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
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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):
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|_| 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:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing
1) Amount Previously Paid:
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4) Date Filed:
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Dear North Bay Bancorp Shareholder:
Due to a production error, the Notice of Meeting/Proxy Statement has
misinformation on page 40. We sincerely apologize for this error and include
along with the Notice, a replacement page 40.
Also due to production delays, the Notice of Meeting/Proxy Statement will be
first mailed to shareholders on or about April 20, 2006 rather than April 10,
2006 as indicated on page 5 of the Proxy Statement.
As a result, the section entitled "SHAREHOLDER PROPOSALS" on page 51 of the
Proxy Statement is amended in full as follows:
"SHAREHOLDER PROPOSALS
The 2007 Annual Meeting of Shareholders will be held on May 10, 2007. December
21, 2006, is the date by which shareholder proposals intended to be presented at
the 2007 Annual Meeting must be received by management of the Company at its
principal executive office for inclusion in the Company's 2007 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 March 8, 2007, the
notice will be considered untimely, and the Company's proxy holders will have
discretionary authority to vote on the proposal."
Sincerely,
North Bay Bancorp
NOTICE OF THE SEVENTH ANNUAL MEETING
OF SHAREHOLDERS OF
NORTH BAY BANCORP
TO THE SHAREHOLDERS OF NORTH BAY BANCORP:
NOTICE IS HEREBY GIVEN that the Seventh Annual Meeting of the Shareholders
of North Bay Bancorp will be held at Copia, 500 First Street, Napa,
California, 94559, on Thursday, May 17, 2006, at 7:00 p.m. to consider and
act on:
(1) Election of Class B Directors. The Board of Directors intends at this time
to present the following nominees for election as Class B Directors to
serve a three year term expiring at the 2009 Annual Meeting of
Shareholders:
Fred J. Hearn Thomas F. Malloy Thomas Shelton
Nominations for election of members of the Board of Directors may be
made by the Board of Directors or by any shareholder of any outstanding
class of capital stock of the corporation entitled to vote for the election
of directors. Notice of intention to make any nominations will be made in
writing and will be delivered or mailed to the President of the corporation
not less than 21 days nor more than 60 days prior to any meeting of
shareholders called for the election of directors; provided however, that
if less than 21 days' notice of the meeting is given to shareholders, the
notice of intention to nominate will be mailed or delivered to the
President of the corporation not later than the close of business on the
tenth day following the day on which the notice of meeting was mailed;
provided further, that if notice of the meeting is sent by third class mail
as permitted by Section 6 of the Company's Bylaws, no notice of intention
to make nominations will be required. The notification will contain the
following information to the extent known to the notifying shareholder: (a)
the name and address of each proposed nominee; (b) the principal occupation
of each proposed nominee; (c) the number of shares of capital stock of the
corporation owned by each proposed nominee; (d) the name and residence
address of the notifying shareholder; and (e) the number of shares of
capital stock of the corporation owned by the notifying shareholder.
Nominations not made in accordance herewith may, in the discretion of the
Chairman of the meeting, be disregarded and upon the Chairman's
instructions, the inspectors of election can disregard all votes cast for
that nominee. A copy of this paragraph will be set forth in a notice to
shareholders of any meeting at which directors are to be elected.
(2) Approval of the North Bay Bancorp Amended and Restated 2002 Incentive
Compensation Plan. The shareholders will be asked to approve the Amended
and Restated North Bay Bancorp 2002 Incentive Compensation Plan (formerly
the North Bay Bancorp 2002 Stock Option Plan).
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(3) Ratification of the Selection of KPMG LLP. The shareholders will be asked
to ratify the Audit Committee's selection of KPMG LLP, independent
certified public accountants, as the independent auditors of North Bay
Bancorp for the year ending December 31, 2006.
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 22, 2006 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 10, 2006
/s/ Wyman G. Smith
-------------------
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
SEVENTH ANNUAL MEETING OF SHAREHOLDERS
OF
NORTH BAY BANCORP
1190 AIRPORT ROAD, SUITE 101
NAPA, CALIFORNIA 94558
(707) 257-8585
To Be Held Thursday, May 17, 2006 at 7:00 p.m.
at Copia, 500 First Street, Napa, California, 94559
___________________________________
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TABLE OF CONTENTS
GENERAL INFORMATION FOR SHAREHOLDERS.........................................................................5
PRINCIPAL SHAREHOLDERS.......................................................................................7
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING...............................................................8
PROPOSAL NO. 1. - ELECTION OF CLASS B DIRECTORS..............................................................8
Management of the Company................................................................................9
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS.......................................................14
Audit Committee.........................................................................................14
Compensation Committee..................................................................................16
Compensation Committee Interlocks and Insider Participation in Compensation Decisions...................18
Shareholder Return on Performance Graph.................................................................18
Nominating and Governance Committee.....................................................................19
COMMUNICATION BY SECURITY HOLDERS WITH THE BOARD OF DIRECTORS..............................................21
SECURITY OWNERSHIP OF MANAGEMENT............................................................................22
EXECUTIVE COMPENSATION......................................................................................27
Summary Executive Compensation Table....................................................................27
Option Grants and Exercises.............................................................................29
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values...............................30
Long Term Incentive Plans - Awards in Last Fiscal Year..................................................31
Employment Agreement and Termination of Employment and Change of Control Arrangements...................31
Incentive Plan..........................................................................................34
Executive Officer Supplemental Executive Retirement Plan................................................34
Compensation of Directors...............................................................................34
OTHER INFORMATION REGARDING MANAGEMENT......................................................................37
Management Indebtedness.................................................................................37
Certain Business Relationships..........................................................................37
Reports of Changes in Beneficial Ownership..............................................................37
PROPOSAL NO. 2..............................................................................................38
APPROVAL OF THE AMENDED AND RESTATED NORTH BAY BANCORP 2002 INCENTIVE COMPENSATION PLAN.....................38
Background..............................................................................................38
The Original Plan.......................................................................................38
The Proposed Amended and Restated Plan..................................................................38
Description of the Amended and Restated Plan............................................................39
Required Vote and Recommendation........................................................................49
PROPOSAL NO. 3 - RATIFICATION OF INDEPENDENT AUDITORS......................................................50
Audit Fees..............................................................................................50
Audit Committee's Pre-Approval Policies and Procedures..................................................50
Required Vote and Recommendation........................................................................51
AVAILABILITY OF FORM 10-K...................................................................................51
SHAREHOLDER PROPOSALS.......................................................................................51
OTHER MATTERS...............................................................................................51
EXHIBIT A..................................................................................................A-1
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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 Seventh Annual Meeting of
Shareholders to be held at Copia, 500 First Street, Napa, California, 94559, on
Thursday, May 17, 2006, at 7:00 p.m. Only shareholders of record at the close of
business on March 22, 2006 , (the "Record Date") will be entitled to notice of
and to vote at the Annual Meeting. On the Record Date, the Company had
outstanding 3,925,000 shares of its Common Stock, all of which will be entitled
to vote at the Annual Meeting and any adjournments of the Annual Meeting. This
proxy statement will be first mailed to shareholders on or about April 10, 2006.
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 the 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 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.
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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 have the effect of a vote
"against" the proposals.
If you hold your shares in street name and do not provide voting instructions to
your broker, your broker cannot vote your shares on any proposal on which your
broker does not have discretionary authority to vote. This is called a broker
non-vote. Broker non-votes will not be counted in tabulations of votes cast on
proposals. Brokers may vote in their discretion on routine matters. Under Nasdaq
rules, the election of directors and the ratification of auditors are routine
matters. If you do not vote your shares held in street name, your broker has
authority to vote on your behalf on these matters.
A copy of the Annual Report of the Company for the fiscal year ended December
31, 2005, accompanies this Proxy Statement. Additional copies of the Annual
Report are available upon request to Wyman G. Smith, Corporate Secretary of the
Company.
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PRINCIPAL SHAREHOLDERS
As of March 22, 2006, no persons known by the Company beneficially owned more
than five percent (5%) of the outstanding Common Stock.(1)
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(1) In computing the percentage of outstanding Common Stock owned beneficially,
the number of shares beneficially owned is divided by the number of outstanding
shares on the Record Date after giving effect to stock dividends declared
through March 31, 2006.
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MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL NO. 1. - ELECTION OF CLASS B DIRECTORS
It is intended to elect three (3) nominees as Class B Directors of the Company
to serve a three year term expiring at the 2009 Annual Meeting of Shareholders.
All of the nominees 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.
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
- - Class "A", "B" and "C", respectively. The current term of office of the
incumbent Class A directors expires at the 2008 Annual Meeting of shareholders,
the current term of the incumbent Class B directors will expire at the 2006
Annual Meeting of Shareholders, and the current term of the incumbent Class C
directors will expire at the 2007 Annual Meeting of Shareholders.
As part of the continuing effort to stream line the corporate structure and to
improve corporate governance, the Board, pursuant to authority granted by the
Company's Bylaws, has decreased the exact number of directors from sixteen (16)
to eleven (11) and reset the number of directors in each class. In furtherance
of this objective, three (3) Class B directors and two (2) Class A directors
have voluntarily resigned effective as of the 2006 Annual Meeting of
Shareholders. In addition, the number of directors has been reset in Class A to
four (4) and Class B to three (3). The number of directors in Class C remains at
four (4). Assuming the three (3) nominees for Class B Directors are elected,
following the 2006 Annual Meeting of Shareholders the classes of directors, and
their members, will be \ structured as follows:
Class A: Thomas N. Gavin, Stephen Spencer, Denise Suikhonen and James E.
Tidgewell
Class B: Fred J. Hearn, Thomas F. Malloy and Thomas Shelton
Class C: David B. Gaw, Conrad W. Hewitt, Richard S. Long and Terry L.
Robinson
At this and 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.
All nominees for Class B director 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
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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.
Management of the Company
Information is provided below regarding the individual nominees and all other
directors of the Company, 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.(2)
The ages stated are as of March 22, 2006. All directors are also directors of
The Vintage Bank. In January 2005, Solano Bank merged with and into The Vintage
Bank.
Susan C. Fonseca, age 51, 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. Fonseca
graduated from Kent State University with a B.A. degree in Spanish and Latin
American Studies.
Thomas N. Gavin (Class A), age 53, has served as a Director of North Bay since
2004 and was a director and Chairman of the Board of Solano Bank. Mr. Gavin is
50% owner of Gavin & Schreiner, a general partnership, 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-seven 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 (Class C), age 60, has served as a Director of North Bay since 1999
and is Chairman of the Board of North Bay and a former Chairman of the Board of
The Vintage Bank where he has served as a director since 1984. He is a former
director of Solono Bank. Mr. Gaw has been engaged in the practice of law in Napa
and Solano Counties for more than thirty-four 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
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(2) As used throughout the Proxy Statement, the term "Executive Officer"
means the President and Chief Executive Officer; Executive Vice President/Credit
Administrator; Executive Vice President/Chief Financial Officer; Executive Vice
President/Chief Operating Officer; Corporate Secretary; Senior Vice
President/Compliance and Risk Manager; Senior Vice President/Human Resources of
North Bay; the President of Solano Bank, a Division of The Vintage Bank; and the
President of The Vintage Bank.
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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 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 North Bay and The Vintage Bank expect to
retain the firm's services in 2006.
Fred J. Hearn, Jr. (Class B), age 52, has served as a Director of North Bay
since 2000 and is a former director of Solano Bank. Mr. Hearn is the CEO and
Chairman of the Board of Napa Pacific, Inc., the parent company of Hearn
Pacific, Inc. and James Nolan Construction, both of which are general
contracting companies. He is also a member in Pacific Valley Development Company
and, until this year, CEO of Pacific Concrete Construction Company, Inc. Mr.
Hearn is an active member of the 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 Board of Directors of the Vacaville Public Education
Foundation.
Conrad W. Hewitt (Class C), age 69, has served as director of North Bay since
1999 and is a retired consultant. He is also a director for Varian, Inc. and is
Chairman of the Audit Committee and a member of the Compensation and Nominating
and 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. He is also an advisory director for 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, of Ernst &
Young and was employed by Ernst & Young for thirty-three years until his
retirement. Mr. Hewitt is a Certified Public Accountant. Mr. Hewitt received a
B.S. in Finance and Economics from the University of Illinois and did
post-graduate work at the University of Southern California.
Richard S. Long (Class C), age 61, has served as a director of North Bay since
1999. He presently serves as Chief Executive Officer of Regulus Group, LLC. Mr.
Long has over thirty years of entrepreneurial and executive management
experience. Regulus is a remittance processor for major banks and corporations
with over ten locations in the United States. 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.
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Thomas F. Malloy (Class B), age 63, has served as a director of North Bay since
1999 and is a past Chairman of the Board of North Bay and of the Board of The
Vintage Bank, where he has served as a director since 1984. He is an insurance
broker and a retired Member of 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 51, is the Executive Vice President and Credit Administrator of
North Bay and Executive Vice President and Credit Administrator of The Vintage
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 currently a member of the Board of
Directors of the North Napa Rotary Club, serves on the Board of Directors of the
Napa Valley College Foundation, and is a member of the California Bankers
Association Real Estate Legislation Committee. Ms. Metro is also a Director and
Audit Committee Chair of SAFE BIDCO, a state assisted fund for enterprise,
business, and industrial development. Ms. Metro is a 1993 graduate of the
Graduate School of Banking, Pacific Coast Banking School, University of
Washington.
John A. Nerland, age 41, is President of Solano Bank, a division of The Vintage
Bank. Prior to his employment with Solano Bank, Mr. Nerland was a Region Manager
at Civic Bank of Commerce. Mr. Nerland also held various positions with
WestAmerica Bank, including, Regional Vice President of WestAmerica's San Rafael
Region. Mr. Nerland currently sits on the boards of Sutter-Solano Hospital
Foundation, Vacaville Museum, and Solano Economic Development Corporation. He is
currently Chairman of the Vacaville Chamber of Commerce, a member of the Board
of Directors of the Vacaville Rotary Club, and 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.
Patrick E. Phelan, age 41, is Executive Vice President and Chief Financial
Officer of North Bay and The Vintage Bank. Prior to joining North Bay in 2005,
Mr. Phelan previously worked from January 2002 through January 2004 as Executive
Vice President and Chief Financial Officer and served as a member of the Board
of Directors of Business Bank of California, and from December 1998 through
December 2001 as Executive Vice President and Chief Financial Officer and served
as a member of the Board of Directors of Metro Commerce Bank. From 2004 until
joining the Company, Mr. Phelan was been a bank consultant, private investor,
and a proposed Board member for a Northern California bank in organization.
Virginia M. Robbins, age 44, is Executive Vice President of North Bay and The
Vintage Bank. Before joining North Bay in 2006, Ms. Robbins was a consultant
with Nelnet, Inc. from October 2005 - January 2006 and Managing Director and
Chief Information and Operations Officer of Chela Education Financing, Inc. from
March 2002 to October 2005; both companies are engaged in the student loan
business. From June 1999 to March 2003, she was Chief Information Officer and
Executive Vice President of Civicbank of Commerce and from February 1997 to
August 1999 was Vice President and Chief Information Officer of Medamerica,
Inc., a physician practice management company. From April 1994 to February 1997,
Ms. Robbins was Senior Vice President and Manager, Information Services and
Human Resources for Civicbank of Commerce and from June 1989 to March 1994 was
Assistant Vice President and Manager, Technical Services of The Pacific Bank,
NA.
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Ms. Robbins holds a Bachelors of Arts degree in mathematics and economics from
Boston University and a Master of Business Administration degree from St. Mary's
College, Moraga, California.
Terry L. Robinson (Class C), age 58, is President and Chief Executive Officer
and a Director of North Bay. He is also a Director and Chief Executive Officer
of The Vintage Bank and was a Director of Solano 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 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. He is also a director of Idaho
First Bank. 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.
Stephanie Rode, age 45, is Senior Vice President and Compliance/Risk Manager for
The Vintage Bank. Ms. Rode joined the Company in 2002 with 22 years banking
experience. Prior to her employment with The Vintage Bank, Ms. Rode served in
Compliance, Operations and Project Management positions with Napa Valley Bank
(later to become Westamerica Bank through acquisition) and Napa National Bank
(later to become Wells Fargo Bank through acquisition). She is an alumnus of
Leadership Napa Valley. Ms. Rode is a graduate of American Banker's Association
Graduate Compliance School and Bank Administration Institute's Graduate Audit
Program.
Thomas Shelton (Class B), age 53, has served as a director of North Bay since
2004. He is the President & CEO of Joseph Phelps Vineyards in St. Helena, CA. He
has played an active role in wine industry issues. He served on the Board of
Directors of Napa Valley Vintners Association from 1996-2000 and served as
President of the trade organization in 1999. As one of the founders of Free the
Grapes, he has endorsed reform of the mandatory three-tier system of wine
distribution in the United States. He has also served as a representative to the
Board of Directors of the Wine Institute, and is active with the Coalition for
Free Trade. He was appointed to the Napa County Watershed Oversight Committee
and continues to serve on the board of the Napa County Watershed Center. He is a
graduate of Wake Forest University with a Bachelor's Degree in Politics and he
began his graduate studies in Political Science at the University of Maryland in
1975.
Wyman G. Smith, age 55, is Corporate Secretary of North Bay and The Vintage Bank
and has served as such since the organization of each entity. He was also
Corporate Secretary of Solano Bank. Mr. Smith has been engaged in the practice
of law in Napa and Solano Counties for more than thirty 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 former member of the Queen
-12-
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 Past 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 North Bay and The Vintage Bank expect to
retain the firm's services in 2006.
Stephen Spencer (Class A), age 55, has served as a Director of North Bay since
2004 and is a former director of Solano Bank. Mr. Spencer oversees three
companies. He has been President of Gateway Realty since 1981, President of
Solano Property Management since 1987, and President and Founding Principal of
Premier Commercial since 1995. He has been a licensed Real Estate Broker since
1977 and Attorney since 1979, and is a current member of the Solano Commercial
Brokers. He is also Past President and Chair of numerous organizations,
including Professional Standards Committee of the Northern Solano Association of
Realtors, Solano Affordable Housing, Fairfield/Suisun Chamber of Commerce, etc.
Mr. Spencer received his B.A. from Drake University and his J.D. from Western
State University.
Denise Suihkonen (Class A), age 49, has served as a director of North Bay since
2004, is a former director of Solano Bank and past chairperson of the Solano
Bank Board. She is a CPA and a partner in Suihkonen CPAs and Consultants LLP,
located in Vacaville. She is active in the community, serving as a Housing and
Redevelopment commissioner for the city of Vacaville and on the board of the
Vacaville Soroptimist, Vacaville Police Activities League, and the Vacaville
Chamber of Commerce.
Glen C. Terry, age 54, is the President of The Vintage Bank. Until April 1, 2002
he was President, Chief Executive Officer, Chief Credit Officer, and a Director
of Solano Bank. Prior to the opening of Solano Bank, beginning in 1999, he
served as Senior Vice President and Solano Region Manager of The Vintage Bank.
Prior to being employed by Solano 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 and has served on the Santa Rosa Design Review Board, the
Santa Rosa Chamber of Commerce and Clinic Ole. He is a member of the Boards of
the Napa Chamber of Commerce, Junior Achievement of the Redwood Empire and Napa,
and the Western Independent Bankers Association. Additionally, he is a Board
member and Treasurer of the Community Foundation of Napa Valley and a Board
member, Trustee, and Treasurer of the Queen of the Valley Hospital Foundation.
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 (Class A), age 60, has served as a Director of North Bay
since 1999 and is a former Chairman of the Board of The Vintage Bank, where he
has served as a Director 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
-13-
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, a member of the
Board of Trustees of Queen of the Valley Hospital, and an honorary member and
past president of The Queen of the Valley Hospital Foundation Board of Trustees.
During 2005, the Company's Board of Directors met fourteen (14) 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
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 and Governance
Committees.
Audit Committee
The Audit Committee, which, during 2005 consisted of Conrad Hewitt (Chair),
Lauren Ackerman, John B. Anthony III, Thomas H. Lowenstein, and James E.
Tidgewell, met twelve (12) times during the fiscal year ended December 31, 2005.
The functions of the Audit Committee are to engage and oversee the Company's
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.
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.
-14-
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 23, 2006)
The Audit Committee of the North Bay Bancorp Board of Directors (the "Audit
Committee") oversees the Company's accounting and financial reporting process
and the audits of the Company's financial statements, as further detailed in the
Committee's Charter attached as Appendix A to this Proxy Statement. All members
of the Audit Committee are independent directors as defined in the rules of the
National Association of Securities Dealers, Inc., and are non-management
directors. In 2005 the members of the Audit Committee were Conrad Hewitt
(Chairman and financial expert), Lauren Ackerman, John B. Anthony III, Thomas H.
Lowenstein, and James E. Tidgewell.
Management is responsible for the Company's internal controls and its financial
reporting process. The Company's independent accountants, KPMG LLP, 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 monitors and oversees these
processes. The Audit Committee selects the Company's independent accountants and
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 has 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 Independent Standards Board Standard No. 1 (Independence Discussions with
Audit Committees), and the Audit Committee discussed with KPMG LLP that firm's
independence.
Based on the Audit Committee's discussion with management and KPMG LLP and the
Audit Committee's review of the representation of management and the report of
KPMG LLP to the Audit Committee, the Audit Committee recommended that the Board
of Directors include the audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2005 filed
with the Securities and Exchange Commission.
-15-
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, 2005, is
compatible with maintaining KPMG LLP's independence.
Respectfully submitted by the Audit Committee,
Conrad Hewitt (Chair), Lauren Ackerman, John B. Anthony III, Thomas H.
Lowenstein, and James E. Tidgewell
Compensation Committee
The Compensation Committee which during 2005 consisted of Richard S. Long
(Chairman), Thomas N. Gavin, Thomas F. Malloy, and Stephen C. Spencer. The
Compensation Committee seven (7) times during the fiscal year ended December 31,
2005. 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
- -------------------------------------------------------
North Bay Bancorp (March 7, 2006)
The Compensation Committee of the Board of Directors establishes and administers
the Company's executive compensation programs. All members of the Committee are
independent directors as defined in the rules of the National Association of
Securities Dealers, Inc. and are non-management directors. In 2005 the members
of the Committee were Richard S. Long (Chairman), Thomas N. Gavin, Thomas F.
Malloy, and Stephen C. Spencer.
The goals of the Company's executive compensation programs are to:
1. Align executive compensation with shareholders interests;
2. Attract, retain, and motivate a highly competent executive team;
3. Link compensation to Company and individual performance;
4. Achieve a balance between short-term and long-term performance; and
5. Support the Company's strategic plan.
-16-
Executive Compensation Study: In connection with reviewing and approving CEO and
other executive officer compensation for 2006 the Compensation Committee engaged
an independent human resources consulting firm to perform an executive
compensation study and analysis for the six mostly highly compensated officers
of the Company. The purpose of the study was to evaluate base pay, short-term
cash incentives, long-term equity incentives, and executive benefits and
perquisites. The study was also intended to serve as a tool to help the
Committee achieve the goals of the Company's executive compensation programs and
evaluate internal pay equity within the Company.
CEO Compensation: The Compensation Committee reviews and approves all components
of the CEO's compensation, including salary, incentive compensation, equity and
long-term incentive compensation, accumulated realized and unrealized stock
option gains, the dollar value to the CEO and the cost to the Company of all
perquisites and other personal benefits, the projected payout obligations under
the CEO's supplemental executive retirement plan and under potential severance
and change-in-control scenarios, and all other compensation as described in the
Executive Compensation section of this Proxy Statement. A spreadsheet setting
forth all of the above components and affixing dollar amounts under the various
payout scenarios was prepared and reviewed by the Committee. Based on this
review and a subjective evaluation of performance and purposes, the Committee
finds the CEO's compensation (and, in the case of severance and
change-in-control scenarios, the potential payouts) in the aggregate to be
reasonable and not excessive.
It should be noted that when the Committee considers any component of the CEO's
total compensation, the aggregate amounts and mix of all the components,
including accumulated (realized and unrealized) option gains are taken into
consideration in the Committee's decisions. The CEO is not present during
discussion or deliberation of his own compensation.
It is the Committee's policy to make compensation decisions in a two-step
process. At the first Committee meeting during the year, the CEO's proposed
compensation is presented, reviewed and analyzed in the context of all
components of his total compensation. Members then have additional time between
meetings to ask for additional information and to raise and further discuss
questions. The discussion is then continued at a second Committee meeting, after
which a vote is taken.
Other Executive Officer Compensation: The Committee reviews and approves
recommendations of the Company's CEO for all elements of executive compensation.
Salary adjustments are determined by a subjective evaluation of performance. No
executive officer of the Company is present during discussion or deliberation of
his or her own compensation.
Incentive Compensation: Approximately 30% to 40% of executive cash compensation
is contingent upon Company performance and adjusted as appropriate for
individual performance. Grants under the Company's stock option plan are
designed to further strengthen the linkage between shareholder return and
executive compensation. The Committee recommends and the independent directors
of the Company annually determine targets for deposit and loan growth, revenues,
earnings, efficiency ratio and return on equity to be used as the measurement
points for decisions regarding executive compensation. Bonuses are awarded in
-17-
amounts determined in accordance with an incentive plan recommended by the
Committee and approved by the independent directors of the Company. The
incentive plan relates the amount of bonuses paid to the performance of the
Company and individual performance 32.8% of the CEO's compensation for 2005 was
a result of a bonus awarded in accordance with the Company's performance.
Internal Pay Equity: In addition to periodically reviewing executive
compensation in light of Company and individual performance, the Compensation
Committee periodically compares all components of compensation of Company
executive officers with compensation for comparable positions in the community
banking industry for the purpose of evaluating the competitiveness of the
Company's executive compensation and determining internal pay equity within the
Company. The executive compensation study conducted by the independent human
resources consulting firm was used for this purpose. In the process of reviewing
each component of executive officer compensation separately, and in the
aggregate, the Committee considers a spreadsheet showing internal pay equity
within the Company. This spreadsheet shows the relationship between each senior
management level of compensation within the Company (e.g., between the CEO, CFO,
Executive VPs and Senior VPs). The comparison includes all components of
compensation (as previously described), both individually and in the aggregate.
The Committee believes that the relative difference between CEO compensation and
the compensation of the Company's other senior executives has not increased
significantly over the years. Over the period reviewed, our CEO's total annual
compensation as described in the Summary Executive Compensation Table in the
Executive Compensation section of this Proxy Statement has been in the range of
1.4 times the compensation of the next highest paid executive officer.
Respectfully submitted by the Compensation Committee,
Richard S. Long, Chair, Thomas N. Gavin, Thomas F. Malloy and Stephen Spencer.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
There were no interlocking relationships where (a) an executive officer of North
Bay or the Bank 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 Bank; (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 Bank; or (c) an executive officer of North Bay or the Bank
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 Bank.
-18-
Shareholder Return on Performance Graph
The following graph compares changes in the value of $100 invested on January 1,
2000 in the Company's Common Stock, in the NASDAQ STOCK MARKET (U.S ) Index and
in an industry index. The Company's current industry index is the SNL NASDAQ
Bank Index.
North Bay Bancorp
[PERFORMANCE CHART OMITTED]
- ----------------------|----------|-----------|-------------------------|------------|---------
| | | Period Ending | |
- ----------------------|----------|-----------|------------|------------|------------|----------
Index | 12/31/00 | 12/31/01 | 12/31/02 | 12/31/03 | 12/31/04 | 12/31/05
- ----------------------|----------|-----------|------------|------------|------------|----------
North Bay Bancorp | 100.00 | 105.98 | 145.09 | 173.09 | 263.76 | 263.98
- ----------------------|----------|-----------|------------|------------|------------|----------
NASDAQ Composite | 100.00 | 79.18 | 54.44 | 82.09 | 89.59 | 91.54
- ----------------------|----------|-----------|------------|------------|------------|----------
SNL NASDAQ Bank Index | 100.00 | 108.85 | 111.95 | 144.51 | 165.62 | 160.57
- ----------------------|----------|-----------|------------|------------|------------|----------
Nominating and Governance Committee
The Nominating and Governance Committee was established in January 2005 and
consists of David B. Gaw, as chair, Fred W. Hearn, Richard S. Long, Thomas F.
Malloy, and Connie Klimisch. The nominating committee met three (3) times during
2005. The principal functions of the Nominating and Governance Committee are to
identify and review the qualifications of nominees for director and to recommend
nominees to the Company's Board of Directors, receive and evaluate
communications from shareholders to the Board of Directors, annually review the
Committee's Charter and the Company's corporate governance guidelines, annually
conduct an assessment of the Board/s performance, periodically assess individual
director performance and the performance of the Chairman of the Board of
Directors, annually report to the Board of Directors on director development and
succession planning, and develop and recommend an education program for the
directors of the Company. Each member of the Nominating and Governance Committee
is independent as defined by current rules of the National Association of
Securities Dealers, Inc.
-19-
For the 2006 annual election of directors the Board of Directors, as part of the
continuing effort to streamline the corporate structure and to improve corporate
governance, decreased the number of directors from sixteen (16) to eleven (11)
and delegated the selection of the Company's nominees and the resetting of the
directors in each class to a task force of independent directors (the "Task
Force"). The Task Force consisted of David B. Gaw, as chair, Fred W. Hearn and
Richard S. Long. For the 2006 annual election of directors the Task Force
selected the three (3) nominees for Class B director listed in this Proxy
Statement under PROPOSAL No. 1 - ELECTION OF DIRECTORS for election by the
Shareholders. The Task Force reset the number of directors in each class by
fixing the number of directors for Class A at four (4) directors, for Class B at
three (3) and for Class C at four (4). In selecting the Company's nominees and
the resetting of the directors in each class, the Task Force considered the
minimum qualifications for nominees described in the Nominating and Governance
Committee Charter.
The Nominating and 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 and Governance Committee will consider director candidates
recommended by securities holders if the procedures contained in the Company's
Bylaws are followed. These procedures are described in the NOTICE OF ANNUAL
MEETING included with this Proxy Statement.
The Nominating and Governance Committee Charter contains a description of the
minimum qualifications for Nominating and 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 and Governance Committee normally conducts an annual review of
the skills and characteristics that should be reflected in the composition of
the Board as a whole. For 2006 this review was delegated by the Board of
Directors to the Task Force. In the future the Nominating and 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 and Governance Committee will take into consideration
-20-
any evaluation of the performance of the incumbent directors. The Nominating and
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 and 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 and Governance Committee has authority to engage a third party to
identify, or evaluate or assist in evaluating, potential nominees.
Insofar as the selection of the nominees for the 2006 annual election of
directors was delegated by the Board Directors to the Task Force, the Nominating
and 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.
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 2005 Annual Meeting of Shareholders
fifteen (15) of the sixteen (16) incumbent directors were present.
-21-
SECURITY OWNERSHIP OF MANAGEMENT
The following table provides information as of March 22, 2006 , 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 declared through March 31,
2006.(3) 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.
- -------------------------------
(3) 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.
-22-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(4)
- ---- ------------------ ----- --------- ----------
Susan C. Fonseca Senior Vice President, 14,517 5,6 0.37%
Human Resources of North
Bay
Thomas N. Gavin Director of North Bay 18,269 5,7 0.46%
of The Vintage Bank
David B. Gaw Chairman of the Board 42,037 8 1.07%
and Director of North
Bay and of The Vintage
Bank
Fred J. Hearn Director of North Bay 26,497 5,9 0.67%
and The Vintage Bank
Conrad W. Hewitt Director of North Bay 21,475 5,10 0.55%
and The Vintage Bank
Richard S. Long Director of North Bay 43,927 5,11 1.12%
and The Vintage Bank
Thomas F. Malloy Director of North Bay 125,723 5,12 3.20%
and The Vintage Bank
- --------------------------------
(4) In computing the percentage of outstanding Common Stock owned beneficially
by each director and executive officer, the number of shares beneficially owned
has been divided by the number of outstanding shares on the Record Date after
giving effect to stock dividends declared through March 31, 2006, and assuming
options exercisable by the director and executive officer within 60 days have
been exercised.
-23-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(4)
- ---- ------------------ ----- --------- ----------
Kathi Metro Executive V.P. and 29,078 5,13 0.74%
Credit Administrator of
North Bay and The
Vintage Bank
John A. Nerland President of Solano 24,021 5,14 0.74%
Bank, a Division of The
Vintage Bank
Terry L. Robinson Director, President, and 176,930 15 4.50%
CEO of North Bay and CEO
and Director of The
Vintage Bank
Stephanie Rode Senior Vice President 4,442 16 0.11%
and Compliance/Risk
Manager for The Vintage
Bank
Thomas Shelton Director of North Bay 8,145 5,17 0.21%
and The Vintage Bank
Stephen Spencer Director of North Bay 19,775 5,18 0.50%
and The Vintage Bank
Denise Suihkonen Director of North Bay 18,277 5,19 0.46%
and The Vintage Bank
Glen C. Terry President of The Vintage 13,138 5,20 0.33%
Bank
James E. Tidgewell Director of North Bay 24,402 5,21 0.62%
and of The Vintage Bank
-24-
Number of
Shares
Beneficially
Name Nature of Position Owned Ownership Percent(4)
- ---- ------------------ ----- --------- ----------
All Current Executive 655,216 22 16.02%
Officers and Directors as a
group (total of 19)
(5) 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.
(6) Included in the total for Ms Fonseca 1,848 shares held by her spouse in the
name of Michael J. Drinker IRA Rollover as to which Ms. Fonseca may indirectly
have shared voting power. Also included in the total for Ms. Fonseca are 12,127
shares as to which Ms. Fonseca holds options exercisable as of May 22, 2006;
(7) Included in the total for Mr. Gavin are 1,365 shares held by NY Life
Securities 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 13,714 shares
as to which Mr. Gavin holds an option exercisable as of May 22, 2006.
(8) Included in the total for Mr. Gaw are 34,221 shares held in the name of the
Gaw Family Trust dated September 22, 1999, of which he is the trustee; 298
shares held as custodian for a minor under the California Uniform Transfers to
Minors Act, and 3,253 shares held for the Gaw, Van Male, Smith, Myers & Miroglio
Profit Sharing Plan of which Mr. Gaw is a trustee as to which he has shared
voting power and as to which he disclaims beneficial ownership. Also included in
the total for Mr. Gaw are 3,562 shares as to which Mr. Gaw holds an option
exercisable as of May 22, 2006.
(9) Included in the total for Mr. Hearn are 10,557 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; 1,316 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 910 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 13,714 shares as to which Mr. Hearn holds an option
exercisable as of May 22, 2006.
(10) Included in the total for Mr. Hewitt are 6,638 shares held in the name of
the Conrad W. Hewitt 2001 Trust and 258 shares held as separate property by Mr.
Hewitt's wife as to which he disclaims beneficial ownership. Also included in
the total for Mr. Hewitt are 14,317 shares as to which Mr. Hewitt holds an
option exercisable as of May 22, 2006.
(11) Included in the total for Mr. Long are 20,099 shares held in the Richard S.
Long and Cynthia A. Long Trust dated September 15, 1993, of which Mr. Long is
trustee; 945 shares held by Charles Schwab & Co. as custodian FBO Cynthia A.
Long IRA dated 4/05/93 as to which Mr. Long may indirectly have shared voting
power; and 14,317 shares as to which Mr. Long holds an option exercisable as of
May 22, 2006.
(12) Included in the total for Mr. Malloy are 80,621 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 38,117 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 may indirectly have shared voting power; and 3,562
shares as to which Mr. Malloy holds an option exercisable as of May 22, 2006.
(13) Included in the total for Ms. Metro are 3,796 shares as to which Ms. Metro
holds options exercisable as of May 22, 2006. Also included are 164 shares held
in an investment club partnership which Ms. Metro is a partner of and may have
shared voting power.
-25-
(14) Included in the total for Mr. Nerland are 85 shares held in the name of the
Nerland Trust dated October 5, 2000, of which Mr. Nerland is the trustee; and
14,661 shares as to which Mr. Nerland holds an option exercisable as of May 22,
2006.
(15) Included in the total for Mr. Robinson are 65,464 shares held in the name
of Snake River Honey Co., Inc., of which he is a director and as to which he has
shared voting power; and 10,874 shares as to which Mr. Robinson holds an option
exercisable as of May 22, 2006.
(16) Included in the total for Ms. Rode are 4,031 shares as to which Ms. Rode
holds an option exercisable as of May 22, 2006.
(17) Included in the total for Mr. Shelton are 5,993 shares as to which Mr.
Shelton holds an option exercisable as of May 22, 2006.
(18) Included in the total for Mr. Spencer are 453 shares held in Joint Tenancy
with Christina Spencer as to which he has shared voting power; 453 shares held
in Joint Tenancy with Stephanie Spencer as to which he has shared voting power;
453 shares held in Joint Tenancy in the names of Haley Monson and Patricia
Monson (Spencer) as to which he may indirectly have shared voting power; and
4,564 held in the name of Solano Gateway Realty, Inc. Profit Sharing Plan of
which he is a trustee and as to which he has shared voting power. Also included
in the total for Mr. Spencer are 13,714 shares as to which Mr. Spencer holds an
option exercisable as of May 22, 2006.
(19) Included in the total for Ms. Suihkonen are 2,278 shares held by Edward D,
Jones & Co. as custodian FBO Andrew T. Suihkonen IRA as to which Ms. Suihkonen
may indirectly have shared voting power; and 7 shares held in Tenancy in Common
with Kristen D. Suihkonen as to which she has shared voting power. Also included
in the total for Ms. Suihkonen are 13,714 shares as to which Ms. Suihkonen holds
an option exercisable as of May 22, 2006.
(20) Included in the total for Mr. Terry are 2,868 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 5,705 shares as to
which Mr. Terry holds an option exercisable as of May 22, 2006.
(21) Included in the total for Mr. Tidgewell are 3,562 shares as to which Mr.
Tidgewell holds an option exercisable as of May 18 2005.
(22) 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 165,425, the number of shares subject
to the exercisable options by all members of the group.
-26-
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 Susan C. Fonseca, Kathi Metro, John A. Nerland, Stephanie Rode,
and Glen C. Terry, the only other executive officers of the Company whose annual
compensation exceeded $100,000 during 2005. (Mr. Robinson, Ms. Fonseca, Ms.
Metro, Mr. Nerland, Ms. Rode and Mr. Terry are sometimes collectively referred
to as the "Named Executive Officers").
- ---------------------------- ---------- ---------------------------------------- --------------------------------- -----------------
Long Term
Annual Compensation Compensation Awards
- ---------------------------- ---------- ---------------------------------------- --------------------------------- -----------------
Securities
Underlying All Other
Name and Principal Other Annual Restricted Options Compensation
Position Year Salary ($) Bonus ($) Compensation Stock Awards ($) (#)(2)(3) ($)
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
Terry L. Robinson 2005 212,000 55,000 -0- -0- -0- 29,434
President and Chief
Executive Officer
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2004 211,000 100,000 -0- -0- 16,537 27,776
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2003 204,999 52,700 -0- -0- 10,419 28,282
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
Susan C. Fonseca Sr. V/P. 2005 90,000 23,000 -0- -0- -0- 13,891
Human Resources
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2004 86,583 32,000 -0- -0- 2,811 6,945
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2003 84,083 20,600 -0- -0- -0- 7,278
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
Kathi Metro Executive V.P. 2005 130,000 38,500 -0- -0- -0- 21,634
and Credit Administrator
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2004 125,833 48,000 -0- -0- 4,465 16,502
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2003 117,399 27,300 -0- -0- 3,125 17,203
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
John A. Nerland President 2005 134,000 50,000 -0- -0- -0- 19,997
of Solano Bank, Division
of The Vintage Bank
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2004 128,000 63,000 -0- -0- 7,442 15,973
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2003 119,166 35,600 -0- -0- -0- 11,360
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
Stephanie Rode 2005 90,000 37,000 -0- -0- -0- 14,150
Senior Vice President and
Compliance/Risk Manager of
The Vintage Bank
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2004 76,000 30,000 -0- -0- 1,984 4,278
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2003 62,000 2,500 -0- -0- 6,077 13,000
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
Glen C. Terry President of 2005 155,000 45,000 -0- -0- -0- 23,153
The Vintage Bank
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2004 150,000 65,000 -0- -0- 7,938 19,373
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
2003 145,833 39,000 -0- -0- 5,209 19,855
- ---------------------------- ---------- ------------ ------------ -------------- ----------------- --------------- -----------------
(23) As adjusted for the split effective December 6, 2004 and 5% stock dividends
declared through March 31, 2006.
-27-
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. Fonseca, Ms. Metro, Mr. Nerland, Ms. Rode, or Mr. Terry since the
value of perquisites and other personal benefits did not exceed the reporting
threshold.
All other compensation for 2004 includes, for each Named Executive Officers,
$250, the value of one share of preferred stock of Vintage Capital Trust, the
Vintage Bank's REIT.
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 $17,858 in 2005, $15,375 in 2004, and $16,553
in 2003. Contributions to the 401(k) Plan for Ms. Fonseca were $10,507 in 2005,
$6,494 in 2004, and $7,147 in 2003. Contributions to the 401(k) Plan for Ms.
Metro were $13,392 in 2005, $9,410 in 2004, and $10,382 in 2003. Contributions
to the 401(k) Plan for Mr. Nerland were $13,816 in 2005, $9,625 in 2004, and
$5,227 in 2003, and $-0- in 2002. Contributions to the 401(k) Plan for Ms. Rode
were $9,836 in 2005, $1,425 in 2004, and $-0- in 2003. Contributions to the
Bank's 401(k) Plan for Mr. Terry were $16,142 in 2005, $11,275 in 2004, and
$12,705 in 2003. Total contributions to the 401(k) Plan for all Named Executive
Officers as a group were $81,551 in 2005, $58,964 in 2004, and $59,688 in 2003.
All Other Compensation for 2005 includes the economic value to Terry L.
Robinson, Kathi Metro, and Glen C. Terry of split dollar life insurance death
benefits provided by The Vintage 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 bank is 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: $1,613 in 2005,
$1,861 in 2004, and $1,439 in 2003; $1,843 in 2005, $630 in 2004, and $600 in
2003, for Kathi Metro; and $745 in 2005, $1,406 in 2004, and $690 in 2003 for
Glen C. Terry. Total economic benefit included in All Other Compensation for all
covered executive officers was $4,251 in 2005, $4,286 in 2004, and $3,097. A
similar agreement was entered into by John Nerland on February 2, 2006.
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", is included in the amount covered under All Other
Compensation in connection with Mr. Robinson's Endorsement Method Split Dollar
Agreement.
In 2001, The Vintage 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. In 2005, The Vintage Bank paid a single premium
$1,250,000 to purchase the life insurance policy that is the subject of John
Nerland's Endorsement Method Split Dollar Agreement.
-28-
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 $963 in 2005, $1,290 in 2004, and $1,250
in 2003. The amounts included for Ms. Fonseca were $234 in 2005, $201 in 2004,
and $131 in 2003. The amounts included for Ms. Metro were $399 in 2005, $221 in
2004, and $221 in 2003. The amounts included for Mr. Nerland were $181 in 2005,
$148 in 2004, and $133 in 2003. The amounts included for Ms. Rode were $114 in
2005, $53 in 2004, and $13 in 2003. The amounts included for Mr. Terry were $216
in 2005, $442 in 2004, $442 in 2003 and $442 in 2002. The amounts included for
all Named Executives as a group were $2,107 in 2005, $2,397 in 2004, and $2,262
in 2003.
Option Grants and Exercises
During fiscal year 2005 no stock options were granted to any of the Named
Executive Officers.
-29-
The following table shows exercises of stock options during fiscal year 2005 by
the Named Executive Officers and the value at December 31, 2005 of unexercised
options on an aggregated basis held by each of those persons as adjusted for the
3-for-2 stock split effective December 6, 2004 and for 5% stock dividends
declared through March 31, 2006:
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
--------------------------------------- ------------- --------------------------------- ------------------------------
Number of Securities Underlying Value of Unexercised
Value Unexercised In-the-Money Options
Shares Acquired Realized Options At Fiscal Year-End at Fiscal Year-End
on Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
--------------------------------------- ------------- --------------------------------- ------------------------------
------------------------ -------------- ------------- --------------------------------- ------------------------------
Terry Robinson, NA NA Exercisable for 10,874 Exercisable $ 69,222
President and CEO Unexercisable for 16,083 Unexercisable $ 121,989
------------------------ -------------- ------------- --------------------------------- ------------------------------
------------------------ -------------- ------------- --------------------------------- ------------------------------
Susan C. Fonseca NA NA Exercisable for 12,127 Exercisable $ 173,673
Senior Vice President, Unexercisable for 4,085 Unexercisable $ 48,872
Human Resources
------------------------ -------------- ------------- --------------------------------- ------------------------------
------------------------ -------------- ------------- --------------------------------- ------------------------------
Kathi Metro, 5,276 89,586 Exercisable for 3,796 Exercisable $ 27,400
Executive Vice Unexercisable for 3,795 Unexercisable $ 27,395
President and Credit
Administrator
------------------------ -------------- ------------- --------------------------------- ------------------------------
------------------------ -------------- ------------- --------------------------------- ------------------------------
John A. Nerland, NA NA Exercisable for 14,661 Exercisable $ 150,336
President of Solano Unexercisable for 11,014 Unexercisable $ 106,645
Bank, a Division of
The Vintage Bank
------------------------ -------------- ------------- --------------------------------- ------------------------------
------------------------ -------------- ------------- --------------------------------- ------------------------------
Stephanie Rode NA NA Exercisable for 4,031 Exercisable for 33,827
Senior Vice President Unexercisable for 4,032 Unexercisable for 33,832
and Compliance/Risk
Manager of The Vintage
Bank
------------------------ -------------- ------------- --------------------------------- ------------------------------
------------------------ -------------- ------------- --------------------------------- ------------------------------
21,106 327,354 Exercisable for 5,705 Exercisable $ 38,145
Glen C. Terry, Unexercisable for 7,442 Unexercisable $ 55,741
President of The
Vintage Bank
------------------------ -------------- ------------- --------------------------------- ------------------------------
For purposes of calculating the value of unexercised stock options as of
December 31, 2005, it is assumed that the fair market value of the shares as of
December 31, 2005 was $25.97 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 declared through March 31, 2006.
-30-
Long Term Incentive Plans - Awards in Last Fiscal Year
There were no transactions in 2005 which require disclosure in a table for
long-term incentive plan awards.
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. As a result of the merger of Solano Bank into The Vintage Bank,
Mr. Robinson's agreement was amended on March 28, 2005, to provide that he will
also serve as Chief Executive Officer of The Vintage Bank. 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 provided for an initial base salary of
$212,000, and annual adjustments as determined by the Board of Directors in its
sole discretion. During 2006, the base salary will be $225,000. 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, or terminated by him on
account of the Company's constructive termination of his employment, 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, increased by an additional amount so that
the net amount retained by the executive, after deduction of any federal, state
and local income tax, any excise tax and FICA Medicare withholding taxes will
equal the total benefits contemplated by the agreement. This amount is payable
over 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, 2003, 2004 and 2005 was
$668,847, $712,350, and $713,500, 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 provided for an
initial base salary of $107,000 and annual adjustments as determined by the
-31-
Board of Directors in its sole discretion. During 2006, the base salary will be
$135,000. 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, 30 days personal time
off, reimbursement of reasonable business expenses, and automobile allowance of
$500 per month.
John A. Nerland. Effective April 15, 2005, the Employment Agreement between John
Nerland and The Vintage Bank expired. Mr. Nerland serves as President of the
Solano Bank division of The Vintage Bank, a wholly owned subsidiary of North
Bay. On May 23, 2005, the Board of Directors of North Bay approved the renewal
of Mr. Nerland's employment for a period of three years and entered into a new
Employment Agreement with Mr. Nerland effective as of June 1, 2005. Unless
terminated at the end of the third year, or any subsequent year, the agreement
will continue on a year-to-year basis. Mr. Nerland's initial base salary will be
$134,000 per year with annual adjustments to be determined by the Board of
Directors in its sole discretion. For 2006, the base salary will be $150,000.
Mr. Nerland will be eligible to receive additional compensation under the terms
of an incentive compensation plan adopted 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 $500 per month.
Mr. Nerland's agreement provides that if Mr. Nerland'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.
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. As a
result of the merger of Solano Bank into The Vintage Bank, Mr. Terry's agreement
was amended on March 28, 2005, to provide that he will serve as President of The
Vintage Bank. 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. During 2006, the base salary will be
$165,000. 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.
-32-
The agreement for each of Ms. Metro, Mr. Nerland, 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. This amount is
payable over a period of twenty-four (24) months following the effective date of
the termination of his or her employment.
The maximum amount payable under Mr. Terry's employment agreement in connection
with any corporate change for 2005 was $365,000 and $361,000 for 2004. The
maximum amount payable under Ms. Metro's current employment agreement in
connection with any corporate change for 2005 was $303,250 and $297,650 for
2004. The maximum amount payable under Mr. Nerland's current employment
agreement in connection with any corporate change for 2005 was $183,300 and
$64,000 in 2004.
The agreement for each of Mr. Robinson, Ms. Metro, Mr. Nerland, 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 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 federal, state and local
income tax, any excise tax, and FICA Medicare withholding taxes will equal the
total benefits contemplated by the agreement.
Effective November 7, 2005, the Company hired Patrick E. Phelan to serve as
Chief Financial Officer of North Bay. On January 23, 2006, the Company's Board
of Directors appointed Virginia M. Robbins as Executive Vice President, Chief
Operating Officer of the Company and of its wholly-owned subsidiary, The Vintage
Bank, effective as of February 10, 2006. The initial base salary for Mr. Phelan
is $175,000 per year and the initial base salary for Ms. Robbins is $200,000 per
year. Mr. Phelan also received a $10,000 signing bonus. Ms. Robbins also has a
$500 per month automobile allowance. Conditioned on approval of the Board of
Directors, the Company also plans to grant each of Mr. Phelan and Ms. Robbins
incentive stock options for 5,000 shares of the Company's common stock.
Although they do not have a written employment agreement, the Board of Directors
has set the 2006 base salaries Senior Vice President/Human Resources Susan C.
Fonseca and senior Vice President/Compliance Risk Manager at $95,000 and
$120,000, respectively.
Ms. Fonseca, Mr. Phelan, Ms. Robbins, and Ms. Rodes are 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, reimbursement of reasonable business expenses, and other benefits
generally available to all employees as outlined in the Company's Employee
-33-
Handbook including separation pay in the event their employment is terminated on
account of a reduction in force, branch closing, or position elimination or
displacement by reason of a business combination or sale the amount of which is
tied to years of service and position.
Incentive Plan
The Board of Directors has adopted a 2006 Incentive Plan, which includes
guidelines and an accrual formula for employee incentive compensation. Under the
Plan, incentive payments are discretionary. Management-level employees have
incentive compensation "targets" calculated as a percentage of base
compensation; the percentage is applicable if a manager attains his or her
annual goals and varies depending upon a manager's title and the net income of
the Company relative to the budget.
During 2006, the Company will accrue into an incentive "pool" from which
incentive payments are made. The amount accrued into the pool varies with the
Company's net income. A "fixed" contribution of $500,000 will be accrued to the
incentive pool during the year regardless of the Company's net income; this
contribution will cover incentives paid to sales personnel who are incented for
attaining business development goals. Additional accruals to the pool will be
made monthly providing the projected net income for 2006 exceeds $6 million. In
2006, the Company will accrue for total incentive payments of $1.3 million, net
of employer payroll taxes, if it attains budgeted net income. Should 2006 net
income exceed budgeted net income, 30% of after tax net income in excess of
budgeted net income will be accrued to the incentive pool.
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, Kathi
Metro, and Glen C. Terry. A similar agreement was entered into with John Nerland
on December 12, 2005. 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; Kathi Metro, $75,000;
John Nerland $75,000, and Glen C. Terry, $75,000. Yearly benefits will continue
until the death of the executive, subject to forfeiture in the event of unfair
competition by the executive with The Vintage Bank prior to commencement of
benefits.
Compensation of Directors
The Board of Directors of North Bay has adopted a director compensation plan.
Under the plan, Directors of North Bay each receive an annual retainer of
$20,000, which is not dependent on the number of meetings attended. In addition
the Chairman of the Board of Directors, the Chairman of the Audit Committee, and
the Chairman of the Compensation Committee are entitled to additional retainers
of $6,000, $5,000, and $3,000, respectively.
Terry L. Robinson, President, Chief Executive Officer and a Director of North
Bay is not eligible to participate in the director compensation plan.
Additionally, during 2004 each director was granted one share of the preferred
stock of Vintage Capital Trust, the Vintage Bank's REIT, valued at $250 per
share.
-34-
Director Stock Options
There were no grants of stock options to non-employee directors during 2005.
After giving effect to the stock splits effective October 1, 1997 and December
6, 2004 and stock dividends declared through March 31, 2006, the aggregate
number of shares subject to options held by non-employee directors of North Bay
Bancorp outstanding as of March 22, 2006 is 193,843. Of this amount options to
purchase 139,165 shares are presently exercisable.
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 and
The Vintage Bank. The deferral program, provides for deferral, at the election
of each director 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 and/or The Vintage
Bank during the Deferred Fee Plan period for reasons other than death or
disability, all amounts deferred, including accrued interest, will be paid in
the manner selected by the director but accrued interest on the deferred
compensation will be calculated at an interest rate that is two-hundred basis
points lower than the rate established by North Bay's Board of Directors in
accordance with the Deferred Fee Plan.
In the event of death while a member of the Board of Directors, the director's
beneficiary will receive the amount that would have been paid to the director
had he or she remained in the program and attained his or her specified
retirement age.
In 1995 The Vintage Bank paid an aggregate single premium of $1,040,000 to
purchase life insurance policies on each director participating in the Deferred
Fee Plan to fund its liability for the death benefit. The Vintage Bank owns and
is the beneficiary of the policies and earns a rate of return on the invested
premiums which is reflected by an increase in the cash value of the policies.
The directors participating in the deferred program have no rights in the
policies. It is the current policy of the Board of Directors not to purchase
additional life insurance policies to fund the death benefit of new directors
who subsequently become eligible to participate in the Deferred Fee Plan.
Management of North Bay believes that the premium investment, after
consideration of the non-taxable nature of earnings on certain insurance
investments, produces a higher return than other taxable investments made in the
normal course of business. Therefore, the net cost of this deferred compensation
program to North Bay is believed to be nominal.
-35-
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.
-36-
OTHER INFORMATION REGARDING MANAGEMENT
Management Indebtedness
Certain provisions of the California Financial Code and federal regulations
enable state chartered Bank to make loans to officers, directors and employees
up to certain specified limits. From time to time The Vintage Bank has 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
Except as described below, there have been no transactions since January 1, 2005
nor are there any currently proposed transactions, to which the Company, or the
Bank, was or is to be a party, in which the amount involved exceeds $60,000 and
in which any director, executive officer, nominee as a director, five percent
(5%) shareholder or member of the immediate family of any of the foregoing
persons had, or will have, a direct or indirect material interest. All such
transactions were made in strict accordance with applicable rules and
regulations and on substantially the same terms as those available at the time
for comparable transactions with disinterested persons.
Mr. Gaw, a Director of the Company and of The Vintage Bank, and Wyman G. Smith,
Corporate Secretary of North Bay 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 2005. During 2005, fees received by the firm for these services
totaled $134,877 of which $85,429 was billed to North Bay and $49,448 to The
Vintage Bank. North Bay and The Vintage Bank expect to retain the firm's
services in 2006.
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, 2005, Form 5 and amendments
thereto furnished to the Company with respect to the fiscal year ending December
31, 2005, 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 Spencer who filed a Form 5 on February 10, 2005, reporting holdings
that should have been reported on a Form 3 but were not reported and Chief
Financial Officer Phelan who filed a Form 4 on January 10, 2006, reporting a
transaction that occurred on December 1, 2005.
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PROPOSAL NO. 2
APPROVAL OF THE AMENDED AND RESTATED NORTH BAY
BANCORP 2002 INCENTIVE COMPENSATION PLAN
Background
The shareholders are being asked to approve the Amended and Restated North
Bay Bancorp 2002 Incentive Compensation Plan (the "Amended and Restated Plan").
The Amended and Restated Plan amends and restates the North Bay Bancorp 2002
Stock Option Plan which was established for the purpose of attracting and
retaining key directors, officers and employees and providing incentive for
excellence in individual performance.
The Original Plan
On February 25, 2002, the Board of Directors (the "Board") of North Bay Bancorp
(the "Company") adopted the North Bay Bancorp 2002 Stock Option Plan (the
"Original Plan").
The Original Plan set aside 1,441,724 shares of Company Common Stock (as
adjusted for stock splits and stock dividends to date) for which options may be
granted to directors, officers, and employees of the Company and its
subsidiaries, as well as certain independent contractors providing services to
the Company or its subsidiaries. Of this amount, 510,796 shares are subject to
presently outstanding stock options and 236,540 shares are available for future
grants.
As of March 22, 2006, fifteen (15) non-employee, directors, nine (9) executive
officers, and one hundred seventy nine (179) employees of the Company and its
subsidiaries were eligible to be granted options under the Original Plan.
The Original Plan provides for the grant of both incentive stock options, as
defined in Section 422(b) of the Internal Revenue Code (the "Code") only to
employees of the Company and its subsidiaries, and non-statutory stock options
(i.e., options which do not meet the requirements of Section 422(b) of the Code)
to employees, officers, directors and certain independent contractors providing
services to the Company and its subsidiaries.
The Proposed Amended and Restated Plan
On March 27, 2006, the Board, upon the recommendation of its Compensation
Committee and subject to approval by the Company's shareholders, amended and
restated the Original Plan, effective March 27, 2006, as the "North Bay Bancorp
2002 Incentive Compensation Plan." In addition to certain nonsubstantive
changes, the Amended and Restated Plan increases the number of shares of Company
Common Stock available for and expands the types of equity-based awards that may
be granted.
New Types of Awards. The Amended and Restated Plan permits the grant of stock
appreciation rights ("SARs"), restricted stock, performance shares and
performance units in addition to grants of incentive stock options and
non-statutory stock options. (Incentive and non-statutory stock options, SARs,
restricted stock, performance shares and performance units are collectively
referred to in this proxy statement as "awards"). A description of each type of
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award can be found in the following discussion under "Grants, Terms, Conditions
and Types of Awards." Awards of SARs, restricted stock, performance shares and
performance units may be granted under the Amended and Restated Plan prior to
its effective date, provided that the effectiveness of those awards must be
contingent on shareholder approval of the Amended and Restated Plan being
obtained.
Increase in the Number of Shares of Common Stock Authorized Under the Amended
and Restated Plan. The Amended and Restated Plan has also been amended to
increase the number of shares of Common Stock available for grant under the
Original Plan by 92,664 shares, from 236,540 to 329,204 shares. As a result, the
number of shares available for grant under the Amended and Restated Plan when
combined with the number of shares of Common Stock currently subject to
outstanding options under the Original Plan would equal 840,000 or 20.4% of the
current outstanding Common Stock of the Company.
Reason for the Amendments. The Company believes that it is in the best interest
of its shareholders to adopt an expanded incentive compensation program which
further aligns the interests of participants with those of the shareholders.
Accordingly, the Company believes it is necessary to adopt the Amended and
Restated Plan so that the Company can offer an incentive compensation program
which will be most attractive to current and prospective participants whose
long-term employment or association with the Company and its subsidiaries is
essential to the Company's business plan. In this regard the Board determined to
expand the types of awards to be granted. The additional types of awards,
especially restricted share grants, utilize fewer shares than stock options,
resulting in less potential shareholder dilution. The additional types of awards
also provide the Company with better retention and incentive tools.
Interest of Directors and Executive Officers in Proposal No. 2. While it is
contemplated that awards will be granted to directors and executive officers
under the Amended and Restated Plan in the future, it is presently not possible
to name those directors and executive officers or the amount of awards they may
receive. Reference is made to the section entitled "Executive Compensation" in
this Proxy Statement for information concerning awards granted and exercised by
certain executive officers during the most recent fiscal year and awards
outstanding on March 22, 2006 and to the report of the Compensation Committee
elsewhere in this Proxy Statement.
Description of the Amended and Restated Plan.
Purpose. The purpose of the Amended and Restated Plan is to enable the Company
to attract, retain and motivate key employees, directors and certain independent
contractors of the Company and its subsidiaries by providing incentives to
expand their proprietary interest in the Company, to increase their efforts on
behalf of the Company and its subsidiaries, and to continue their association
with the Company and its subsidiaries.
Administration and Amendment of the Amended and Restated Plan. The Amended and
Restated Plan provides for administration by the Board or by a committee
composed of directors appointed by the Board for this purpose (the "Committee").
The Committee has the responsibility and authority to make all determinations
deemed necessary or advisable for administering the Amended and Restated Plan,
including, but not limited to, determining which persons are eligible for
selection as participants in the Amended and Restated Plan and establishing the
terms and conditions to be included in every award under the Amended and
Restated Plan.
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The Board or the Committee may, from time to time, amend the Amended and
Restated Plan or amend any and all agreements evidencing awards granted under
the Amended and Restated Plan. An amendment of the Amended and Restated Plan
will be subject to the approval of the Company's shareholders only to the extent
required by applicable laws, regulations or rules. Except as provided in the
Amended and Restated Plan with respect to adjustment of and changes in the
shares, no termination, modification or amendment of the Amended and Restated
Plan may, without the consent of the participant to whom an award was previously
granted, adversely affect the rights of the participant under the award.
Eligibility for Participation. Awards may be granted under the Amended and
Restated Plan to full- or part-time salaried or hourly employees of the Company
or any of its subsidiaries, directors, or an officer of the Company who is not a
full- or part-time salaried employee of the Company or any of its subsidiaries
as well as independent contractors providing services to the Company or any of
its subsidiaries. The Board has absolute discretion to determine which
directors, officers, employees and independent contractors are eligible to
participate in the Amended and Restated Plan. Only employees of the Company or
its subsidiaries may be granted incentive stock options under the Amended and
Restated Plan.
Number of Shares Subject to Amended and Restated Plan. If Proposal No. 2 is
approved, the Company may issue in the aggregate up to 840,000 shares of its
Common Stock upon the exercise of awards granted under the Amended and Restated
Plan and the Original Plan. In addition, any authorized shares:
o not issued and available for grant under the Company's 1993 Stock
Option Plan on the effective date of the Amended and Restated Plan;
and
o any shares issued under the 1993 Plan that are forfeited or
repurchased by the Company; or
o that are issuable upon exercise of options granted under the 1993 Plan
that expire or become unexercisable for any reason without having been
exercised in full,
will no longer be available for grant and issuance under the 1993 Plan, but will
be available for grant and issuance under the Amended and Restated Plan. At no
time, however, will the total number of shares issuable upon exercise of all
outstanding awards and the total number of shares provided for under any stock
bonus or similar plan of the Company exceed thirty percent (30%) of the
then-outstanding shares of the Company's Common Stock.
The number of shares available for issuance under the Amended and Restated Plan
is subject to adjustment for stock dividends, stock splits and changes into or
exchanges for other securities of the Company or of another corporation. In the
event of any of these changes in the outstanding Common Stock of the Company,
the Board will substitute for or add to each share of Common Stock subject to an
award under the Amended and Restated Plan, the number and kind of shares or
other securities into which each share will be so changed or exchanged, or to
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which each share will be entitled, as the case may be. An appropriate like
adjustment will be made to the number and kind of shares as to which outstanding
awards, or portions thereof then-unexercised, may be exercised. Adjustment in
outstanding awards will be made without change in the total price applicable to
the unexercised portion of the award and with a corresponding adjustment in the
award price per share.
The Amended and Restated Plan, like the Original Plan, will expire on
February 24, 2012 unless terminated earlier by the Board.
Terminating Events. If and when a Terminating Event is approved by
shareholders or otherwise occurs, all awards granted under the Amended and
Restated Plan will vest. All participants can exercise the awards then
outstanding and not exercised at that time before the consummation of the
transaction causing the termination. Alternatively, the Board may provide for
the cancellation of those awards in exchange for a cash payment equal to the
excess of the fair market value of the stock as of the date of the Terminating
Event over the exercise price of the awards.
Provision may be made in connection with the Terminating Event for the
Amended and Restated Plan or awards granted under the Amended and Restated Plan
to continue, or for the substitution of those awards with new awards covering
stock of a successor corporation or a parent or subsidiary corporation of a
successor corporation, solely at the discretion of the successor corporation or
parent or subsidiary corporation, with appropriate adjustments as to the number
and kind of shares and prices. In that case, the Amended and Restated Plan and
awards under the Amended and Restated Plan previously granted will continue in
the manner and under the terms so provided.
The Amended and Restated Plan defines "Terminating Event" as the occurrence
of one or more of the following events:
o the consummation of a plan of dissolution or liquidation of the
Company;
o the consummation of a plan of reorganization, merger or consolidation
involving the Company, except for a reorganization, merger or
consolidation where (A) the shareholders of the Company immediately
prior to such reorganization, merger or consolidation own directly or
indirectly at least 50% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
reorganization, merger or consolidation (the "Surviving Corporation")
in substantially the same proportion as their ownership of voting
securities of the Company immediately prior to such reorganization,
merger or consolidation and the individuals who were members of the
Board immediately prior to the execution of the agreement providing
for such reorganization, merger or consolidation constitute at least
50% of the members of the board of directors of the Surviving
Corporation, or a corporation beneficially directly or indirectly
owning a majority of the voting securities of the Surviving
Corporation, or (B) the Company is reorganized, merged or consolidated
with a corporation in which any shareholder owning at least 50% of the
combined voting power of the outstanding voting securities of the
Company immediately prior to such reorganization, merger or
consolidation, owns at least 50% of the combined voting power of the
outstanding voting securities of the corporation resulting from such
reorganization, merger or consolidation;
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o the sale of all or substantially all of the assets of the Company to
another person; or
o the acquisition of beneficial ownership of stock representing more
than fifty percent (50%) of the voting power of the Company then
outstanding by another person.
Termination of Participant's Service. In the event the Participant's
service with the Company or a subsidiary of the Company terminates:
o As a result of such Participant's death or disability, the term of the
award will expire twelve months (or such other period specified in the
participant's award agreement) after death or disability but not later
than the original expiration date specified in the award agreement.
o As a result of termination of the participant's service with the
Company (by resignation or otherwise) for cause, the term of the award
will expire immediately upon termination (notice or advice of which
shall subsequently be given by the Company), and thereafter neither
the participant nor the participant's estate will be entitled to
exercise the award with respect to any shares whatsoever, whether or
not after the termination the participant may receive payment from the
Company for vacation pay, for services rendered prior to termination,
for services for the day on which termination occurred, for salary in
lieu of notice or for other benefits.
o As a result of termination for any reason other than disability, death
or cause, the term of the award will expire three months (or such
other period specified in the participant's award Agreement) after
such termination, but not later than the original expiration date
specified in the award agreement.
The Committee has the authority to prescribe different rules, other than those
discussed above, that apply upon the termination of employment of a particular
participant. Those rules shall be memorialized in the participant's original or
amended award agreement or similar document.
Section 162(m). Section 162(m) of the Code generally limits to $1 million the
annual corporate income tax deduction for compensation which is not
"performance-based" that is paid to each of the chief executive officer and the
four other highest paid executive officers of a publicly-held corporation. The
Company intends incentive stock options and non-statutory stock options awarded
under the Plan granted with an exercise price at least equal to the fair market
value of the stock on the date of grant to qualify for the performance-based
exception from the $1 million deduction limitation. In addition, if the Amended
and Restated Plan is approved by the shareholders, awards other than options
under the Plan are intended to be eligible for treatment as "performance-based"
compensation under Section 162(m) of the Code by reason of being conditioned
upon one or more of the specific performance criteria described below under
"Performance Measures."
Section 409A Compliance. Section 409A of the Code, which was enacted in late
2004, provides that non-qualified deferred compensation plans must meet
specified rules relating to the timing of deferral elections, the timing of
distributions of the deferred compensation and changes in the form or timing of
payments of deferred compensation. Section 409A also imposes limits on the
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manner in which nonqualified deferred compensation plans may be funded and
specifies penalties that will apply to a nonqualified deferred compensation plan
that does not meet the rules. While awards granted under the Amended and
Restated Plan are intended to be exempt from, or meet the requirements of,
Section 409A of the Code (unless the Board at the time of grant specifically
provides that an award is not intended to comply with Section 409A), final
guidance under that Section has not been published. If an award is subject to
Section 409A and does not meet the requirements of Section 409A, the participant
generally will include in ordinary income in the first year of the failure, any
compensation deferred with respect to the award for that year and all previous
years (and earnings), to the extent not previously included in income and not
subject to a substantial risk of forfeiture. Unless limited by Section 162(m) of
the Code, the Company will be entitled to a tax deduction in the same amount and
at the same time as an employee recognizes ordinary income. The participant also
will be subject to an additional tax of 20% on the amounts required to be
included in income, as well as interest at the federal income tax underpayment
rate plus 1% on the amounts that would have been included in income if the
deferral had been included in the participant's income in the year deferred, or
if later, the year the award is no longer subject to a substantial risk of
forfeiture.
Grants, Terms, Conditions, and Types of Awards. Awards may be granted at any
time and from time to time prior to the termination of the Amended and Restated
Plan to those directors, officers, employees of the Company and its
subsidiaries, and independent contractors providing services to the Company or
its subsidiaries, who, in the judgment of the Board, contribute to the
successful conduct of the operation of the Company through their judgment,
interest, ability and special efforts. The following is discussion of the types
and conditions of the different types of awards that will be available if
Proposal No. 2 is approved.
Stock Options. The exercise price under each stock option will not be less than
100% of the fair market value of the Common Stock on the date the award is
granted, as that value is determined by the Board or the Committee. In addition,
if a participant owns stock of the Company possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
the exercise price of an incentive stock award will not be less than 110 percent
(110%) of the fair market value at the time the award is granted.
The purchase price will be paid in full at the time of purchase, plus any income
taxes which may then be due and payable, for the number of shares being
purchased by:
o cash or the equivalent; or
o subject to the Committee's approval, tender of shares of the Company's
Common Stock that have been held by the participant for at least six
(6) months with a fair market value as of the date of exercise equal
to the exercise price; or
o by any combination of these methods.
The Committee also has discretion to approve other methods of payment.
Duration and Exercise of Stock Options. Each stock option granted under the
Amended and Restated Plan will be exercisable in a manner and at a time, up to
but not exceeding ten years from the date the option is granted, as the Board or
the Committee will determine at the time the option is granted. If an officer or
employee owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, however, the option term
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for an incentive option may not exceed five (5) years from the date of grant.
Stock options granted under the Amended and Restated Plan will provide that the
options granted to employees will vest at a minimum rate of at least 20% per
year.
Any portion of an option not exercised will accumulate and can be exercised by
the participant at any time prior to the expiration date of the option unless
earlier terminated pursuant to the terms of the Amended and Restated Plan.
Options under the Amended and Restated Plan are not transferable in any manner
other than by will or by the laws of descent and distribution, by instrument to
an inter vivos or testamentary trust in which the options are to be passed to
beneficiaries upon the death of the trustor/settlor, or by gift to a member of
the participant's immediate family. The options may be exercised, during the
lifetime of a participant, only by the participant.
Options granted under the Amended and Restated Plan may also contain any other
provisions, which will not be inconsistent with the above terms, as the Board or
Committee deems appropriate. No option, however, nor anything contained in the
Amended and Restated Plan, will confer upon any employee any right to continue
in the employ of the Company or any of its subsidiaries nor limit in any way the
right of the Company to terminate his or her employment at any time.
Stock Appreciation Rights. A stock appreciation right or "SAR" is an award that
consists of the right to be paid an amount measured by the appreciation in the
fair market value of shares of the Company's Common Stock on the date of grant
to the date of exercise of the right. SARs may be granted to participants at any
time and from time to time as determined by the Committee. Subject to the terms
and conditions of the Amended and Restated Plan, the Committee will have
complete discretion in determining the number of SARs granted to each
participant and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs. The grant price of a SAR will
equal the fair market value of a share of the Company's Common Stock on the date
of grant.
SARs may be exercised upon whatever terms and conditions the Committee, in its
sole discretion, imposes upon them. Upon exercise of an SAR, a participant will
be entitled to receive payment from the Company in an amount determined by
multiplying:
o The amount by which the fair market value of a share of Company Common
Stock on the date of exercise exceeds the grant price of the SAR; by
o The number of shares of Common Stock with respect to which the SAR is
exercised.
The payment upon SAR exercise must be in shares of the Company's Common Stock.
Any shares delivered in payment will be deemed to have a value equal to the fair
market value of the shares on the date of exercise of the SAR.
Except as otherwise provided in a participant's award agreement, no SAR granted
under the Amended and Restated Plan may be sold, transferred, pledged, assigned,
encumbered, or otherwise alienated or hypothecated, other than by will or by the
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laws of descent and distribution. Further, except as otherwise provided in a
participant's award agreement, all SARs granted to a participant under the
Amended and Restated Plan will be exercisable during the participant's lifetime
only by such participant.
Restricted Stock. Restricted stock is an award that consists of shares of the
Company's Common Stock that may be subject to certain restrictions. Restricted
stock may be granted to participants at any time and from time to time as be
determined by the Committee. Except as provided in the award agreement, the
restricted shares granted under the Amended and Restated Plan may not be sold,
transferred, pledged, assigned, encumbered, or otherwise alienated or
hypothecated until the end of the applicable period of restriction established
by the Committee and specified in the restricted stock award agreement, or upon
earlier satisfaction of any other conditions, as specified by the Committee in
its sole discretion and set forth in the restricted stock award agreement. All
rights with respect to the restricted shares granted to a participant under the
Plan will be available during such participant's lifetime and prior to the end
of the period of restriction only to such participant.
The Committee may impose any other conditions and/or restrictions on any shares
of restricted stock granted under the Amended and Restated Plan as it may deem
advisable including, without limitation, a requirement that participants pay a
stipulated purchase price for each share of restricted stock, restrictions based
upon the achievement of specific performance goals, time-based restrictions on
vesting following the attainment of the performance goals, time-based
restrictions, and/or restrictions under applicable federal or state securities
laws.
To the extent deemed appropriate by the Committee, the Company may retain the
certificates representing shares of restricted stock in the Company's possession
until such time as all conditions and/or restrictions applicable to those shares
have been satisfied.
Except as otherwise provided in the award agreement, shares of restricted stock
covered by each restricted stock grant made under the Amended and Restated Plan
will become freely transferable by the participant after the last day of the
applicable period of restriction.
If the Committee so determines, participants holding shares of restricted stock
granted under the Amended and Restated Plan may be granted the right to exercise
full voting rights with respect to those shares during the period of
restriction.
During the period of restriction, participants holding shares of restricted
stock granted under the Amended and Restated Plan (whether or not the Company
holds the certificate(s) representing the shares) may, if the Committee so
determines, be credited with dividends paid with respect to the underlying
shares while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. If the grant or vesting of
restricted shares granted to a participant is designed to comply with the
requirements of the performance-based exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to the restricted shares, such that the dividends and/or the restricted
shares maintain eligibility for the performance-based exception.
Performance Units and Performance Shares. Subject to the terms of the Amended
and Restated Plan, performance units and/or performance shares awards may be
granted to participants in amounts and on any terms, and at any time and from
time to time, as determined by the Committee. At the Committee's discretion,
each grant of performance units/shares awards will be evidenced by an award
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agreement that specifies the initial value, the duration of the award, the
performance measures, if any, applicable to the award, and such other provisions
as the Committee determines which are not inconsistent with the terms of the
Amended and Restated Plan.
Each performance unit will have an initial value that is established by the
Committee at the time of grant. Each performance share will have an initial
value equal to the fair market value of a share of the Company's Common Stock on
the date of grant. The Committee will set performance goals in its discretion
which, depending on the extent to which they are met, will determine the number
and/or value of performance units/shares awards that will be paid out to the
participant.
Subject to the terms of the Amended and Restated Plan, after the applicable
performance period has ended, the holder of performance units/shares awards will
be entitled to receive a payout based on the number and value of performance
units/shares awards earned by the participant over the performance period, to be
determined as a function of the extent to which the corresponding performance
goals have been achieved. Payment of earned performance units/shares awards will
be as determined by the Committee and, if applicable, as evidenced in the
related award agreement. Subject to the terms of the Amended and Restated Plan,
the Committee, in its sole discretion, may pay earned performance units/shares
awards in the form of cash or in shares of the Company's Common Stock (or in a
combination thereof) that have an aggregate fair market value equal to the value
of the earned performance units/shares awards at the close of the applicable
performance period. Shares may be delivered subject to any restrictions deemed
appropriate by the Committee. No fractional shares will be issued. The
determination of the Committee with respect to the form of payout of awards will
be stated in the award agreement pertaining to the grant of the award or the
resolutions establishing the award.
Unless otherwise provided by the Committee, participants holding performance
units/shares will be entitled to receive dividend units with respect to
dividends declared with respect to the shares represented by such performance
units/shares. Dividends may be subject to the same accrual, forfeiture, and
payout restrictions as apply to dividends earned with respect to shares of
restricted stock as determined by the Committee.
Except as otherwise provided in a participant's award agreement, performance
units/shares awards may not be sold, transferred, pledged, assigned, encumbered,
or otherwise alienated or hypothecated, other than by will or by the laws of
descent and distribution.
Performance Measures. The general performance measurers, the attainment of which
may determine the degree of payout and/or vesting with respect to awards to
participants that are designed to qualify for the performance-based exception,
provided by Section 162(m) of the Code, to be used for purposes of such grants
shall be chosen by the Compensation Committee from among:
o Earnings per share (actual or diluted);
o Net income (before or after taxes);
o Return on average assets;
o Return on average equity;
o Revenues;
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o Deposit and/or loan growth;
o Efficiency ratio;
o Non-interest expense;
o Market share; and
o Any of the above measures compared to peer or other companies.
Actual performance measures will be chosen by the Compensation Committee.
Performance measures may be set either at the Company level, affiliate level,
division level, or business unit level. Awards that are designed to qualify for
the performance-based exception, and that are held by employees, may not be
adjusted upward, provided, however, that the Committee shall retain the
discretion to adjust such awards downward.
If applicable tax and/or securities laws change to permit Committee discretion
to alter the governing performance measures without obtaining shareholder
approval of such changes, the Committee will have sole discretion to make such
changes without obtaining shareholder approval.
Tax Effects of Plan Participation.
Federal Income Tax Consequences. The following is a summary of the material
United States federal income tax consequences of the grant of an award pursuant
to the Plan to the Company and to the participants in the Plan. The summary is
based on the provisions of the Code and regulations, rulings and judicial
decisions as of the date of this proxy statement. Such authorities can change so
as to alter the United States federal income consequences discussed below. The
following is only a summary of the effect of United States federal income
taxation upon participants and the Company with respect to the grant, exercise
and settlement of awards under the Amended and Restated Plan. It does not
purport to be complete and does not discuss the tax consequences arising in the
context of the participant's death or the income tax laws of any municipality,
state or foreign country in which the participant's income or gain may be
taxable and does not discuss special rules which may apply if a participant is
subject to Section 16 of the Securities Exchange Act of 1934.
Incentive Stock Options. An employee who is granted an incentive stock option
generally does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise is an adjustment item for alternative
minimum tax purposes and may subject the employee to the alternative minimum
tax. Upon a disposition of the shares more than two years after grant of the
option and more than one year after exercise of the option (the "holding
periods"), the employee will recognize long-term capital gains or losses equal
to the difference between the sale price and the exercise price. If the holding
periods are not satisfied, then: (1) if the sale price exceeds the exercise
price, the employee will recognize a capital gain equal to the excess, if any,
of his or her sale price over the fair market value of the shares on the date of
exercise and will recognize ordinary income equal to the difference, if any,
between the lesser of the sale price or the fair market value of the shares on
the exercise date and the exercise price or (2) if the sale price is less than
the exercise price, the employee will recognize a capital loss equal to the
difference between the exercise price and the sale price. The Company ordinarily
is entitled to a deduction in the same amount and at the same time as the
employee recognizes ordinary income which can occur only when the holding
periods are not satisfied.
-47-
Non-Statutory Stock Options. A participant does not recognize any taxable income
at the time a non-statutory stock option is granted. Upon exercise, the
participant generally recognizes ordinary income measured by the excess of the
then-fair market value of the shares over the exercise price. Any taxable income
recognized in connection with an option exercise by an employee is subject to
tax withholding. The Company is entitled to a deduction in the same amount and
at the same time as the participant recognizes ordinary income. Upon a
disposition of such shares by a participant, any difference between the sale
price and the fair market value of the shares when income was previously
recognized is treated as a long-term or short-term capital gain or loss,
depending on the holding period.
Restricted Stock. A participant who receives restricted stock will not recognize
taxable income at the time of the award. Instead, the participant will recognize
ordinary income on the dates when the stock is no longer subject to a
substantial risk of forfeiture. The participant's ordinary income is measured as
the excess of the fair market value of the Common Stock on the date the shares
are no longer subject to a substantial risk of forfeiture over the amount paid
for the shares, if any. The participant may accelerate his or her recognition of
ordinary income and begin his or her capital gains holding period by timely
filing (i.e., within thirty days of the award) an election pursuant to Section
83(b) of the Code. In such event, the ordinary income recognized, if any, is
measured as the excess of the fair market value of the shares on the date of the
award over the amount paid for the shares, if any, and the capital gain holding
period commences on such date. The ordinary income recognized by an employee
will be subject to tax withholding. Unless limited by Section 162(m) of the
Code, the Company is entitled to a deduction in the same amount and at the same
time as the participant recognizes ordinary income.
Stock Appreciation Rights. To the extent that a grant of an SAR is exempt from
the application of the new rules under Section 409A of the Code because it is
granted at fair market value, the grant of SARs under the Plan normally will not
result in the recognition of taxable income by a participant. A participant
generally will recognize ordinary income in the year of exercise of a SAR in an
amount equal to the fair market value of the shares, if any, paid to the
participant upon the exercise of the SAR. The ordinary income recognized by an
participant will be subject to tax withholding. Unless limited by Section 162(m)
of the Code, the Company ordinarily is entitled to a deduction in the same
amount and at the same time as the participant recognizes ordinary income.
Performance Units and Performance Shares. A participant generally will not
recognize taxable income upon the grant or vesting of performance units or
shares. Upon payment of cash or shares of the Company's Common Stock based on
the number and value of the performance units or shares earned over the
performance cycle, a participant generally will recognize as ordinary income an
amount equal to the cash and the fair market value of any shares received. The
ordinary income recognized by an employee will be subject to tax withholding.
Unless limited by Section 162(m) of the Code, the Company is entitled to a
deduction in the same amount and at the same time as the participant recognizes
ordinary income.
-48-
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 approve the Amended and Restated North Bay
Bancorp 2002 Incentive Compensation Plan (formerly the North Bay Bancorp 2002
Stock Option Plan). An abstention or failure to vote shares represented and
entitled to vote at the meeting will be treated as a negative vote. The Board
recommends that shareholders vote FOR this proposal.
-49-
PROPOSAL NO. 3 - RATIFICATION OF INDEPENDENT AUDITORS
The Company's independent 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, 2006. In recognition of the
important role of the independent auditor, the Board of Directors has determined
that Audit Committee's selection of the independent auditor should be submitted
to the shareholders for review and ratification. 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, 2005, 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, 2004, preparation for the audit of
financial statements of North Bay for the fiscal year ended December 31, 2005,
and consultation with North Bay's management regarding year end tax planning.
Audit Fees
The following table itemizes fees billed the Company by KPMG LLP during the
fiscal years 2005 and 2004:
- ------------------------------------- ------------------- ----------------------
2005 2004
- ------------------------------------- ------------------- ----------------------
Audit fees: 24 $157,000 $160,000
- ------------------------------------- ------------------- ----------------------
Audit related fees:
- ------------------------------------- ------------------- ----------------------
Other accounting services 25 0 0
- ------------------------------------- ------------------- ----------------------
Tax fees:
- ------------------------------------- ------------------- ----------------------
Tax return preparation $37,450 19,780
- ------------------------------------- ------------------- ----------------------
Assistance with FTP examination 0 0
- ------------------------------------- ------------------- ----------------------
Tax consultation 26 0 5,000
- ------------------------------------- ------------------- ----------------------
All other fees: 27 $145,000 0
- ------------------------------------- ------------------- ----------------------
(24) 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.
(25) 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."
(26) Services include tax compliance, tax advice and tax planning. Services in
2004 include quarterly review of estimated tax payments.
(27) Services include the audit of internal controls related Section 404 of the
Sarbanes-Oxley Act.
Audit Committee's Pre-Approval Policies and Procedures
The services performed by KPMG LLP in 2005 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 independent 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.
-50-
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,
2006. An abstention or failure to vote shares represented and entitled to vote
at the meeting will be treated as a negative vote. The Board of Directors
recommends that shareholders vote FOR this proposal.
AVAILABILITY OF FORM 10-K
A copy of the Company's 2005 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 Wyman G. Smith, Corporate Secretary,
North Bay Bancorp, P.O. Box 2200, Napa, California 94558.
SHAREHOLDER PROPOSALS
The 2007 Annual Meeting of Shareholders will be held on May 10, 2007. December
11, 2006, is the date by which shareholder proposals intended to be presented at
the 2007 Annual Meeting must be received by management of the Company at its
principal executive office for inclusion in the Company's 2007 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 24, 2007, 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 10, 2006, at Napa, California For the Board of Directors
/s/ Wyman G. Smith
-------------------
Wyman G. Smith
Corporate Secretary
-51-
EXHIBIT A
North Bay
Bancorp Logo
AUDIT COMMITTEE CHARTER
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 subsidiary.
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.
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.
-A1-
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 Registered Public Accountants
The Committee shall:
1. Be directly responsible for the appointment, compensation, retention and
oversight of the work of any independent 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 registered public accountants;
3. Approve in advance registered independent accountants' audit plan and
audit services;
4. Review and confirm the registered independent accountants' independence
from the Company, by (a) obtaining from the registered independent
accountants a formal written statement delineating all relationships
between the registered independent accountants and the Company, consistent
with Independence Standards Board Standard 1, (b) discussing with the
registered independent accountants any disclosed relationships or services
that might impact the registered independent accountants' objectivity and
independence and (c) reviewing at least annually fees paid to the
registered independent accountants for audit and non-audit services;
5. Review annually the registered independent accountants' performance and
qualification;
6. Receive from the registered independent accountants timely reports on
(a) significant accounting policies and practices to be used, (b)
alternative treatments of financial information within generally accepted
accounting principals that have been discussed with the Company's
-A2-
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 registered independent
accountants and the Company's Management, such as any Management letter or
schedule of unadjusted differences;
7. Review with the registered independent accountants the quality of the
Company's accounting and reporting principles and practices, internal
controls and any significant issues and risk areas of the Company;
8. Review with the registered independent accountants significant
accounting developments and pronouncements; and
9. Meet in executive session with a representative of the Company's
registered independent auditing firm.
10. Obtain a report from the registered independent accountant at least
annually describing the firm's internal control procedures and any material
issues raised by the inspections of the Public Company Accounting Oversight
Board.
B. Internal and Compliance Audit
The Committee shall:
1. Review the internal audit, credit administration and credit review
functions of the Company and its subsidiary, 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. The internal audit and risk compliance functions shall report
directly to the Audit Committee. For operational purposes, on a daily basis
the functions shall report to the CEO or his/her designated Officer. Review
on a regular basis, the audit and compliance matrix and risk assessment
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 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, credit administration and credit review
outsourcing firms. The Audit Committee has the authorized responsibility to
appoint, terminate or replace these firms and personnel;
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;
-A3-
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 subsidiary.
7. Review the Company's policies with respect to risk assessment and risk
management.
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 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;
-A4-
3. Approve in advance the engagement of any independent accountants other
than the Company's principal independent registered public 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 prerequisites for the Company and its subsidiary;
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.
8. Provide oversight as the Audit Committee for the Corporation's banking
subsidiary and, in that regard, the Committee directs, and shall be
entitled to rely upon, the risk Management group, Management and
independent auditors to identify issues, if any, of significance requiring
Committee oversight.
9. 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.
-A5-
Appendix A
[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 22, 2006 , at the annual meeting of
shareholders to be held on May 17, 2006 or any adjournment thereof. The
undersigned hereby further confers upon the Proxies, and each of them, or their
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, 2005, 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 this Proxy in the box below. Date_____________
_________________________________ ___________________________________
Stockholder sign above Co-holder (if any) sign above
1. ELECTION OF CLASS B DIRECTORS TO SERVE A THREE YEAR TERM EXPIRING AT THE 2009
ANNUAL MEETING OF SHAREHOLDERS .
NOMINEES
Fred J. Hearn; Thomas F. Malloy; and Thomas Sheldon
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 THE AMENDED AND RESTATED NORTH BAY 2002 INCENTIVE
COMPENSATION PLAN
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 class and for Proposals No. 2 and 3.
- --------------------------------------------------------------------------------
Detach above card, sign, date and mail in postage paid envelope provided.
-A6-
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
IF YOUR ADDRESS HAS CHANGED, PLEASE CORRECT THE ADDRESS IN THE SPACE PROVIDED
BELOW AND RETURN THIS PORTION WITH THE PROXY IN THE ENVELOPE PROVIDED.
____________________________________
____________________________________
____________________________________
APPENDIX B
NORTH BAY BANCORP
2002 INCENTIVE COMPENSATION PLAN
Amended and Restated Effective March 27, 2006
TABLE OF CONTENTS
Page
Article 1. Restatement, Objectives, and Duration.......................1
Article 2. Definitions.................................................1
Article 3. Administration..............................................5
Article 4. Shares Subject to the Plan and Maximum Awards...............5
Article 5. Eligibility and Participation...............................7
Article 6. Stock Options...............................................7
Article 7. Stock Appreciation Rights...................................9
Article 8. Restricted Stock...........................................10
Article 9. Performance Units and Performance Shares...................11
Article 10. Performance Measures.......................................12
Article 11. Rights of Participants.....................................13
Article 12. Termination of Employee....................................13
Article 13. Terminating Events.........................................14
Article 14. Amendment, Modification, and Termination...................14
Article 15. Withholding................................................15
Article 16. Successors.................................................15
Article 17. General Provisions.........................................15
Article 1. Restatement, Objectives, and Duration
1.1 The Plan. North Bay Bancorp (the "Company"), a California corporation,
adopted the "North Bay Bancorp 2002 Stock Option Plan" (the "Plan"), and its
original effective date was February 25, 2002. The Plan, upon its establishment,
provided both for the grant of Incentive Stock Options, intended to qualify
under Section 422 of the Code, as well as Nonqualified Stock Options.
Subject to approval by the Company's shareholders, the Plan is renamed the
"North Bay Bancorp 2002 Incentive Compensation Plan" and amended and restated
effective March 27, 2006 (the "Effective Date") to permit the grant of Stock
Appreciation Rights, Restricted Stock, Performance Shares and Performance Units
in addition to grants of Incentive Stock Options and Nonqualified Stock Options.
Awards of Stock Appreciation Rights, Restricted Stock, Performance Shares and
Performance Units may be granted under this Plan prior to the Effective Date,
provided that the effectiveness of such Awards shall be contingent upon
shareholder approval of the Plan, as amended and restated, being obtained.
1.2 Objectives of the Plan. The objectives of the Plan are to optimize the
profitability and growth of the Company through incentives that are consistent
with the Company's goals and that link the personal interests of Participants to
those of the Company's shareholders, to provide Participants with an incentive
for excellence in individual performance, and to promote teamwork among
Participants.
The Plan is further intended to provide flexibility to the Company and its
Affiliates in their ability to motivate, attract, and retain the services of
Participants who make significant contributions to the Company's success and to
allow Participants to share in that success.
1.3 Duration of the Plan. The Plan shall remain in effect, subject to the
right of the Committee to amend or terminate the Plan at any time pursuant to
Article 14 hereof, until all Shares subject to it shall have been purchased or
acquired according to the Plan's provisions. However, in no event may an Award
of an Incentive Stock Option be granted under the Plan on or after the tenth
(10th) anniversary of the original effective date (i.e., on or after February
24, 2012).
Article 2. Definitions
Whenever used in this Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:
2.1 "Affiliate" means any corporation, partnership or limited liability
company which controls, is controlled by, or is under common control with, the
Company. A corporation, partnership or limited liability company that attains
the status of an Affiliate on a date after the original effective date of the
Plan shall be considered an Affiliate commencing as of that date.
2.2 "Award" means, individually or collectively, a grant under this Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock, Performance Shares or Performance Units.
2.3 "Award Agreement" means a written or electronic agreement entered into
by the Company and a Participant setting forth the terms and provisions
applicable to an Award granted under this Plan.
-1-
2.4 "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.5 "Board" or "Board of Directors" means the Board of Directors of the
Company, as constituted from time to time.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means the committee(s) appointed from time to time by the
Company's Board of Directors to administer the Plan. The Committee shall consist
of non-employee Directors who are independent directors as defined by Rule
4200(a)(15) of the rules of The Nasdaq Stock Market ("Independent Directors").
The full Board of Directors, in its discretion, may act as the Committee under
the Plan, whether or not a Committee has been appointed, and shall do so with
respect to grants of Awards to non-employee Directors. However Awards to
executive officers of the Company must be approved by either the Committee or a
majority of Independent Directors. Except with respect to Awards to executive
officers or non-employee Directors, the Committee may delegate to one or more
members of the Committee or officers of the Company, individually or acting as a
committee, any portion of its authority, except as otherwise expressly provided
in the Plan. In the event of a delegation to a member of the Committee, officer
or a committee thereof, the term "Committee" as used herein shall include the
member of the Committee, officer or committee with respect to the delegated
authority. Notwithstanding any such delegation of authority, the Committee
comprised of members of the Board of Directors and appointed by the Board of
Directors shall retain overall responsibility for the operation of the Plan.
2.8 "Company" means North Bay Bancorp, a California corporation, and any
successor thereto as provided in Article 16 hereof.
2.9 "Covered Employee" means a Participant who, as of the date of vesting
and/or payout of an Award, or the date upon which the Company or any of its
Affiliates is entitled to a tax deduction as a result of the Award, as
applicable, is one of the group of "covered employees," as defined in the
regulations promulgated under Code Section 162(m) or any successor statute.
2.10 "Director" means any individual who is a member of the Board of
Directors of the Company or an Affiliate; provided, however, that any Director
who is employed by the Company shall be treated as an Employee under the Plan.
2.11 "Disability" shall have the same meaning as "permanent and total
disability" under Section 22(e)(3) of the Code.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Employee" means:
i. any individual who is a full- or part-time salaried or hourly
employee (i.e., paid in accordance with normal payroll
procedures) of the Company or of an Affiliate (a "Payroll
Employee");
-2-
ii. an officer of the Company who is not a full- or part-time
salaried employee of the Company or of an Affiliate;
iii. a Director; and
iv. an independent contractor who performs services for the Company
or an Affiliate and who is not a Director.
Services as an independent contractor, non-employee officer, or member of the
Board of Directors shall be considered employment for all purposes of the Plan,
except as provided in Section 5.1.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.15 "Fair Market Value" shall mean the market price of a Share, determined
by the Committee as follows:
i. If Shares were traded over-the-counter on the date in question
but were not traded on the NASDAQ system or the NASDAQ National
Market System, then the Fair Market Value shall be equal to the
mean between the last reported representative bid and asked
prices quoted for such date by the principal automated
inter-dealer quotation system on which Shares are quoted or, if
Shares are not quoted on any such system, by the "Pink Sheets"
published by the National Quotation Bureau, Inc.;
ii. If Shares were traded over-the-counter on the date in question
and were traded on the NASDAQ system or the NASDAQ National
Market System, then the Fair Market Value shall be equal to the
last transaction price quoted for such date by the NASDAQ system
or the NASDAQ National Market System;
iii. If Shares were traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the
closing price reported by the applicable composite transactions
report for such date; and
iv. If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith
on such basis as it deems appropriate. In all cases, the
determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.
2.16 "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 hereof and that is designated as an Incentive Stock
Option and that is intended to meet the requirements of Code Section 422.
2.17 "Insider" shall mean an individual who is, on the relevant date, an
executive officer, director or ten percent (10%) beneficial owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, all as defined under Section 16 of the Exchange Act.
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2.18 "Key Employee" shall mean an individual as defined in Code Section
416(i) (but without regard to paragraph (5) thereof) of the Company.
2.19 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6 hereof that is not intended to meet the
requirements of Code Section 422, or that otherwise does not meet such
requirements.
2.20 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.21 "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option.
2.22 "Participant" means an Employee who has been selected to receive an
Award or who has an outstanding Award granted under the Plan.
2.23 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.24 "Performance Share" means an Award granted to a Participant, as
described in Article 9 hereof.
2.25 "Performance Unit" means an Award granted to a Participant, as
described in Article 9 hereof.
2.26 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, pursuant to the Restricted Stock Award
Agreement, as provided in Article 8 hereof.
2.27 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof and the
rules promulgated thereunder, including a "group" as defined in Section 13(d)
thereof and the rules promulgated thereunder.
2.28 "Restricted Stock" means an Award granted to a Participant pursuant to
Article 8 hereof.
2.29 "Shares" means shares of the Company's common stock.
2.30 "Stock Appreciation Right" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the terms
of Article 7 hereof.
2.31 "Ten Percent Shareholder" means an Employee who at the time an ISO is
granted owns Shares possessing more than ten percent of the total combined
voting power of all classes of outstanding Shares of the Company or stock of any
Affiliate, within the meaning of Code Section 422. For these purposes, an
Employee shall be deemed to own the Shares and stock owned, directly or
indirectly, by or for such Employee's brothers, sisters, spouse, ancestors and
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lineal descendants. Shares and stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Shares or
stock with respect to which such Employee holds an Option shall not be counted.
2.32 "Terminating Event" shall mean the occurrence of any of the following
events:
i. the consummation of a plan of dissolution or liquidation of the
Company;
ii. the consummation of a plan of reorganization, merger or
consolidation involving the Company, except for a reorganization,
merger or consolidation where (A) the shareholders of the Company
immediately prior to such reorganization, merger or consolidation
own directly or indirectly at least 50% of the combined voting
power of the outstanding voting securities of the corporation
resulting from such reorganization, merger or consolidation (the
"Surviving Corporation") in substantially the same proportion as
their ownership of voting securities of the Company immediately
prior to such reorganization, merger or consolidation and the
individuals who were members of the Board of Directors
immediately prior to the execution of the agreement providing for
such reorganization, merger or consolidation constitute at least
50% of the members of the board of directors of the Surviving
Corporation, or a corporation beneficially directly or indirectly
owning a majority of the voting securities of the Surviving
Corporation, or (B) the Company is reorganized, merged or
consolidated with a corporation in which any shareholder owning
at least 50% of the combined voting power of the outstanding
voting securities of the Company immediately prior to such
reorganization, merger or consolidation, owns at least 50% of the
combined voting power of the outstanding voting securities of the
corporation resulting from such reorganization, merger or
consolidation.
iii. the sale of all or substantially all of the assets of the Company
to another Person;
iv. the acquisition of beneficial ownership of stock representing
more than fifty percent (50%) of the voting power of the Company
then outstanding by another Person.
2.33 "Vesting Event" shall mean the approval by the shareholders of the
Company of any matter, plan or transaction which would constitute a Terminating
Event, or if any Terminating Event occurs without shareholder approval, the
occurrence of such Terminating Event.
Article 3. Administration
3.1 General. Subject to the terms and conditions of the Plan, the Plan
shall be administered by the Committee. The members of the Committee shall be
appointed from time to time and shall serve as the discretion of the Board of
Directors. Except as otherwise provided in the Plan, the Committee shall have
the authority to delegate administrative duties to officers of the Company. For
purposes of making Awards to Insiders, the Committee shall be comprised solely
of two or more members of the Board of Directors who qualify as "independent
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directors" under Rule 4200(a)(15) of the rules of The Nasdaq Stock Market. For
purposes of making Awards to Employees who are Covered Employees but not
Insiders, the Committee shall be comprised solely of two or more members of the
Board of Directors who qualify as "outside directors" under Section 162(m)(4)(C)
of the Code. If the Committee members meet both such qualifications, then one
Committee may administer the Plan both with respect to Employees who are
Insiders and Employees who are Covered Employees. That Committee may administer
the Plan with respect to Employees who are neither Insiders nor Covered
Employees.
3.2 Authority of the Committee. Except as limited by law or by the articles
of incorporation or bylaws of the Company, and subject to the provisions hereof,
the Committee shall have full power to select those Employees who shall be
offered the opportunity to participate in the Plan; determine the sizes and
types of Awards; determine the terms and conditions of Awards in a manner
consistent with the Plan; construe and interpret the Plan and any agreement or
instrument entered into under the Plan; establish, amend, or waive rules and
regulations for the Plan's administration; and amend the terms and conditions of
any outstanding Award as provided in the Plan. Further, the Committee shall make
all other determinations that it deems necessary or advisable for the
administration of the Plan. The Committee shall annually deliver financial
statements of the Company to all Participants to whom such delivery is required
by Section 260.140.46 of the California Code of Regulations or successor statute
or regulation. As permitted by law and the terms of the Plan, the Committee may
delegate its authority hereunder. No member of the Committee shall be liable for
any action taken or decision made in good faith relating to the Plan or any
Award granted hereunder.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Committee shall be final, conclusive, and binding on all
persons, including the Company, its shareholders, Directors, Employees,
Participants, and their estates and beneficiaries, unless changed by the Board.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2 hereof, the number of Shares hereby reserved for
issuance to Participants under the Plan shall equal 840,000, and the maximum
number of Shares that may be granted to any one Participant during a calendar
year shall be 100,000. Any Shares covered by an Award (or portion of an Award)
granted under the Plan which is forfeited or canceled or expires shall be deemed
not to have been delivered for purposes of determining the maximum number of
Shares available for delivery under the Plan. Shares reserved for issuance to
Participants shall be authorized but unissued Shares. The Committee shall
determine the appropriate methodology for calculating the number of Shares
issued pursuant to the Plan.
At no time shall the total number of Shares covered by Awards and the total
number of Shares provided for under any stock bonus or similar plan of the
Company exceed 30% of the then outstanding Shares of the Company's common stock,
calculated in accordance with the conditions and exclusions of Rule 260.140.45
of the California Code of Regulations or any successor statute or regulation.
In the event that any outstanding Award granted under this Plan, including
Substitute Awards, for any reason expires or is canceled or otherwise
terminated, the Shares allocable to the unexercised portion of such Award shall
become available for the purposes of this Plan. In addition, any authorized
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Shares not issued or subject to outstanding Awards under the Company's 1993
Stock Option Plan (the "Prior Plan") on the original effective date of this Plan
and any Shares issued under the Prior Plan that are forfeited or repurchased by
the Company or that are issuable upon exercise of options granted pursuant to
the Prior Plan that expire or become unexercisable for any reason without having
been exercised in full, will no longer be available for grant and issuance under
the Prior Plan, but will be available for grant and issuance under this Plan.
4.2 Adjustments in Authorized Shares. Upon a change in corporate
capitalization, such as a stock split, stock dividend or a corporate
transaction, such as any merger, consolidation, combination, exchange of shares
or the like, separation, including a spin-off, or other distribution of stock or
property of the Company, any reorganization (whether or not such reorganization
comes within the definition of such term in Code Section 368) or any partial or
complete liquidation of the Company, such adjustment shall be made in the number
and class of Shares that may be delivered under Section 4.1, in the number and
class of and/or price of Shares subject to outstanding Awards granted under the
Plan, and in the Award limits set forth in Section 4.1, as may be determined to
be appropriate and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights.
4.3 Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that, unless the
Committee determines otherwise at the time such adjustment is considered, no
such adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's or any Award's meeting the requirements of Section
162(m) of the Code, as from time to time amended.
4.4 Substitute Awards. If the Company at any time should succeed to the
business of another corporation through merger or consolidation, or through the
acquisition of stock or assets of such corporation, Awards may be granted under
the Plan in substitution of awards previously granted by such corporation which
awards are outstanding at the date of the succession ("Substitute Awards"). The
Committee shall have discretion to determine the extent to which such Substitute
Awards shall be granted, the persons to receive such Substitute Awards, the
number of Shares to be subject to such Substitute Awards, and the terms and
conditions of such Substitute Awards which shall, to the extent permissible
within the terms and conditions of the Plan, be equivalent to the terms and
conditions of the surrendered awards. The terms of such Substitute Awards may be
determined by the Committee in its sole discretion, provided however, that the
Option Price of any Option that is a Substitute Award shall be an amount such
that, in the sole and absolute judgment of the Committee (and if the Substitute
Awards are to be ISO's, in compliance with Section 424(a) of the Code), the
economic benefit provided by such Substitute Award is not greater than the
economic benefit represented by the surrendered award as of the date of the
succession.
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Article 5. Eligibility and Participation
5.1 Eligibility. Only Employees shall be eligible to participate in this
Plan. Only Payroll Employees of the Company or an Affiliate shall be eligible
for the grant of ISOs.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted and shall determine the nature and amount of each
Award, provided that ISOs shall be awarded only to Payroll Employees.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the Plan.
6.3 Option Price. Each Award Agreement for Options shall specify the Option
Price. The Option Price of an Option shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant except as otherwise provided
in this Section and under Section 4.4. If an ISO is granted to a Ten Percent
Shareholder, the Option Price shall be at least 110 percent of the Fair Market
Value of the stock subject to the ISO.
6.4 Duration of Options. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant, provided
that an ISO must expire no later than the tenth (10th) anniversary of the date
upon which the ISO was granted. However, in the case of an ISO granted to a Ten
Percent Shareholder, the ISO by its terms shall not be exercisable after the
expiration of five years from the date such ISO is granted.
6.5 Exercise of Options. Options shall be exercisable at such times and be
subject to such restrictions and conditions as the Committee shall in each
instance approve, which need not be the same for each grant or for each
Participant, provided, however, that:
i. Upon the occurrence of a Vesting Event, the Option shall become
immediately exercisable as to all Shares covered by such Option,
whether or not previously vested;
ii. In the event that a Participant's service as an Employee
terminates, the Option shall be exercisable only to the extent
the Option was vested as of the date of such termination, unless
otherwise specified in the Participant's Award Agreement; and
iii. Options granted to Payroll Employees other than officers of the
Company shall vest at the rate of at least 20 percent of the
Shares subject thereto per year over five (5) years from the date
of grant of the Option.
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6.6 Payment. Options shall be exercised by the delivery of a written,
electronic or telephonic notice of exercise to the Company or its designated
agent, setting forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment of the Option Price for the Shares.
Upon the exercise of any Option, the Option Price for the Shares being
purchased pursuant to the Option shall be payable to the Company in full either:
(a) in cash or its equivalent; or (b) subject to the Committee's approval, by
delivery of previously acquired Shares having an aggregate Fair Market Value at
the time of exercise equal to the total Option Price (provided that the Shares
that are delivered must have been held by the Participant for at least six (6)
months prior to their delivery to satisfy the Option Price); or (c) by a
combination of (a) and (b); or (d) by any other method approved by the Committee
in its sole discretion. Unless otherwise determined by the Committee, the
delivery of previously acquired Shares may be done through attestation. No
fractional shares may be tendered or accepted in payment of the Option Price.
Unless otherwise determined by the Committee, cashless exercises are
permitted pursuant to Federal Reserve Board Regulation T, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law.
Subject to any governing rules or regulations, as soon as practicable after
receipt of notification of exercise and full payment, the Company shall deliver
to the Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased pursuant to the
Option(s).
Unless otherwise determined by the Committee, all payments under all of the
methods indicated above shall be paid in United States dollars.
6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, or under any blue sky or state securities laws applicable
to such Shares.
6.8 Nontransferability of Options. During a Participant's lifetime, the
Participant's Options shall be exercisable only by him or her and shall not be
transferable. An Option shall not be transferable other than by will or by the
laws of descent and distribution, provided, however, that NQSOs may be
transferred by instrument to an inter vivos or testamentary trust in which the
Options are to be passed to beneficiaries upon the death of the trustor/settlor,
or by gift to "immediate family", as that term is defined in 17 C.F.R.
240.16a-1(e) or successor statute or regulation thereto.
6.9 Special Limitation on Grants of Incentive Stock Options. No ISO shall
be granted to an Employee under the Plan or any other ISO plan of the Company or
its Affiliates to purchase Shares as to which the aggregate Fair Market Value
(determined as of the date of grant) of the Shares which first become
exercisable by the Employee in any calendar year exceeds $100,000. To the extent
an Option initially designated as an ISO exceeds the value limit of this Section
or otherwise fails to satisfy the requirements applicable to ISOs, it shall be
deemed a NQSO and shall otherwise remain in full force and effect. Article 7.
Stock Appreciation Rights
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7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee.
Subject to the terms and conditions of the Plan, the Committee shall have
complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs.
The grant price of a SAR shall equal the Fair Market Value of a Share on
the date of grant.
7.2 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR, and such other
provisions as the Committee shall determine.
7.3 Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion.
7.4 Exercise of SARs. SARs may be exercised upon whatever terms and
conditions the Committee, in its sole discretion, imposes upon them.
7.6 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The amount by which the Fair Market Value of a Share on the date
of exercise exceeds the grant price of the SAR; by
(b) The number of Shares with respect to which the SAR is exercised.
The payment upon SAR exercise shall be in Shares. Any Shares delivered in
payment shall be deemed to have a value equal to the Fair Market Value on the
date of exercise of the SAR.
7.7 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, encumbered, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, except as otherwise provided in a Participant's Award Agreement, all
SARs granted to a Participant under the Plan shall be exercisable during such
Participant's lifetime only by such Participant.
Article 8. Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.
8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period(s)
of Restriction, the number of Shares of Restricted Stock granted, and such other
provisions as the Committee shall determine which are not inconsistent with the
terms of this Plan.
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8.3 Transferability. Except as provided in the Award Agreement, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, encumbered, or otherwise alienated or hypothecated until the end of
the applicable Period of Restriction established by the Committee and specified
in the Restricted Stock Award Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole discretion and set
forth in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during such Participant's lifetime and prior to the end of the Period of
Restriction only to such Participant.
8.4 Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, and/or restrictions under applicable federal or
state securities laws.
To the extent deemed appropriate by the Committee, the Company may retain
the certificates representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied.
Except as otherwise provided in the Award Agreement, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan shall become
freely transferable by the Participant after the last day of the applicable
Period of Restriction.
8.5 Voting Rights. If the Committee so determines, Participants holding
Shares of Restricted Stock granted hereunder may be granted the right to
exercise full voting rights with respect to those Shares during the Period of
Restriction.
8.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder (whether or
not the Company holds the certificate(s) representing such Shares) may, if the
Committee so determines, be credited with dividends paid with respect to the
underlying Shares while they are so held. The Committee may apply any
restrictions to the dividends that the Committee deems appropriate. Without
limiting the generality of the preceding sentence, if the grant or vesting of
Restricted Shares granted to a Covered Employee is designed to comply with the
requirements of the Performance-Based Exception, the Committee may apply any
restrictions it deems appropriate to the payment of dividends declared with
respect to such Restricted Shares, such that the dividends and/or the Restricted
Shares maintain eligibility for the Performance-Based Exception.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units/Shares Awards. Subject to the terms of the
Plan, Performance Units and/or Performance Shares Awards may be granted to
Participants in such amounts and upon such terms, and at any time and from time
to time, as shall be determined by the Committee.
9.2 Award Agreement. At the Committee's discretion, each grant of
Performance Units/Shares Awards shall be evidenced by an Award Agreement that
shall specify the initial value, the duration of the Award, the performance
measures, if any, applicable to the Award, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the Plan.
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9.3 Value of Performance Units/Shares Awards. Each Performance Unit shall
have an initial value that is established by the Committee at the time of grant.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the date of grant. The Committee shall set performance goals
in its discretion which, depending on the extent to which they are met, will
determine the number and/or value of Performance Units/Shares Awards that will
be paid out to the Participant. For purposes of this Article 9, the time period
during which the performance goals must be met shall be called a "Performance
Period."
9.4 Earning of Performance Units/Shares Awards. Subject to the terms of
this Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares Awards shall be entitled to receive a payout based on
the number and value of Performance Units/Shares Awards earned by the
Participant over the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been achieved.
9.5 Form and Timing of Payment of Performance Units/Shares Awards. Payment
of earned Performance Units/Shares Awards shall be as determined by the
Committee and, if applicable, as evidenced in the related Award Agreement.
Subject to the terms of the Plan, the Committee, in its sole discretion, may pay
earned Performance Units/Shares Awards in the form of cash or in Shares (or in a
combination thereof) that have an aggregate Fair Market Value equal to the value
of the earned Performance Units/Shares Awards at the close of the applicable
Performance Period. Such Shares may be delivered subject to any restrictions
deemed appropriate by the Committee. No fractional shares will be issued. The
determination of the Committee with respect to the form of payout of such Awards
shall be set forth in the Award Agreement pertaining to the grant of the Award
or the resolutions establishing the Award.
Unless otherwise provided by the Committee, Participants holding
Performance Units/Shares shall be entitled to receive dividend units with
respect to dividends declared with respect to the Shares represented by such
Performance Units/Shares. Such dividends may be subject to the same accrual,
forfeiture, and payout restrictions as apply to dividends earned with respect to
Shares of Restricted Stock, as set forth in Section 8.6 hereof, as determined by
the Committee.
9.6 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares Awards may not be sold, transferred,
pledged, assigned, encumbered, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution.
Article 10. Performance Measures
Unless and until the Committee proposes for shareholder vote and the
Company's shareholders approve a change in the general performance measures set
forth in this Article 10, the attainment of which may determine the degree of
payout and/or vesting with respect to Awards to Covered Employees that are
designed to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants shall be chosen from among:
(a) Earnings per share (actual or diluted);
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(b) Net income (before or after taxes);
(c) Return on average assets;
(d) Return on average equity;
(e) Revenues;
(f) Deposit and/or loan growth;
(g) Efficiency ratio
(h) Non-interest expense;
(i) Market share; and
(j) Any of the above measures compared to peer or other companies.
Performance measures may be set either at the Company level, Affiliate
level, division level, or business unit level.
Awards that are designed to qualify for the Performance-Based Exception,
and that are held by Covered Employees, may not be adjusted upward, provided,
however, that the Committee shall retain the discretion to adjust such Awards
downward.
If applicable tax and/or securities laws change to permit Committee
discretion to alter the governing performance measures without obtaining
shareholder approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining shareholder approval.
Article 11. Rights of Participants
11.1 Employment. Nothing in the Plan shall confer upon any Participant any
right to continue in the Company's or any Affiliate's employ, or as a Director,
or interfere with or limit in any way the right of the Company or its Affiliates
to terminate any Participant's employment, engagement or directorship at any
time.
11.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected to
receive a future Award.
11.3 Rights as a Shareholder. Except as provided in Sections 8.5, 8.6 and
9.5 or in an applicable Award Agreement consistent with such Sections, a
Participant shall have none of the rights of a shareholder with respect to
shares of common stock covered by any Award until the Participant becomes the
record holder of such Shares, or the Period of Restriction has expired, as
applicable.
Article 12. Termination of Employee
In the event the Participant's service as an Employee terminates:
i. As a result of such Participant's death or Disability, the term
of the Award shall expire twelve months (or such other period
specified in the Participant's Award Agreement) after such death
or Disability but not later than the original expiration date
specified in the Award Agreement.
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ii. As a result of termination of the Employee's employment with the
Company (by resignation or otherwise) for cause, the term of the
Award shall expire immediately upon such termination (notice or
advice of which shall subsequently be given by the Company), and
thereafter neither the Employee nor the Employee's estate shall
be entitled to exercise the Award with respect to any Shares
whatsoever, whether or not after such termination the Employee
may receive payment from the Company for vacation pay, for
services rendered prior to termination, for services for the day
on which termination occurred, for salary in lieu of notice or
for other benefits. For purposes of this Plan, "cause" shall mean
an act of embezzlement, fraud, dishonesty or breach of fiduciary
duty to the Company or its shareholders, disclosure of any of the
secrets or confidential information of the Company, the
inducement of any client or customer of the Company to break any
contract with the Company, or the inducement of any principal for
whom the Company acts as agent to terminate such agency
relationship, the engagement in any conduct which constitutes
unfair competition with the Company, the removal of the
Participant from office by any court or bank regulatory agency,
or such other similar acts which the Committee in its discretion
reasonably determines to constitute adequate cause for
termination of the Participant from service as an Employee. As
used in this Paragraph, Company includes Affiliates of the
Company.
iii. As a result of termination for any reason other than Disability,
death or cause, the term of the Award shall expire three months
(or such other period specified in the Participant's Award
Agreement) after such termination, but not later than the
original expiration date specified in the Award Agreement.
Unless otherwise determined by the Committee, an authorized leave of
absence pursuant to a written agreement or other leave entitling an Employee to
reemployment in a comparable position by law or rule shall not constitute a
termination of employment for purposes of the Plan unless the Employee does not
return at or before the end of the authorized leave or within the period for
which re-employment is guaranteed by law or rule. For purposes of this Article,
a "termination" includes an event which causes a Participant to lose his
eligibility to participate in the Plan (e.g., an individual is employed by a
company that ceases to be a Affiliate). In the case of a consultant, the meaning
of "termination" or "termination of employment" includes the date that the
individual ceases to provide services to the Company or its Affiliates. In the
case of a non-employee Director, the meaning of "termination" includes the date
that the individual ceases to be a Director of the Company or its Affiliates.
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Notwithstanding the foregoing, the Committee has the authority to prescribe
different rules that apply upon the termination of employment of a particular
Participant, which shall be memorialized in the Participant's original or
amended Award Agreement or similar document.
An Award that remains unexercised after the latest date it could have been
exercised under any of the foregoing provisions or under the terms of the Award
shall be forfeited.
Article 13. Terminating Events
Not less than thirty (30) days prior to the occurrence of a Terminating
Event, the Committee or the Board shall notify each Participant of the pendency
of the Terminating Event. Upon the effective date of the Terminating Event, the
Plan shall automatically terminate and all Awards theretofore granted shall
terminate, unless provision is made in connection with such transaction for the
continuance of the Plan and/or assumption of Awards theretofore granted, or
substitution for such Awards with new Awards covering stock of a successor
corporation, or a parent or subsidiary corporation thereof, solely at the
discretion of such successor corporation or parent or subsidiary corporation,
with appropriate adjustments as to number and kind of shares and prices, in
which event the Plan and Awards theretofore granted shall continue in the manner
and under the terms so provided. If the Plan and unexercised Awards shall
terminate pursuant to the preceding sentence, all persons shall have the right
to exercise the Awards then outstanding and not exercised, whether vested or
not, at such time prior to the consummation of the transaction causing such
termination as the Company shall designate, unless the Board shall have provided
for the cancellation of such Awards in exchange for a cash payment equal to the
excess of the Fair Market Value of the Shares as of the date of the Terminating
Event over the exercise price of such Awards.
Article 14. Amendment, Modification, and Termination
14.1 Amendment, Modification, and Termination. Subject to the terms of the
Plan, the Board may at any time and from time to time, alter, amend, suspend, or
terminate the Plan in whole or in part.
14.2 Awards Previously Granted. Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment, or modification of the Plan
shall adversely affect in any material way any Award previously granted under
the Plan, without the written consent of the Participant holding such Award.
14.3 Shareholder Approval Required for Certain Amendments. Shareholder
approval will be required for any amendment of the Plan that does any of the
following: (a) increases the maximum number of Shares subject to the Plan; (b)
changes the designation of the class of persons eligible to receive ISOs under
the Plan; or (c) modifies the Plan in a manner that requires shareholder
approval under applicable law or the rules of a stock exchange or trading system
on which Shares are traded.
Article 15. Withholding
The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable taxes (including social security or social charges), domestic or
foreign, required by law or regulation to be withheld with respect to any
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taxable event arising as a result of this Plan. The Participant may satisfy,
totally or in part, such Participant's obligations pursuant to this Section 15
by electing to have Shares withheld, to redeliver Shares acquired under an
Award, or to deliver previously owned Shares that have been held for at least
six (6) months, provided that the election is made in writing on or prior to (i)
the date of exercise, in the case of Options and SARs, (ii) the date of payment,
in the case of Performance Units/Shares, and (iii) the expiration of the Period
of Restriction in the case of Restricted Stock. Any election made under this
Section 15 may be disapproved by the Committee at any time in its sole
discretion. If an election is disapproved by the Committee, the Participant must
satisfy his obligations pursuant to this paragraph in cash.
Article 16. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
through merger, consolidation, or otherwise, of all or substantially all of the
business, stock and/or assets of the Company.
Article 17. General Provisions
17.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
17.2 Severability. If any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
17.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
17.4 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act, unless determined otherwise by
the Board. To the extent any provision of the Plan or action by the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board.
17.5 Listing. The Company may use reasonable endeavors to register Shares
issued pursuant to Awards with the United States Securities and Exchange
Commission or to effect compliance with the registration, qualification, and
listing requirements of any state or foreign securities laws, stock exchange, or
trading system.
17.6 Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
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17.7 No Additional Rights. Neither the Award nor any benefits arising under
this Plan shall constitute part of any contract between the Participant and the
Company or any Affiliate, and accordingly, subject to Section 14.2, this Plan
and the benefits hereunder may be terminated at any time in the sole and
exclusive discretion of the Committee without giving rise to liability on the
part of the Company for severance payments.
17.8 Noncertificated Shares. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange or trading system.
17.9 Governing Law. The Plan and each Award Agreement shall be governed by
the laws of California, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation of the Plan
to the substantive law of another jurisdiction. Unless otherwise provided in the
Award Agreement, recipients of an Award under the Plan are deemed to submit to
the exclusive jurisdiction and venue of the federal or state courts whose
jurisdiction covers California to resolve any and all issues that may arise out
of or relate to the Plan or any related Award Agreement.
17.10 Compliance with Code Section 409A. No Award that is subject to
Section 409A of the Code shall provide for deferral of compensation that does
not comply with Section 409A of the Code, unless the Board, at the time of
grant, specifically provides that the Award is not intended to comply with
Section 409A of the Code. Notwithstanding any provision in the Plan to the
contrary, with respect to any Award subject to Section 409A, distributions on
account of a separation from service may not be made to Key Employees before the
date which is six (6) months after the date of separation from service (or, if
earlier, the date of death of the employee).
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