholder-recommended nominees
and Nominating/Governance Committee nominees will be evaluated in the same
manner including, but not limited to:
o examination of the curriculum vitae of nominees,
o interviews,
o background checks, and
o verification of references.
The Nominating/Governance Committee has authority to engage a third party to
identify, or evaluate or assist in evaluating, potential nominees.
The Nominating/Governance Committee did not engage a third party to perform any
functions in connection with identifying or evaluating the nominees listed and
identified in this Proxy Statement.
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 on November
14, 1999 in the Company's Common Stock, in the Nasdaq Stock Market (U.S ) Index
and in an industry index. 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.
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
[GRAPHIC OMITTED]
16
Communication by Security Holders with the Board of Directors
The Company's Board of Directors provides a process for shareholders to send
communications to the Board of Directors. The manner in which shareholders can
communicate with the Board of Directors and the Company's process for
determining which communications will be relayed to the Board of Directors is
available to shareholders on the Company's web-site. The Company's web-site is
located at www.northbaybancorp.com.
Policy Regarding Director Attendance at Annual Meetings
The Board of Directors has adopted a policy requiring all directors to attend
annual meetings of shareholders. At the 2003 Annual Meeting of Shareholders
eight of the nine incumbent directors were present.
17
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information as of March 12, 2004, 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 29, 2004.
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.
18
[ADD NOMINEE]
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(5)
- ---- ------------------ ----- --------- ----------
Lee-Ann Cimino Senior Vice President 6, 7 %
and Chief Financial
Officer of North Bay,
Solano Bank, and The
Vintage Bank
______________ 6, 8 %
David B. Gaw Chairman of the Board of 9 %
North Bay and director
of Solano Bank
______________ 6, 10 %
Conrad W. Hewitt Director of North Bay 11 %
Richard S. Long Director of North Bay 6, 12 %
______________ 6, 13 %
______________ 6, 14 %
Kathi Metro Executive V.P. and 6, 15 %
Credit Administrator of
North Bay and of Solano
Bank
- ------------------
(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
giving effect to stock dividends paid through March 29, 2004, and assuming
options exercisable by the director and executive officer within 60 days have
been exercised.
19
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(5)
- ---- ------------------ ----- --------- ----------
John A. Nerland President, Chief 6, 16 %
Executive Officer, and a
Director of Solano Bank
Terry L. Robinson Director, President, and 17 %
CEO of North Bay and
Director of Solano Bank
and The Vintage Bank
Glen C. Terry President, CEO, and a 6, 18 %
Director of The Vintage
Bank
______________ 6, 19 %
All Current Executive 20 %
Officers and Directors as a
group (total of __)
(6) 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.
(7) Included in the total for Ms. Cimino are ___ shares as to which Ms. Cimino
holds options exercisable as of May 12, 2004.
(8)
(9) Included in the total for Mr. Gaw are _______ shares held in the name of the
Gaw Family Trust dated September 22, 1999, of which he is the trustee; ___
shares as custodian for a minor under the California Uniform Transfers to Minors
Act. Also included in the total for Mr. Gaw are _____ shares as to which Mr. Gaw
holds an option exercisable as of May 12, 2004.
(10)
(11) Included in the total for Mr. Hewitt are ______ shares held in the name of
the Conrad W. Hewitt 2001 Trust. Also included in the total for Mr. Hewitt are
_____ shares as to which Mr. Hewitt holds an option exercisable as of May 12,
2004.
(12) Included in the total for Mr. Long are ______ shares held in the Richard S.
Long and Cynthia A. Long Trust dated September 15, 1993, of which Mr. Long is
trustee and ________ shares as to which Mr. Long holds an option exercisable as
of May 12, 2004.
(13)
(14)
20
(15) Included in the total for Ms. Metro are _____ shares as to which Ms. Metro
holds options exercisable as of May 12, 2004.
(16) Included in the total for Mr. Nerland are ______ shares held in the name of
the Nerland Trust dated October 5, 2000, of which Mr. Nerland is the trustee.
(17) Included in the total for Mr. Robinson are ______ 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 _______ shares as to which Mr. Robinson holds an option
exercisable as of May 12, 2004.
(18) Included in the total for Mr. Terry are ______ 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 ______
shares as to which Mr. Terry holds an option exercisable as of May 12, 2004.
(19)
(20) 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.
21
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 Lee-Ann Cimino, Kathi Metro, John A. Nerland, and Glen C. Terry,
the only other executive officers of the Company whose annual compensation
exceeded $100,000 during 2003. (Mr. Robinson, Ms. Cimino, Ms. Metro, Mr.
Nerland, and Mr. Terry are sometimes collectively referred to as the "Named
Executive Officers").
Summary Executive Compensation Table
Long Term
Annual Compensation Compensation Awards
Restricted Securities All Other
Name and Principal Other Annual Stock Awards Underlying Compensation
Position Year Salary ($) Bonus ($) Compensation ($) Options (#) ($)
Terry L. Robinson 2003 204,999 52,700 -0- -0- 6,000(21) 28,282
President and Chief
Executive Officer
2002 198,125 55,000 -0- -0- -0- 26,755
2001 191,000 60,000 -0- -0- -0- 25,909
Lee-Ann Cimino 2003 88,083 17,600 -0- -0- 1,400(21) 8,127
Sr. V.P. and Chief
Financial Officer
2002 85,167 21,000 -0- -0- -0- 7,478
2001 80,667 19,000 -0- -0- -0- 6,816
Kathi Metro 2003 117,399 27,300 -0- -0- 1,800(21) 17,203
Executive V.P. and
Credit Administrator
2002 113,333 28,000 -0- -0- -0- 16,169
2001 105,833 33,000 -0- -0- -0- 15,147
John A. Nerland 2003 119,166 35,600 -0- -0- -0- 11,360
President and CEO
of Solano Bank
2002 81,458 24,000 -0- -0- 10,500(21) 4,339
2001 -0- -0- -0- -0- -0- -0-
Glen C. Terry 2003 145,833 39,000 -0- -0- 3,000(21) 19,855
Pres., CEO and Chief
Credit Officer of
The Vintage Bank
2002 137,917 39,000 -0- -0- -0- 18,544
2001 128,333 42,000 -0- -0- -0- 16,756
(21) As adjusted for the 5% stock dividend paid March 29, 2004.
22
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, 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 $16,553 in 2003, $15,139 in 2002, and $15,758
in 2001. Contributions to the 401(k) Plan for Ms. Cimino were $7,674 in 2003,
$7,040 in 2002, and 6,655 in 2001. Contributions to the 401(k) Plan for Ms.
Metro were $10,382 in 2003, $9,378 in 2002, and $8,814 in 2001. Contributions to
the 401(k) Plan for Mr. Nerland were $5,227 in 2003, $-0- in 2002, and $-0- in
2002. Contributions to the Bank's 401(k) Plan for Mr. Terry were $12,705 in
2003, $ 11,412 in 2002, and $10,140 in 2001.
All Other Compensation for 2003 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: $1,439 in 2003, $1,326 in 2002 and $495 in 2001 for
Terry L. Robinson; $368 in 2003, $353 in 2002 and $82 in 2001 for Lee-Ann
Cimino; $600 in 2003, $570 in 2002 and $133 in 2001 for Kathi Metro; and $690 in
2003, $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 $1,250 in 2003, $1,290 in 2002, and 654
in 2001. The amounts included for Ms. Cimino were $85 in 2003, $85 in 2002, and
$79 in 2001. The amounts included for Ms. Metro were $221 in 2003, $221 in 2002,
and $200 in 2001. The amounts included from Mr. Nerland were $133 in 2003, $89
in 2002, and $-0- in 2001 . The amounts included from Mr. Terry were $442 in
2003, $442 in 2002, and $400 in 2001.
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.
23
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.
All Other Compensation for 2001, 2002, and 2003 includes $1,150, $2,616, and
$2,729 respectively, which is the taxable benefit of Mr. Robinson's benefits
under the Director Supplemental Retirement Program described in the section of
this proxy statement entitled "Compensation of Directors."
Option Grants and Exercises
The following table sets forth information concerning individual grants of stock
options during fiscal year 2003 to each of the Named Executive Officers, as
adjusted for the 5% stock dividends paid through March 29, 2004:
24
Options Granted in Last Fiscal Year
No. of
Underlying % of Total Options Exercise or
Options Granted Granted to Employees in Base Expiration Grant Date
Name Fiscal Year Price($/Sh.) Date Value(22)
- -----------------------------------------------------------------------------------------------------------------
Terry Robinson, 6,300 7% $26.91 July 1, 2013 $38,312
President and CEO
Lee-Ann Cimino, Senior 1,400 2% $26.91 July 1, 2013 $8,514
Vice President and
Chief Financial Officer
Kathi Metro, 1,800 2% $26.91 July 1, 2013 $10,946
Executive Vice
President and Credit
Administrator
John A. Nerland, -0- N/A N/A N/A N/A
President and CEO of
Solano Bank
3,150 4% $26.91 July 1, 2013 $19,157
Glen C. Terry,
President and CEO of
The Vintage Bank
(22) Present value at date of grant using the Black-Scholes model
25
The following table shows exercises of stock options during fiscal year 2003 by
the Named Executive Officers and the value at December 31, 2003 of unexercised
options on an aggregated basis held by each of those persons:
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money Options
Shares Acquired Realized Options At Fiscal Year-End at Fiscal Year-End
on Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------------------------------------------------------------------------------------------------------
Terry Robinson, Exercisable for 13,401 Exercisable - $ 161,659
President and CEO Unexercisable for 6,300 Unexercisable - $ 14,424
Lee-Ann Cimino, Senior $ Exercisable for 1,021 Exercisable - $ 9,575
Vice President and Unexercisable for 1,725 Unexercisable - $ 5,759
Kathi Metro, $ Exercisable for 2,553 Exercisable - $ 23,937
Executive Vice Unexercisable for 8,820 Unexercisable - $ 10,311
President and Credit
Administrator
John A. Nerland, $ Exercisable for 2,205 Exercisable - $ 11,798
President, CEO of Unexercisable for 8,820 Unexercisable $ 47,194
$ Exercisable for 11,260 Exercisable - $ 98,152
Glen C. Terry, Unexercisable for 4,635 Unexercisable - $ 28,745
President, CEO, and
Chief Credit Officer
of The Vintage Bank
For purposes of calculating the value of unexercised stock options as of
December 31, 2003, it is assumed that the fair market value of the shares as of
December 31, 2003 was $28.48 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 29, 2004.
Long Term Incentive Plans - Awards in Last Fiscal Year
There were no transactions in 2004 which require disclosure in a table for
long-term incentive plan awards.
26
Employment Agreement and Termination of Employment and Change of Control
Arrangements.
Terry L. Robinson. Effective March 1, 2004, North Bay Bancorp entered into an
Employment Agreement with Mr. Robinson as President and Chief Executive Officer
of the Company . The initial term of the Robinson Agreement continues until the
third anniversary after the effective date (March 1, 2007). Unless terminated by
Mr. Robinson 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 $212,000, 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 death, termination
by the Company for cause, or 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 2001, 2002 and 2003 was
$634,132, $642,875, and $668,847 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.
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
27
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 an 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 2003 was $184,833. The maximum amount payable
under Ms. Metro's current employment agreement in connection with any corporate
change for 2003 was $262,328.
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 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
28
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.
29
Director Stock Options
In July 2003, stock options were granted to directors of North Bay Bancorp as
follows:.
Directors Gaw, Lowenstein, Malloy, and Tidgewell were granted 2,200 options each
with a grant date of July 1, 2003 at an exercise price of $27.50 per share.
Directors Hewitt, Long, Gavin and Hearn were granted 720 options each with a
grant date of July 1, 2003 at an exercise price of $27.50 per share. All options
are non-qualified stock options. All options vest over four years at the rate of
25% per year. All options must be exercised within ten years of the date of
grant subject to the director continuing as a director of North Bay Bancorp.
After giving effect to the stock split effective October 1, 1997, and stock
dividends paid through March 29, 2004, the aggregate number of shares subject to
directors' options outstanding as of March 12, 2004 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
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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.
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
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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 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 2003, fees received by the firm for these services
totaled $_______, of which $_______ was billed to North Bay, $______ to Solano
Bank, and $______ 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, 2003, Form 5 and amendments
thereto furnished to the Company with respect to the fiscal year ending December
31, 2003, 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, except for
Director Fred J. Hearn who filed a Form 5 on February 17, 2004, reporting a
transaction that occurred on June 30, 2000.
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PROPOSAL NO. 2 - AMENDMENT TO BYLAWS INCREASING THE AUTHORIZED RANGE OF
DIRECTORS.
The Bylaws of the Company currently provides for a range of directors of not
less than six (6) nor more than eleven (11). The shareholders of the Company
must approve an amendment to the Bylaws in order to change the range. However,
the exact number of directors within the may be reduced or increased within the
range by a resolution duly adopted by the Board of Directors. The Board of
Directors has currently set the exact number at ten (10).
Assuming Proposal No. 2 is approved by the shareholders, the first paragraph of
Section 16 of the Company's Bylaws will be amended to read as follows:
"Section 16. Number and Qualification of Directors The authorized number of
directors shall be not less than nine (9) nor more than seventeen (17), until
changed by amendment of the Articles of Incorporation or, if not prohibited by
the Articles, by an amendment of this bylaw adopted by the shareholders. The
exact number of directors within said range is fixed at ten (10) and may be
reduced or increased within said range by a resolution duly adopted by the Board
of Directors. Directors need not be shareholders of the corporation. No
reduction of the authorized number of directors shall have the effect of
removing any director before his or her term of office expires."
Reason for the Proposal
The Company and its subsidiaries are in the process of restructuring their
respective Boards of Directors and the Company plans to merge The Vintage Bank
and Solano Bank so that the consolidated banks operate under a single charter.
As a result, assuming Proposal No. 2 is approved, the Company intends to
increase the number of directors to sixteen (16). Accordingly, again assuming
Proposal No. 2 is approved, subsequent to the 2004 Annual Meeting of
Shareholders, the Board of Directors will appoint six (6) additional directors.
See "PROPOSAL No. 1 - Election of Directors." Of the six additional directors,
it is presently intended that three will be assigned to Class A and three will
be assigned to Class B.
Required Vote and Recommendation for Proposal No. 2
The affirmative vote of a majority of outstanding shares of North Bay is
required to approve Proposal No. 2 . An abstention or failure to vote shares
represented and entitled to vote at the meeting for a particular proposal will
be treated as a negative vote for that proposal. The Board of Directors has
unanimously approved both proposals and recommends that shareholders vote FOR
Proposal No. 2.
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PROPOSAL NO. 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, 2004. 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 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, 2003, 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, 2003, preparation for the audit of
financial statements of North Bay for the fiscal year ended December 31, 2003,
and consulted with North Bay's management regarding year end tax planning.
Audit Fees
The following table itemizes fees billed the Company by KPMG during the fiscal
years 2003 and 2002:
- -------------------------------------------- -------------- -------------
2003 2002
- -------------------------------------------- -------------- -------------
Audit fees: (1) $107,830 $105,600
- -------------------------------------------- -------------- -------------
Audit related fees:
- -------------------------------------------- -------------- -------------
Other accounting services (2) 0 6,145
- -------------------------------------------- -------------- -------------
Tax fees:
- -------------------------------------------- -------------- -------------
Tax return preparation 15,000 18,677
- -------------------------------------------- -------------- -------------
Assistance with FTP examination 600 0
- -------------------------------------------- -------------- -------------
Tax consultation (3) 132,680 6,000
- -------------------------------------------- -------------- -------------
All other fees: 0 0
- -------------------------------------------- -------------- -------------
(1) Services include the audit of the Company's annual financial statement and
reviews of financial statements included in the Quarterly Reports on Form 10-Q
or services that are normally provided by the accountants in connection with
statuary and regulatory filings for engagement.
(2) Services include assurance and related services by the auditor that are
reasonable related the performance of the audit or review on the Company's
financial statements and are not reported under "Audit Fees."
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(3) Services include tax compliance, tax advice and tax planning. Services in
2002 and 2003 include quarterly review of estimated tax payments. Services in
2003 also include fees of $125,000 for tax planning associated with the
establishing a Real Estate Investment Trust.
Audit Committee's Pre-Approval Policies and Procedures
The services performed by KPMG LLP in 2003 were pre-approved in accordance the
pre-approval policy and procedures adopted by the Audit Committee. The policy
describes that the Audit Committee approve, in advance, any audit, audit-related
and non-audit service provided to the Company by the independent accountants.
Additionally the Committee must approve the independents accountants' audit plan
and audit services in advance. The Chairman of the Audit Committee has been
delegated the authority to approve services up to $50,000 in between meetings,
as necessary.
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.
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:
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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 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,
2004. 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.
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Availability of Form 10-K
A copy of the Company's 2003 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 2005 Annual Meeting of Shareholders will be held on May 5, 2005. December
11, 2004, is the date by which shareholder proposals intended to be presented at
the 2005 Annual Meeting must be received by management of the Company at its
principal executive office for inclusion in the Company's 2005 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 23, 2005, 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: April 9, 2004. For the Board of Directors
Napa, California
Wyman G. Smith
Corporate Secretary
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