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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-12
North Bay BANCORP
__________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________________
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):
_______________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________________
5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was 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:
_______________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_______________________________________________________________________
3) Filing Party:
_______________________________________________________________________
4) Date Filed:
_______________________________________________________________________
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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:
Thomas N. Gavin Richard S. Long
David B. Gaw Thomas H. Lowenstein
Fred J. Hearn, Jr. Thomas F. Malloy
Conrad W. Hewitt Terry L. Robinson
Connie Klimisch 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.
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(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
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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..............................................................................1
PRINCIPAL SHAREHOLDERS............................................................................................3
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING....................................................................4
PROPOSAL No. 1. -ELECTION OF DIRECTORS............................................................................4
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS.................................................................9
Audit Committee..........................................................................................9
Compensation Committee..................................................................................11
Nominating/Governance Committee.........................................................................12
Compensation Committee Interlocks and Insider Participation in Compensation Decisions...................13
Shareholder Return on Performance Graph.................................................................14
COMMUNICATION BY SECURITY HOLDERS WITH THE
BOARD OF DIRECTORS...............................................................................................15
SECURITY OWNERSHIP OF MANAGEMENT.................................................................................16
EXECUTIVE COMPENSATION...........................................................................................20
Summary Executive Compensation Table....................................................................20
Option Grants and Exercises.............................................................................22
Options Granted in Last Fiscal Year.....................................................................23
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values...............................24
Long Term Incentive Plans - Awards in Last Fiscal Year..................................................24
Employment Agreement and Termination of Employment and Change of Control Arrangements...................25
Executive Officer Supplemental Executive Retirement Plan................................................27
Compensation of Directors...............................................................................27
OTHER INFORMATION REGARDING MANAGEMENT...........................................................................29
Management Indebtedness.................................................................................29
Certain Business Relationships..........................................................................30
Reports of Changes in Beneficial Ownership..............................................................30
PROPOSAL NO. 2 - AMENDMENT TO BYLAWS INCREASING THE AUTHORIZED RANGE OF DIRECTORS...............................31
Required Vote and Recommendation for Proposal No. 2....................................................31
PROPOSAL NO. 3 - RATIFICATION OF INDEPENDENT AUDITORS...........................................................32
Required Vote and Recommendation........................................................................34
AVAILABILITY OF FORM 10-K........................................................................................35
SHAREHOLDER PROPOSALS............................................................................................35
OTHER MATTERS....................................................................................................35
EXHIBIT A - Audit Committee Charter..............................................................................36
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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 by 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
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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, 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
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Houghton Gifford, M.D. Director Emeritus(2) 126,386 5.5%
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 giving effect to stock dividends
paid through March 29, 2004, and assuming options exercisable, if any, by the
named person within 60 days have been exercised.
(2) Included in the total for Dr. Gifford are 126,386 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 Connie Klimisch, 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, subject to the power of the Board of Directors, in its
discretion, to increase or decrease the number of directors.
The Nominees have been divided into the following classes:
Class A: Thomas N. Gavin, Thomas H. Lowenstein, and James E. Tidgewell.
Class B: Fred J. Hearn, Jr., Connie Klimisch, and Thomas F. Malloy.
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 are non-management directors.
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 elected and
qualified, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
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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 selected by the Board of Directors annually pursuant to
the Bylaws of the Company.3 The ages stated are as of March 12, 2004.
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.
Thomas N. Gavin, age 51, 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-six 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. He also
holds a Chartered Financial Consultant degree 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 former 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 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
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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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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.
Fred J. Hearn, Jr., age 50, 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-six years. He is also a member in Pacific Valley Development Company and
CEO of Pacific Concrete Construction Company Inc. Mr. Hearn is an active member
of both the Fairfield and Vacaville Chambers of Commerce, 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. Mr. Hearn is
presently serving on the council of major companies for the Vacaville Chamber of
Commerce and the Board of Directors of the Vacaville Public Education
Foundation.
Conrad W. Hewitt, age 67, 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 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.
Connie Klimisch, age 49, has served as a Director of Solano Bank since 2003. Ms.
Klimisch is the President & CEO of Klimisch, Inc., a company engaged in the
automobile collision repair business since 1947. In 1999, Ms Klimisch was
honored as one of the Most Influential Women in the Collision Repair Industry.
Ms. Klimisch is a past Chairman of the Vallejo Chamber of Commerce and is active
in the Rotary Club of Vallejo where she has served as a director for three
years. In 1990, Ms. Klimisch was selected as the North Bay YMCA Volunteer of the
Year and in 1998 she was awarded the Athena Award by the Vallejo Chamber of
Commerce for outstanding service to her community. She holds a B.S. in Nursing
from Chico State University.
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Richard S. Long, age 59, is a director of North Bay since November 1999 and
presently serves as Chief Executive Officer of Regulus Group, LLC. 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.
Thomas H. Lowenstein, age 61, 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 61, is a director and past Chairman of the Board 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 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 Board of Directors of the North Napa Rotary Club, serves as President of 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 and Audit Committee Chair of SAFE BIDCO, a state assisted fund
for enterprise, business, and industrial development.
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,
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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 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. in Business and
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, 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
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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 58, 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 a certified public accountant and partner in the accounting firm of G & J
Seiberlich & Co LLP, with which he has been associated since 1976. 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 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.
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 that
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.
-9-
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
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 29, 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 Board of Directors. A copy of the charter as
approved on January 23, 2004 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
-10-
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-Qs 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.
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
-11-
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. 20.5% of the CEO's compensation for 2003 was a
result of a 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.
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 Lauren Ackerman, Andrew J. Nicks, M.D., and Thomas H. Shelton each of whom
is a director of The Vintage Bank and John Anthony, III, Stephen C. Spencer, and
Denise C. Suihkonen each of whom is a director of Solano Bank. It is anticipated
that Messrs. Anthony and Shelton and Ms. Suihkonen will be assigned to Class A
and that Ms. Ackerman, Dr. Nicks, and Mr. Spencer will be assigned to Class B.
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
-12-
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 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.
-13-
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]
NORTH BAY BANCORP NAPA CA
Cumulative Total Return
----------------------------------------------------
11/4/99 12/99 12/00 12/01 12/02 12/03
NORTH BAY BANCORP 100.00 92.79 72.92 83.58 117.26 139.94
NASDAQ STOCK MARKET (U.S.) 100.00 132.73 80.05 63.54 43.93 65.68
NASDAQ BANK 100.00 93.96 107.34 116.21 118.96 153.05
Copyright (C) 2002 Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
-14-
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.
-15-
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.
-16-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(5)
- ---- ------------------ ----- --------- ----------
Lee-Ann Cimino Senior Vice President 8,479 6, 7 0.37%
and Chief Financial
Officer of North Bay,
Solano Bank, and The
Vintage Bank
Thomas N. Gavin Director of North Bay 7,132 6, 8 0.31%
and Chairman of the
Board and Director of
Solano Bank
David B. Gaw Chairman of the Board of 22,758 9 0.99%
North Bay and Director
of Solano Bank
Fred J. Hearn Director of North Bay 11,510 6, 10 0.50%
and Solano Bank
Conrad W. Hewitt Director of North Bay 9,140 11 0.40%
Connie Klimisch Director of Solano Bank 2,729 6, 12 0.12%
Richard S. Long Director of North Bay 23,393 6, 13 1.02%
Thomas H. Lowenstein Director of North Bay 31,253 6, 14 1.36%
and The Vintage 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
(i) giving effect to stock dividends paid through March 29, 2004, and (ii)
assuming options exercisable by the director and executive officer within 60
days have been exercised.
-17-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(5)
- ---- ------------------ ----- --------- ----------
Thomas F. Malloy Director of North Bay 71,718 6, 15 3.13%
and Director of The
Vintage Bank
Kathi Metro Executive V.P. and 17,593 6, 16 0.77%
Credit Administrator of
North Bay and of Solano
Bank
John A. Nerland President, Chief 5,617 6, 17 0.25%
Executive Officer, and
Director of Solano Bank
Terry L. Robinson Director, President, and 100,515 18 4.36%
CEO of North Bay and
Director of Solano Bank
and The Vintage Bank
Glen C. Terry President, CEO, and 15,756 6, 19 0.68%
Director of The Vintage
Bank
James E. Tidgewell Director of North Bay 12,870 6 0.56%
and Chairman of the
Board of The Vintage
Bank
All Current Executive 370,982 20 15.81%
Officers and Directors as a
group (total of 16)
- --------------------
(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 1,021 shares as to which Ms. Cimino
holds options exercisable as of May 12, 2004.
-18-
(8) Included in the total for Mr. Gavin are 826 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 4,376 shares as to
which Mr. Gavin holds an option exercisable as of May 12, 2004.
(9) Included in the total for Mr. Gaw are 22,151 shares held in the name of the
Gaw Family Trust dated September 22, 1999, of which he is the trustee; and 181
shares held as custodian for a minor under the California Uniform Transfers to
Minors Act.
(10) Included in the total for Mr. Hearn are 5,785 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; 798 shares held by Diane E. Hearn as
custodian for minors under the California Uniform Transfers to Minors Act as to
which Mr. Hearn may have voting power; and 551 shares held in Joint Tenancy with
Alma Haslett as to which he has shared voting power. Also included in the total
for Mr. Hearn are 4,376 shares as to which Mr. Hearn holds an option exercisable
as of May 12, 2004.
(11) Included in the total for Mr. Hewitt are 3,014 shares held in the name of
the Conrad W. Hewitt 2001 Trust. Also included in the total for Mr. Hewitt are
6,126 shares as to which Mr. Hewitt holds an option exercisable as of May 12,
2004.
(12) Included in the total for Ms. Klimisch are 1,074 shares held by NFS/FMTC
Rollover IRA FBO Dennis R. Klimisch as to which Ms. Klimisch may indirectly have
shared voting power; and 1,323 shares as to which Ms. Klimisch holds an option
exercisable as of May 12, 2004.
(13) Included in the total for Mr. Long are 12,154 shares held in the Richard S.
Long and Cynthia A. Long Trust dated September 15, 1993, of which Mr. Long is
trustee; 572 shares held by Prudential Securities as custodian FBO Cynthia A.
Long IRA dated 4/05/93 as to which Mr. Long may indirectly have shared voting
power; and 6,126 shares as to which Mr. Long holds an option exercisable as of
May 12, 2004.
(14) Included in the total for Mr. Lowenstein are 27,311 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; 3,942 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.
(15) Included in the total for Mr. Malloy are 48,751 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 20,897 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.
(16) Included in the total for Ms. Metro are 2,553 shares as to which Ms. Metro
holds options exercisable as of May 12, 2004.
(17) Included in the total for Mr. Nerland are 52 shares held in the name of the
Nerland Trust dated October 5, 2000, of which Mr. Nerland is the trustee; and
2,205 shares as to which Mr. Nerland holds an option exercisable as of May 12,
2004.
(18) Included in the total for Mr. Robinson are 39,586 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 13,401 shares as to which Mr. Robinson holds an option
exercisable as of May 12, 2004.
(19) Included in the total for Mr. Terry are 1,735 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 11,260 shares as to
which Mr. Terry holds an option exercisable as of May 12, 2004.
(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 56,008 the number of shares subject to
the exercisable options by all members of the group.
-19-
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 $100,000 during 2003. (Mr. Robinson, Ms. Cimino, Ms. Metro, Mr.
Nerland, and Mr. Terry are sometimes collectively referred to as the "Named
Executive Officers").
Long Term
Annual Compensation Compensation Awards
Restricted Securities All Other
Name and Principal Other Annual Stock Awards Underlying Compensation
Position Year Salary ($) 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. and CEO of 2002 137,917 39,000 -0- -0- -0- 18,544
The Vintage Bank 2001 128,333 42,000 -0- -0- -0- 16,756
- --------------------
(21) As adjusted for the 5% stock dividend paid March 29, 2004.
-20-
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
2001. 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 Named 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.
-21-
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
$2,729 respectively, which is the taxable benefit of Mr. Robinson's benefits
under the Director Supplemental Retirement Program described in the section of
this proxy statement entitled "Compensation of Directors."
Option Grants and Exercises
The following table sets forth information concerning individual grants of stock
options during fiscal year 2003 to each of the Named Executive Officers, as
adjusted for the 5% stock dividends paid through March 29, 2004:
-22-
Options Granted in Last Fiscal Year
No. of
Underlying % of Total Options Exercise or
Options Granted to Employees in Base Expiration Grant Date
Name Granted Fiscal Year Price($/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 $19,157
Glen C. Terry,
President and CEO of
The Vintage Bank
- --------------------
(22) Present value at date of grant using the Black-Scholes model
-23-
The following table shows exercises of stock options during fiscal year 2003 by
the Named Executive Officers and the value at December 31, 2003 of unexercised
options on an aggregated basis held by each of those persons:
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money Options
Shares Acquired Realized Options At Fiscal Year-End at Fiscal Year-End
on Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
Terry Robinson, -0- N/A Exercisable for 13,401 Exercisable $ 161,659
President and CEO Unexercisable for 6,300 Unexercisable $ 14,424
Lee-Ann Cimino, Senior -0- N/A Exercisable for 1,021 Exercisable $ 9,575
Vice President and Unexercisable for 1,725 Unexercisable $ 5,759
Chief Financial Officer
Kathi Metro, -0- N/A Exercisable for 2,553 Exercisable $ 23,937
Executive Vice Unexercisable for 8,820 Unexercisable $ 10,311
President and Credit
Administrator
John A. Nerland, -0- N/A Exercisable for 2,205 Exercisable $ 11,798
President, CEO of Unexercisable for 8,820 Unexercisable $ 47,194
Solano Bank
Glen C. Terry, -0- N/A Exercisable for 11,260 Exercisable $ 98,152
President and CEO of Unexercisable for 4,635 Unexercisable $ 28,745
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.
-24-
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, paid time off in accordance with the Company's
Employee Handbook, 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
-25-
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
his or her 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 to an 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
-26-
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.
-27-
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
options held by non-employee directors of North Bay Bancorp outstanding as of
March 12, 2004 is 48,465.
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.
-28-
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.
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
-29-
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 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 $187,395, of which $121,896 was billed to North Bay, $20,501 to Solano
Bank, and $44,998 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.
-30-
PROPOSAL NO. 2 - AMENDMENT TO BYLAWS INCREASING THE AUTHORIZED RANGE OF
DIRECTORS.
The Bylaws of the Company currently provide 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 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. For the names and class assignments of the additional
directors see "COMMITTEES AND MEETINGS OF THE BOARD OF
DIRECTORS-Nominating/Governance Committee."
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.
-31-
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 consultation 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
statutory 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."
-32-
(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:
-33-
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.
-34-
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
-35-
EXHIBIT A - Audit Committee Charter
[North Bay Logo]
AUDIT COMMITTEE CHARTER
January 23, 2004
I. COMMITTEE PURPOSE
The primary purpose of the Audit Committee (the "Committee") of the
Board of Directors of North Bay Bancorp (the "Company") is to oversee
the Company's accounting and financial reporting processes and the
audits of the Company's financial statements.
II. COMMITTEE 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.
III. COMMITTEE COMPOSITION AND MEETINGS
The Committee shall have a minimum of three (3) members, each of whom
shall be a member of the Board of Directors and meet the qualification
and independence requirements of the Nasdaq Stock Market, Inc. and
applicable law. Members of the Committee shall be appointed by and
serve at the discretion of the Board of Directors, which shall also
appoint the Committee's Chairman.
The Committee shall meet regularly as necessary to fulfill its
responsibilities. Special meetings may be called by the Chairman of the
Committee or the Chairman of the Board. The Committee may also take
action by unanimous written consent of its members. The Committee may
delegate any of its responsibilities to a subcommittee comprised solely
of a member or members of the Committee. At any meeting of the
Committee or a subcommittee of the Committee, the presence of one-half
of its members then in office shall constitute a quorum for the
transaction of business; and the act of a majority of the members
present at a meeting at which a quorum is present shall be the act of
the Committee or subcommittee.
Except as the Committee may otherwise decide in its discretion,
Committee meetings
-36-
shall be attended by the Company's Chief Executive Officer, Chief
Financial Officer, Controller, Internal Audit Director and outside
Counsel and a representative of the Company's independent accountants.
The Committee may request that any other director, officer or employee
of the Company or any of the consultants or advisors attend a Committee
meeting or meet with any member of the Committee or its advisors. The
Committee shall have the authority to retain and terminate, at the
Company's expense, legal counsel, accountants or other consultants or
advisors, as the Committee determines necessary to carry out its
duties. The Committee may meet with any person in executive session,
and shall meet in executive sessions as directed below.
The Company shall provide appropriate funding, as determined by the
Committee, in its capacity as a committee of the Board of Directors,
for payment of (a) compensation to any registered public accounting
firm engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services to the Company, (b)
compensation to any advisors employed by the Committee as permitted by
this Charter, and (c) ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out its duties.
IV. COMMITTEE 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.
A. Independent Accountants
The Committee shall:
1. Be directly responsible for the appointment, compensation, retention
and oversight of the work of any registered public accounting firm
engaged (including resolution of disagreements between management and
the auditor regarding financial reporting) for the purpose of preparing
or issuing an audit report or performing other audit, review or attest
services for the Company, and each such registered public accounting
firm shall report directly to the Committee, all as and to the extent
required under applicable rules of the Nasdaq Stock Exchange Market,
Inc. or SEC rules;
2. Approve in advance any audit, audit-related and non-audit services
to be provided to the Company by the independent accounts;
3. Approve in advance the independent accountants' audit plan and audit
services;
4. Review and confirm the independent accountants' independence from
the Company, by (a) obtaining from the independent accountants a formal
written statement delineating all relationships between the independent
accountants and the Company, consistent with Independence Standards
Board Standard 1, (b) discussing with the independent accountants any
disclosed relationships or services that might impact the
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independent accountants' objectivity and independence and (c) reviewing
at least annually fees paid to the independent accountants for audit
and non-audit services;
5. Evaluate regularly the independent accountants' performance;
6. Receive from the independent accountants timely reports on (a) all
critical accounting policies and practices to be used, (b) all
alternative treatments of financial information within generally
accepted accounting principals that have been discussed with the
Company's management, ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent accounts and (c) other material written communications
between the independent accountants and the Company's management, such
as any management letter or schedule of unadjusted differences;
7. Review regularly with the independent accountants the quality of the
Company's accounting and reporting principles and practices and any
significant issues and risk areas of the Company;
8. Review regularly with the independent accountants significant
accounting developments and pronouncements; and
9. Meet regularly in executive session with a representative of the
Company's independent auditing firm.
B. Internal and Compliance Audit
The Committee shall:
1. 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, credit review outsourcing
reports shall be reviewed by the Committee. The internal audit and
compliance 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/her designated officer. Review on a
regular basis, the audit and compliance matrix regarding progress with
the plans;
2. Review significant issues raised in the internal audit program, and
any matters involving fraud, illegal acts or significant deficiencies
in internal controls;
3. Meet regularly in executive session with the Company's internal
audit, compliance and credit review firms.
4. 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;
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5. 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, and;
6. Receive from Management, the internal audit and credit
administration review firms and the independent auditors' significant
risks or exposures and assess the steps Management has taken to
minimize such risks to the Company and its subsidiaries.
C. Financial Reporting
The Committee shall:
1. Review with management and the independent accountants significant
financial reporting issues, among other items recent professional and
regulatory pronouncements, revenue recognition, significant reserves,
off-balance sheet items, judgment items and risks;
2. Approve all related-party transactions (as defined by rules of the
Nasdaq Stock Market, Inc.) between the Company or any of its
subsidiaries and any Company directors or nominee for director, Company
executive officer, beneficial owner of more than five percent (5%) of
the Company's outstanding securities or members of the immediate family
of any of the foregoing persons;
3. 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;
4. Review in advance with the Company's management and independent
accountants the quarterly press release reporting the Company's
financial results;
5. Review with the Company's management and independent accountants the
audited financial statements to be included in the Company's Annual
Reports on Form 10-K (or the Annual Report to Shareholders if
distributed prior to the filing of the Form 10-K), including the
selection, application and disclosure of critical accounting policies
and other significant issues and items, and the matters required to be
discussed by Statement of Auditing Standards No. 61, Communications
with Audit Committee.
D. Other Responsibilities
The Committee shall:
1. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters, and the confidential,
anonymous submissions by employees regarding
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questionable accounting or auditing matters;
2. Review with the Company's General Counsel legal matters that could
have a significant impact on the Company's financial statements or
results of operations;
3. Approve in advance the engagement of any independent accountants
other than the Company's principal independent accountants;
4. Review at least annually the adequacy of this Charter and recommend
to the Board of Directors any proposed changes to this Charter;
5. Prepare the report of the Committee required to be included in the
Company's annual proxy statement;
6. Review the policies and procedures in effect for considering
officers' expenses and perquisites for the Company and its
subsidiaries;
7. 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 (2) years. An outside facilitator may be used
to conduct this self-evaluation; and
8. Perform other responsibilities as directed by the Board of Directors
V. FREQUENCY OF MEETINGS
The Audit Committee should meet as a minimum quarterly.
VI. 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.
VII. 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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APPENDIX A
NORTH BAY BANCORP PROXY CARD
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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 12, 2004, at the annual meeting of
shareholders to be held on May 6, 2004 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.
The undersigned acknowledges receipt of (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, 2003, 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 AND ASSIGNMENT OF CLASS.
NOMINEES AND ASSIGNED CLASSES:
Class A: James A. Tidgewell, Thomas H. Lowenstein, and Thomas N. Gavin.
Class B: Thomas F. Malloy, Fred J. Hearn, Jr., and Connie Klimisch.
Class C: David B. Gaw; Conrad W. Hewitt; Richard S. Long; Terry L. Robinson.
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 INCREASING THE AUTHORIZED NUMBER OF
DIRECTORS.
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 their
assigned classes 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
1190 Airport Road, Suite 101
Napa, California 94558
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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