SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FNB BANCORP
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
NA
(2) Aggregate number of securities to which transaction applies: NA
(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): NA
(4) Proposed maximum aggregate value of transaction: NA (5) Total fee
paid: NA
[ ] 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: NA
(2) Form, Schedule or Registration Statement No.: NA
(3) Filing Party: NA
(4) Date Filed: NA
FNB BANCORP
975 El Camino Real
South San Francisco, California 94080
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held Wednesday, May 14, 2003
7:30 P.M.
--------------------
TO THE SHAREHOLDERS OF FNB BANCORP:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of FNB BANCORP, a California corporation (the "Company") will
be held at the Basque Cultural Center, 599 Railroad Avenue, South San Francisco,
California, on Wednesday, May 14, 2003, at 7:30 p.m., for the following
purposes:
1. To elect the eight (8) incumbent directors identified in the
accompanying proxy statement;
2. To ratify and approve the FNB Bancorp 2002 Stock Option Plan;
3. To ratify the appointment of KPMG LLP as independent auditors of
the Company to serve for the 2003 fiscal year; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournment or adjournments thereof.
Section 7 of the Bylaws of the Company provides for the nomination of
directors as follows:
"Nominations for election to the Board of Directors may be made by the
Board of Directors or by any shareholder entitled to vote for the election of
directors. Nominations, other than those made by the Board of Directors, shall
be made in writing and shall be delivered or mailed, with first-class United
States mail postage prepaid, to the Secretary not less than 20 days nor more
than 50 days prior to any meeting of shareholders called for the election of
directors; provided, however, that if less than 25 days notice of the meeting is
given to the shareholders, such nomination shall be mailed or delivered to the
Secretary not later than the close of business on the seventh day following the
day on which the notice of the meeting was mailed. Shareholder nominations shall
contain the following information: (a) the name, age, business address and, if
known, residence address of each proposed nominee; (b) the principal occupation
or employment of each proposed nominee; (c) the total number of shares of
capital stock of the corporation that are beneficially owned by each proposed
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nominee and by the nominating shareholder; (d) the name and residence address of
the notifying shareholder; and (e) any other information the corporation must
disclose regarding director nominees in the corporation's proxy solicitation.
Nominations not made in accordance with this Section may be disregarded by the
Chairman of the meeting, and if the Chairman so instructs, the inspectors of
election may disregard all votes cast for each such nominee."
Only those shareholders of record at the close of business on April 7,
2003, will be entitled to notice of and to vote at the Annual Meeting.
As an added convenience, a shareholder can choose to vote by telephone
or by using the Internet as indicated on the proxy card. If you vote by
telephone or electronically through the Internet, there is no need to return the
proxy card. Please refer to the attached proxy statement for a more complete
description of the procedures for telephone and Internet voting.
You are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
/s/ THOMAS C. MCGRAW
-----------------------------------------
Thomas C. McGraw
Secretary
South San Francisco, California
April 17, 2003
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE VOTE BY
TELEPHONE, OR BY THE INTERNET, OR SIGN AND RETURN THE ENCLOSED PROXY CARD AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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Mailed to shareholders on or
about April 17, 2003
FNB BANCORP
975 El Camino Real
South San Francisco, California 94080
Telephone (650) 588-6800
PROXY STATEMENT
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is being furnished to the shareholders of FNB
Bancorp, a California corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held at Basque Cultural Center, 599
Railroad Avenue, South San Francisco, California, at 7:30 p.m. on Wednesday, May
14, 2003. Only shareholders of record on April 7, 2003 (the "Record Date"), will
be entitled to notice of and to vote at the Annual Meeting. At the close of
business on the Record Date, the Company had outstanding and entitled to be
voted 2,437,043 shares of its no par value Common Stock (the "Common Stock").
Shareholders may vote their shares without attending the Annual
Meeting, whether their shares of Common Stock are held in their names or through
a broker, bank or other nominee. Shareholders may vote by mail (by submitting a
proxy) or by telephone or by using the Internet, and instructions for voting by
mail, by telephone or by using the Internet are set forth on the enclosed proxy
card. For shares held through a broker, bank or other nominee, shareholders may
vote by submitting their voting instructions to the broker, bank or other
nominee. Voting instructions may be given by telephone or by using the Internet,
if the broker, bank or other nominee makes those methods available to the
shareholder, in which case the procedures will be enclosed with the Proxy
Statement forwarded by the broker, bank or other nominee.
The presence in person or by proxy of a majority of the shares entitled
to vote is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence or
absence of a quorum. "Broker non-votes" are shares held by brokers or nominees
who are present in person or represented by proxy, but which are not voted on a
particular matter because under applicable rules the broker cannot vote on the
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matter in the absence of instructions from the beneficial owner. The effect of
abstentions and broker non-votes on the calculation of the required vote on
specific proposals to be brought before the Annual Meeting is discussed under
each proposal, where applicable.
Shareholders of Common Stock are entitled to one vote for each share
held, except that for the election of directors each shareholder has cumulative
voting rights and is entitled to as many votes as shall equal the number of
shares held by such shareholder multiplied by the number of directors to be
elected. Each shareholder may cast all of his or her votes for a single
candidate or distribute such votes among any or all of the candidates as he or
she chooses. However, no shareholder shall be entitled to cumulate votes (in
other words, cast for any candidate a number of votes greater than the number of
shares of stock held by such shareholder) unless such candidate's name has been
placed in nomination prior to the voting and the shareholder has given notice at
the Annual Meeting prior to the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such notice, all shareholders may
cumulate their votes for candidates in nomination. Prior to voting, an
opportunity will be given for shareholders or their proxies at the Annual
Meeting to announce their intention to cumulate their votes. The proxy holders
are given, under the terms of the proxy, discretionary authority to cumulate
votes on shares for which they hold a proxy.
Any person giving a proxy in the form accompanying this Proxy Statement
has the power to revoke that proxy prior to its exercise. The proxy may be
revoked prior to the Annual Meeting by delivering to the Secretary of the
Company either a written instrument revoking the proxy or a duly executed proxy
bearing a later date, or by voting on a later date by telephone or by using the
Internet. The proxy may also be revoked by the shareholder by attending and
voting in person at the Annual Meeting. The proxy will be voted as directed by
the shareholder giving the proxy and if no directions are given on the proxy,
the proxy will be voted "FOR" the nominees of the Board of Directors, "FOR"
ratification and approval of the FNB Bancorp 2002 Stock Option Plan, "FOR"
ratification of the appointment of KPMG LLP as independent auditors of the
Company to serve for the 2003 fiscal year, and at the proxy holders' discretion,
on such other matters, if any, which may come before the Annual Meeting
(including any proposal to adjourn the meeting).
Any shareholder may choose to vote shares of Common Stock by telephone
by calling the toll-free number (at no cost to the shareholder) indicated on the
proxy card. Telephone voting is available 24 hours per day. Easy to follow voice
prompts allow a shareholder to vote shares and to confirm that instructions have
been properly recorded. The Company's telephone voting procedures are designed
to authenticate the identity of shareholders by utilizing individual control
numbers. If a shareholder votes by telephone, there is no need to return the
proxy card.
Any shareholder may also choose to vote shares of Common Stock
electronically by using the Internet, as indicated on the proxy card. Internet
voting procedures are designed to authenticate the identity of a shareholder and
to confirm that instructions have been properly recorded. The Company believes
these procedures are consistent with the requirements of applicable law. If a
shareholder votes electronically by using the Internet, there is no need to
return the proxy card.
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The Company will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. The Company will reimburse brokerage houses, fiduciaries,
custodians and others holding Common Stock in their names or names of nominees
or otherwise for reasonable out-of-pocket expenses incurred in sending proxy
materials to the beneficial owners of such Common Stock. In addition to the
solicitation of proxies by use of the mail, some of the officers, directors and
regular employees of the Company may (without additional compensation) solicit
proxies by telephone, Internet or personal interview, the costs of which will be
borne by the Company.
ANNUAL REPORT
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 2002, including audited consolidated financial statements of the
Company (the "Annual Report") is enclosed with this Proxy Statement. Additional
copies of the Annual Report are available upon request to the Secretary of the
Company, Thomas C. McGraw, at FNB Bancorp, 975 El Camino Real, South San
Francisco, California 94080.
THE ANNUAL REPORT INCLUDES A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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PRINCIPAL SHAREHOLDERS
As of April 7, 2003, no person known to the Company owned beneficially
or of record more than five percent (5%) of the outstanding shares of its Common
Stock, except as indicated in the chart below:
- ------------------------------ ----------------------------- -------------------
Amount and Nature of Percentage of
Name and Address Beneficial Ownership Ownership(1)
- ------------------------------ ----------------------------- -------------------
The Ricco Lagomarsino Trust 231,646 9.51
26 Hillcrest Drive
Daly City, CA 94014
- ------------------------------ ----------------------------- -------------------
Thomas G. Atwood 236,193(2) 9.69
c/o Cypress Abbey Company
P.O. Box 516
Colma, CA 94014
- ------------------------------ ----------------------------- -------------------
Cede & Co.(3) 973,060 39.93
Box 20, Bowling Green Station
New York, NY 10004
- ------------------------------ ----------------------------- -------------------
(1) Based upon 2,437,043 shares outstanding.
(2) Includes 191,444 shares owned by Cypress Abbey Company, a corporation in
which Mr. Atwood is the principal shareholder.
(3) Cede & Co. is the nominee of The Depository Trust Company of New York, New
York, and acts as the record owner of securities held in "street name" for
a number of brokerage firms and other financial institutions.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
The Bylaws of the Company provide a procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full in the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Nominations not made in accordance therewith may be disregarded by
the Chairman of the Meeting, and upon his instructions the tellers of votes may
disregard all votes cast for such nominee(s).
The Bylaws of the Company provide that the Board of Directors shall
consist of not less than five nor more than nine shareholders, the exact number
to be fixed and determined from time to time by resolution of a majority of the
full Board of Directors or by resolution of a majority of the shareholders at
any annual or special meeting thereof. The current number of directors has been
fixed by resolution of the Board of Directors at eight (8). The directors to be
elected at the Annual Meeting shall hold office for one year and until their
successors are elected and have qualified. The eight (8) nominees receiving the
highest number of affirmative votes of the shares present in person or
represented by proxy and entitled to vote for them shall be elected as
directors. Only votes cast "FOR" a nominee will be counted in determining
whether that nominee has been elected as a director.
All proxies will be voted for the election of the following eight (8)
nominees recommended by the Board of Directors, unless authority to vote for the
election of any director or directors is withheld by the shareholder on the
proxy card. All of the nominees are incumbent Directors. If any nominee should
unexpectedly decline or be unable to act as a director, the proxies may be voted
for a substitute nominee to be designated by the Board of Directors. The Board
of Directors has no reason to believe that any nominee will become unavailable
and has no present intention to nominate persons in addition to or in lieu of
those named below.
The following table sets forth information with respect to beneficial
ownership of the Common Stock of the Company by those persons nominated by the
Board of Directors for election as directors, as well as all directors and
executive officers of FNB Bancorp and its subsidiary, First National Bank of
Northern California, a national banking association (herein called the "Bank" or
"First National Bank"), as a group. There is no family relationship between any
of the directors and/or executive officers, except that Edward J. Watson is
related by marriage to Anthony J. Clifford. The Company has only one class of
shares outstanding, Common Stock.
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- ----------------------------- ------- ------------------------- ------------- --------------------------------------
Shares Beneficially Owned
as of April 7, 2003 (1)
Nominee Age Positions Held Director
With the Bank Since % of
and Company Sole (2) Shared (3) Total
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Michael R. Wyman 66 Chairman of the Board, 1978 for 4,735 23,194 1.15(4)
Director Bank;
2001 for
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Thomas C. McGraw 51 Chief Executive 1989 for 1,418 116,296 4.83(5)
Officer, Secretary, Bank;
Director 2001 for
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Neil J. Vannucci 66 Director 1989 for 1,362 47,919 2.02(6)
Bank;
2001 for
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Edward J. Watson 55 Director 1996 for 2,263 3,316 0.23(7)
Bank;
2001 for
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Daniel J. Modena 69 Director 1996 for 1,152 1,111 0.09(8)
Bank;
2001 for
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Lisa Angelot 45 Director 1999 for 10,974 -- 0.45(9)
Bank;
2001 for
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Jim D. Black 46 President, Director 2002 for 5,068 935 0.25(10)
Bank and
Company
- ----------------------------- ------- ------------------------- ------------- ------------- ------------ -----------
Anthony J. Clifford 40 Executive Vice 2002 for 3,317 -- 0.14(11)
President and Chief Bank and
Operating Officer, Company
Director
- ----------------------------------------------------------------------------- ------------- ------------ -----------
All directors and executive officers (10 persons) as a group 37,619 192,771 9.38(12)
- ----------------------------------------------------------------------------- ------------- ------------ -----------
(1) This table is based upon information supplied by directors, executive
officers and principal shareholders. Percentages are based upon 2,437,043
shares outstanding.
(2) The named persons exercise sole voting and investment power with respect to
shares listed in this column.
(3) The named persons share voting and investment power with respect to shares
listed in this column.
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(4) Includes 23,194 shares held by the Wyman Family Trust for which Mr. Wyman
serves as co-trustee. Includes 262 shares of presently exercisable stock
options under the Company's 2002 Stock Option Plan. Excludes 5,954 shares
held in the Bank's Deferred Compensation Trust.
(5) Includes 116,296 shares held by the Thomas C. and Virginia K. McGraw Family
Trust for which Mr. McGraw serves as co-trustee. Includes 890 shares of
presently exercisable stock options under the Company's Stock Option Plan
and 262 shares of presently exercisable stock options under the Company's
2002 Stock Option Plan.
(6) Includes 47,919 shares held by the Vannucci Family Trust for which Mr.
Vanucci serves as co-trustee and 890 shares of presently exercisable stock
options under the Company's Stock Option Plan and 262 shares of presently
exercisable stock options under the Company's 2002 Stock Option Plan.
(7) Includes 3,316 shares held in the Dreher, Garfinkle & Watson Money Purchase
Pension Plan, under which Edward J. Watson and Eugene Garfinkle serve as
Trustees and 890 shares of presently exercisable stock options under the
Company's Stock Option Plan and 262 shares of presently exercisable stock
options under the Company's 2002 Stock Option Plan.
(8) Includes 890 shares of presently exercisable stock options under the
Company's Stock Option Plan and 262 shares of presently exercisable stock
options under the Company's 2002 Stock Option Plan.
(9) Includes 1,214 shares held by Ms. Angelot as Custodian for Eric Angelot and
290 shares held by Ms. Angelot as Custodian for Katherine Brandenberger. A
total of 231,646 shares are held by The Ricco Lagomarsino Trust for which
Ms. Angelot serves as one of the co-trustees. Ms. Angelot disclaims
beneficial ownership of such shares. Includes 699 shares of presently
exercisable stock options under the Company's Stock Option Plan and 262
shares of presently exercisable stock options under the Company's 2002
Stock Option Plan.
(10) Includes 3,421 presently exercisable stock options under the Company's
Stock Option Plan. Includes 198 shares held in trust for Greg Black and
includes 198 shares held in trust for Janelle Black. Excludes 1,293 shares
held in the Bank's Deferred Compensation Trust.
(11) Includes 3,247 presently exercisable stock options under the Company's
Stock Option Plan. Excludes 1,479 shares held in the Bank's Deferred
Compensation Trust.
(12) Includes a total of 17,596 shares of presently exercisable stock options
under the Company's Stock Option Plan and 1,572 shares of presently
exercisable stock options under the Company's 2002 Stock Option Plan.
Excludes 11,672 shares held by the Bank's Deferred Compensation Trust for
the accounts of Messrs. Wyman, Black, Clifford and Ramsey. See "Deferred
Compensation Plan" herein.
- ---------------------
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The following table sets forth certain information as of the Record
Date with respect to each Director of the Company and the Bank, each person
nominated for election as a Director, and each executive officer named in the
Executive Compensation table elsewhere herein, as well as for all other
executive officers of the Company and the Bank.
Michael R. Wyman Chairman of the Board of Directors of the Company since
2001. Chairman of the Board of Directors of First
National Bank since 1999 and Director of First National
Bank since 1983. Retired as Chief Executive Officer of
the Company and First National Bank effective March 31,
2002. Previously, Chief Executive Officer of First
National Bank since 1983 and President of First National
Bank from 1983 to 1996.
Thomas C. McGraw Director and Secretary of the Company since 2001. Chief
Executive Officer of the Company and First National Bank
since April 1, 2002. Director and Secretary of First
National Bank since 1989, and President and Chief
Operating Officer of First National Bank from October
2001 until April 1, 2003. Formerly, self-employed
communications consultant in San Mateo and Marin
Counties, since 1987.
Neil J. Vannucci Director of the Company since 2001. Director of First
National Bank since 1989. Director of U.S. Concrete
since 1999. President of Bay Cities Building Materials
from 1995 to 1999.
Edward J. Watson Director of the Company since 2001. Director of First
National Bank since 1996. Certified Public Accountant.
Attorney and partner in the law firm of Watson & Lanctot
LLP, formerly known as Dreher, Garfinkle & Watson.
Daniel J. Modena Director of the Company since 2001. Director of First
National Bank since 1996. Attorney and partner in the
law firm of Modena & Royce in South San Francisco since
1961.
Lisa Angelot Director of the Company since 2001. Director of First
National Bank since 1999. Property manager for the
Lagomarsino Properties in Daly City since 1992. Her
grandfather was Ricco Lagomarsino, Founding Director and
Chairman of First National Bank.
Jim D. Black Director of the Company and First National Bank since
March 2002. President of the Company and First National
Bank since April 1, 2002. Formerly, Senior Vice
President and Senior Lending Officer of First National
Bank and an employee since 1981.
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Anthony J. Clifford Director of the Company and First National Bank since
March 2002. Executive Vice President and Chief Operating
Officer of the Company and First National Bank since
April 1, 2002. Formerly, Vice President and Branch
Administrator of First National Bank since 1995; Vice
President and Branch Manager of First National Bank
since 1990; and Assistant Vice President and Branch
Manager of First National Bank since 1983.
James B. Ramsey Senior Vice President and Chief Financial Officer of the
Company since 2001. Senior Vice President, Chief
Financial Officer and Cashier of First National Bank
since 1997. Formerly, Vice President/Controller of
Mid-Peninsula Bank in Palo Alto since 1994, Senior Vice
President and Chief Financial Officer of Codding Bank in
Rohnert Park, California since 1989, and Executive
Vice-President and Chief Financial Officer of Pajaro
Valley Bank since 1982.
Charles R. Key Senior Vice President and Director of Information
Systems of First National Bank and an employee since
1970.
None of the directors of the Company is a director of 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 such Act or any company registered as an investment company under the
Investment Company Act of 1940, whose common stock is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended.
Committees of the Board of Directors
The Company has an Audit Committee and a Compensation Committee. In
addition, the entire Board of Directors of the Company functions as the
nominating committee. The current members of the Company's Audit Committee are
Edward J. Watson, Neil J. Vannucci and Daniel J. Modena. The current members of
the Company's Compensation Committee are Lisa Angelot, Neil J. Vannucci and
Edward J. Watson. The Company was formed in 2001 to become the holding company
for First National Bank. Upon consummation of a plan of reorganization approved
by the shareholders of the Bank, effective March 15, 2002, the Bank became a
wholly owned subsidiary of the Company. The members of the Company's Audit
Committee met five (5) times during 2002 and the members of the Company's
Compensation Committee met once during 2002. All incumbent directors of the
Company attended at least seventy-five percent (75%) of the meetings of the
board of directors and the committees of which they were members during 2002.
First National Bank has an Audit Committee, a Loan and Discount
Committee (which functions as an executive committee of the Board of Directors)
and a Compensation Committee.
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First National Bank does not have a nominating committee, but the Loan
and Discount Committee functions as the Bank's nominating committee, as
necessary. Since March 15, 2002, the Company has been the sole shareholder of
the Bank.
The current members of the Bank's Audit Committee are Edward J. Watson,
Neil J. Vannucci and Daniel J. Modena. The principal functions of the Audit
Committee are (1) to examine and review both internal audit controls and
regulatory audit reports and to meet with the First National Bank auditors
concerning audit procedures and controls and (2) to monitor the First National
Bank investments.
The current members of the Bank's Loan and Discount committee are
Michael R. Wyman, Thomas C. McGraw, Daniel J. Modena and Lisa Angelot. The
principal functions of the Loan and Discount Committee are to oversee loans and
investments and the routine operations of First National Bank by delegation from
the board of directors and to advise and report to the full board regarding such
matters.
The members of the Bank's Compensation Committee are Lisa Angelot, Neil
J. Vannucci and Edward J. Watson. The Compensation Committee investigates and
advises the board of directors as to employee benefit arrangements and conducts
executive searches whenever First National Bank proposes to hire executive
personnel. The Compensation Committee also reports to the board of directors
with regard to executive compensation, including bonus compensation.
The board of directors of First National Bank met a total of twelve
(12) times during 2002. During this same period, the Loan and Discount Committee
met twenty-seven (27) times, the Audit Committee met five (5) times and the
Compensation Committee met once. All incumbent directors of the Bank attended at
least seventy-five percent (75%) of the meetings of the board of directors and
the committees of which they were members during 2002.
Compensation of Directors
No fees or other compensation has been paid to the non-officer
directors of the Company since incorporation of the Company on February 28,
2001. The Company became the holding company for First National Bank, effective
March 15, 2002. No separate fees will be paid to the directors of the Company
during 2003 for their attendance at meetings of the board of directors or for
their attendance at meetings of the committees of the board of directors.
Each non-officer director of First National Bank was paid $30,000 in
fees for attending meetings of the board of directors during 2002. The aggregate
amount of such fees paid by First National Bank in 2002 was $150,000. No fees
were paid to the directors during 2002 for their attendance at meetings of the
committees of the board of directors of the Bank. During 2002, each non-officer
director of First National Bank was granted a non-statutory option for 262
shares of common stock pursuant to the FNB Bancorp 2002 Stock Option Plan.
12
Board Compensation Committee Report
Set forth below is the Report of the members of the Compensation
Committee of the Board of Directors of the Company and the Bank:
The Company was formed in 2001 to become the holding company of First
National Bank. After approval by the shareholders of the Bank, the holding
company reorganization became effective on March 15, 2002. No separate
compensation was paid to the executive officers of the Company during 2002. It
is expected that the compensation to be paid by First National Bank to executive
officers during 2003 will include payment for all services rendered or to be
rendered by such officers to the Company during 2003, including their attendance
at meetings of the board of directors and their attendance at meetings of
committees of the board of directors of the Company.
The compensation of the executive officers of First National Bank is
reviewed and approved annually by the board of directors based on the
recommendations by the Compensation Committee. During 2002, Lisa Angelot, Neil
J. Vanucci and Edward J. Watson served as members of the Bank's Compensation
Committee. Executive officers of First National Bank during 2002 were: Thomas C.
McGraw, Chief Executive Officer and Secretary; Jim D. Black, President; Anthony
J. Clifford, Executive Vice President and Chief Operating Officer; James B.
Ramsey, Senior Vice President and Chief Financial Officer; and Charles R. Key,
Senior Vice President and Director of Information Systems.
The Compensation Committee's philosophy is that compensation should be
designed to reflect the value created for shareholders while supporting First
National Bank's strategic goals. The Compensation Committee reviews the
compensation of the executive officers annually to insure that First National
Bank's compensation programs are related to financial performance and consistent
generally with employers of comparable size in the industry. Other than as
described herein, there are no other employment contracts between First National
Bank and any officer of First National Bank. Annual compensation for First
National Bank's executive officers includes the components described below.
Base salary is related to the individual executive officer's level of
responsibility and comparison with comparable employers in the industry. The
board of directors reviews and sets base salaries annually, taking into
consideration the recommendations of the Chief Executive Officer (for executive
officers other than the Chief Executive Officer). In conducting its review of
salaries, the board of directors takes into consideration the overall
performance of First National Bank.
The board of directors determines the base salary for the Chief
Executive Officer by (a) examining the financial performance of First National
Bank against its present goals; (b) examining the financial performance of First
National Bank as compared to the banking industry generally; (c) evaluating the
overall performance of the Chief Executive Officer; and (d) comparing the base
salary of the Chief Executive Officer to that of other chief executive officers
in the banking industry in the market area of First National Bank.
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The compensation paid to Messrs. McGraw, Black, Clifford, Ramsey and
Key during 2002 is set forth in the table of "Executive Compensation" below. On
December 14, 2002, effective as of January 1, 2003, the board of directors
approved the following base salaries: Mr. McGraw's salary was increased to
$195,750 Mr. Black's salary was increased to $183,750; Mr. Clifford's salary was
increased to $168,000; Mr. Ramsey's salary was increased to $151,641; and Mr.
Key's salary was increased to $135, 360.
First National Bank does not have a formal bonus plan. The board of
directors, at its discretion, awarded bonuses to its executive officers during
2002, including bonuses to Messrs. Black, Clifford, Ramsey and Key (which are
set forth in the table of "Executive Compensation" below). Bonus compensation is
based on the return on beginning shareholder equity for each year and individual
performance criteria are established by the Compensation Committee for each
executive officer.
The entire board of directors can, at its discretion, grant stock
options to key officers of the Company and First National Bank who are primarily
responsible for the growth and management of its business. As of December 31,
2002, a total of 116,718 shares were reserved for options previously granted and
currently outstanding under the FNB Bancorp Stock Option Plan (successor as of
March 15, 2002, to the First National Bank of Northern California 1997 Stock
Option Plan) and the FNB Bancorp 2002 Stock Option Plan, including options for
an aggregate of 32,764 shares of common stock (as adjusted for stock dividends
paid in 1998, 1999, 2000, 2001 and 2002) which have been granted to Messrs.
McGraw, Black, Clifford, Ramsey and Key. A summary of the stock options granted
to such officers during 2002, including the exercise prices, is set forth below
in the table of "Option/SAR Grants In Last Fiscal Year." The exercise price of
an incentive stock option is set at the fair market value of the shares on the
date of grant. All options granted and currently outstanding are incentive stock
options, vesting at the rate of 20 percent per year over the period of 5 years
from date of grant and are exercisable for a period of 10 years from the grant
date.
Submitted by the Compensation Committee:
Lisa Angelot
Neil J. Vannucci
Edward J. Watson
14
Equity Compensation Plan Information
The chart below lists information regarding common stock issuable upon
the exercise of stock options, the weighted average exercise price of those
options and the number of shares available for issuance under the FNB Bancorp
Stock Option Plan and the FNB Bancorp 2002 Stock Option Plan. The Company has no
other equity compensation plan and there are no warrants or other rights
outstanding that would result in the issuance of shares of the Company's common
stock.
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Plan Category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and future issuance under
warrants and rights rights equity compensation plans
(excluding securities
reflected in column (a))
(a) (b) (c)
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans
approved by security holders 116,718 $23.49 138,538
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders -0- -0- -0-
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Total 116,718 $23.49 138,538
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
15
Executive Compensation
Set forth below is the compensation of the Chief Executive Officer of
the Company and the Bank and the other most highly compensated officers (whose
total annual salary and bonus exceeds $100,000) for services in all capacities
to the Company and the Bank during the three years ended December 31, 2002.
==================================================================================================
Annual Compensation
- --------------------------------- ----------- ------------------ -------------- ------------------
Name and Position Year Salary Bonus (1) All Other
Compensation(2)(3)
- --------------------------------- ----------- ------------------ -------------- ------------------
Thomas C. McGraw, 2000 $ -- $ -- $ --
Chief Executive Officer, 2001 -- -- --
Secretary 2002 177,681 -- --
- --------------------------------- ----------- ------------------ -------------- ------------------
Jim D. Black, 2000 $115,848 $55,000 $18,233
President 2001 149,695 44,000 13,674
2002 168,592 35,200 14,203
- --------------------------------- ----------- ------------------ -------------- ------------------
Anthony J. Clifford, 2000 $97,032 $42,500 $15,271
Executive Vice President, 2001 120,000 34,000 11,720
Chief Operating Officer 2002 152,916 34,000 12,882
- --------------------------------- ----------- ------------------ -------------- ------------------
James B. Ramsey, 2000 $123,288 $50,000 $19,404
Senior Vice President, 2001 147,003 40,000 13,674
Chief Financial Officer 2002 144,240 32,000 12,151
- --------------------------------- ----------- ------------------ -------------- ------------------
Charles R. Key, 2000 $100,000 $37,500 $15,739
Senior Vice President, 2001 125,004 30,000 13,535
Director, Information Systems 2002 128,760 24,000 11,098
==================================================================================================
(1) Bonuses are indicated for the years upon which they are based, and are
payable in the same year.
(2) Each of Messrs. McGraw, Black and Clifford is provided with the use of a
Company-owned automobile. No executive officer received perquisites or
other personal benefits in excess of the lesser of $50,000 or 10 percent of
each such officer's total annual salary and bonus during 2000, 2001 or
2002.
(3) Amounts shown represent contributions to The First National Bank Profit
Sharing and 401(k) Plan for the accounts of the named officers.
16
The following table sets forth certain information concerning the
granting of options under the FNB Bancorp 2002 Stock Option Plan during the year
ended December 31, 2002 (adjusted for the 2002 stock dividend).
Option/SAR Grants In Last Fiscal Year
- ------------------------------------------------------------------------------------- ----------------------
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation
for Option Term (3)
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
Number of Percentage of
Securities Total
Underlying Options/SARs
Option/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($Sh) (2) Date 5% 10%
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
Thomas C. McGraw 262 0.8% $26.19 7-24-12 $ 4,315 $ 10,936
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
Jim D. Black 3,150 9.7% $26.19 7-24-12 $51,884 $131,483
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
Anthony J. Clifford 3,150 9.7% $26.19 7-24-12 $51,884 $131,483
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
James B. Ramsey 2,625 8.1% $26.19 7-24-12 $43,236 $109,569
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
Charles R. Key 2,625 8.1% $26.19 7-24-12 $43,236 $109,569
- --------------------- ---------------- ----------------- --------------- ------------ ---------- -----------
(1) Options granted under the FNB Bancorp 2002 Stock Option Plan were either
incentive options or nonstatutory options and become exercisable in
accordance with a vesting schedule established at the time of grant.
Vesting cannot extend beyond ten (10) years from the date of grant. All
options granted to the named executive officers are incentive stock options
and have an exercise price equal to the fair market value of the Company's
common stock on the date of grant. Options granted under the FNB Bancorp
2002 Stock Option Plan are adjusted to protect against dilution in the
event of certain changes in the Company's capitalization, including stock
splits and stock dividends, and upon a change in control of the Company,
all outstanding options will become fully vested and exercisable.
(2) The exercise price was determined based upon the average of the bid and
asked price of the Company's common stock on the grant date.
(3) In accordance with Securities and Exchange Commission rules, these columns
show gains that might exist for the respective options, assuming that the
market price of the stock appreciates from the date of grant over the 10
year option term at the annualized rates of 5% and 10%, respectively.
17
The following table sets forth the number of shares of the Company's
Common Stock acquired by each of the named executive officers upon the exercise
of stock options during the fiscal year 2002, if any, the net value realized
upon exercise, the number of shares of the Company's common stock represented by
outstanding stock options held by each of the named executive officers as of
December 31, 2002, the value of such options based on the average of the bid and
asked price of the Company's common stock, and certain information concerning
unexercised options under the Company's stock option plans.
Aggregated Option/SAR Exercises In Last Fiscal Year And
FY-End Option/SAR Values
- ---------------------- -------------- ----------- ----------------------- --------------------------
Number of Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs at Options/SARs
on Value Fiscal Year-End (#) at Fiscal Year- End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
- ---------------------- -------------- ----------- ----------------------- --------------------------
Thomas C. McGraw ------ ------ 1,152 / ----- 1,449 / -----
- ---------------------- -------------- ----------- ----------------------- --------------------------
Jim D. Black ------ ------ 3,421 / 7,132 4,460 / 7,640
- ---------------------- -------------- ----------- ----------------------- --------------------------
Anthony J. Clifford ------ ------ 3,247 / 7,057 4,353 / 7,568
- ---------------------- -------------- ----------- ----------------------- --------------------------
James B. Ramsey ------ ------ 3,401 / 6,601 4,460 / 7,640
- ---------------------- -------------- ----------- ----------------------- --------------------------
Charles R. Key ------ ------ 3,268 / 6,537 4,353 / 7,568
- ---------------------- -------------- ----------- ----------------------- --------------------------
(1) The aggregate value has been determined based upon the average of the bid
and asked price for the Company's common stock at year-end, minus the
exercise price.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Employment Contracts. There are no employment contracts between the
Company or First National Bank and the executive officers named in the tables
above, other than the Salary Continuation Agreements, the Management Continuity
Agreements, the Deferred Compensation Plan and the Company's stock option plans,
as described below. Effective March 15, 2002, the Company assumed all of the
Bank's rights and obligations under the Bank's 1997 Stock Option Plan (re-named
the FNB Bancorp Stock Option Plan). All other employee benefit plans of the
Bank, existing on that date, are to be continued, modified or assumed by the
Company as determined by mutual agreement of the Bank and the Company, in
accordance with applicable laws, regulations and tax rules.
Salary Continuation Agreements. First National Bank purchased life
insurance policies on the life of Michael R. Wyman on December 21, 1996, and on
the life of James B. Ramsey on December 30, 1998. First National Bank also
18
entered into Salary Continuation Agreements with Messrs. Wyman and Ramsey in the
form proposed by Clark/Bardes Consulting (the "Agreements"). First National Bank
is the sole owner and beneficiary under such life insurance policies, which
policies indirectly offset the anticipated costs for certain death, disability
and post-employment/retirement benefits for Messrs. Wyman and Ramsey. The cash
surrender value of each insurance policy, which is expected to increase over the
term of the policy, is included among the "other assets" on the balance sheet of
First National Bank. The Agreements provide for annual benefits to be paid to
Mr. Wyman or his designated beneficiary of up to $60,000 per year over a period
of 15 years; and annual benefits to be paid to Mr. Ramsey or his designated
beneficiary of up to $50,000 per year over a period of 20 years. Such benefits
are effective in each case upon: (i) attainment of 66 years of age (65 in the
case of Mr. Ramsey) or his death or disability prior to such time if he is
actively employed by First National Bank at the time; (ii) termination of his
employment by First National Bank without "cause" (as defined in the
Agreements); and (iii) termination or constructive termination of his employment
by First National Bank after the occurrence of a "change in control" of First
National Bank (as defined in the Agreements).
Management Continuity Agreements. On July 20, 2000, First National Bank
entered into Management Continuity Agreements with Jim D. Black, Charles R. Key
and Anthony J. Clifford. Each Agreement provides for the payment of a severance
benefit to the officer upon termination of employment after a "change in
control" of First National Bank (as defined in the Agreements). The purpose of
the Agreements is to maintain sound and vital management of First National Bank,
thereby protecting its best interests, in the event of a proposed change in
control of First National Bank. The amount of the benefit payable under each
Agreement is two times the "base annual salary" of the relevant officer for the
twelve month period immediately preceding a "change in control." In addition, if
any payment of the benefit constitutes an "excess parachute payment" that is
subject to an excise tax imposed by the Internal Revenue Code of 1986, as
amended, First National Bank will increase the amounts payable to the extent
necessary to place the officer in the same after-tax position that would have
existed had no excise tax been imposed. First National Bank can elect to pay
benefits in a lump sum payment or in monthly installments over a period not
exceeding two years following the date of termination of employment. Each
Management Continuity Agreement continues for two years from July 20, 2000, and
is subject to automatic one year renewals thereafter, unless First National Bank
gives written notice of non-renewal.
Deferred Compensation Plan. First National Bank has established a
Deferred Compensation Plan. Participation in the Plan is open to all officers of
First National Bank with the title Vice President or higher. The Deferred
Compensation Plan consists of a Deferred Compensation Trust, dated November 1,
1997, with The Mechanics Bank serving as Trustee, and individual Deferred
Compensation Agreements between First National Bank and each of the
participating officers. The funds contributed to the Plan are those of the
individual participant, and represent income earned and/or bonuses granted as an
employee of First National Bank. No funds of First National Bank may be
contributed to the Plan. Under the Plan, a participant may elect to defer the
receipt of a portion of his or her cash salary and/or bonus. First National Bank
maintains a record of the deferred compensation for each participant, and at the
time of distribution, is obligated to effect the distribution as well as
collection of any and all taxes due at such time. Each participant may elect
19
whether he or she will receive distribution of his or her entire account,
subject to applicable tax withholding requirements, upon reaching a specified
age, or upon passage of at least five years or upon termination of employment.
In order to discharge its obligations in respect of such deferred compensation,
First National Bank makes contributions of the deferred compensation specified
by the participants to the Deferred Compensation Trust, which are then invested
in accordance with the instructions of the participants. The principal and any
earnings in the Trust are held separate and apart from other funds of First
National Bank and are used for the discharge of First National Bank's
obligations to the participants. As of April 7, 2003, the Deferred Compensation
Trust held an aggregate of 6,272 shares of Common Stock for the accounts of
Messrs. McGraw, Black, Clifford, Ramsey and Key, representing approximately
0.26% of the total shares outstanding on such date (consisting of 1,293 shares
for Jim D. Black; 1,479 shares for Anthony J. Clifford; 3,500 shares for James
B. Ramsey; and no shares for Thomas C. McGraw and Charles R. Key.
FNB Bancorp Stock Option Plan. The board of directors of the Bank
adopted the First National Bank of Northern California 1997 Stock Option Plan
(the "Bank Stock Option Plan"), which was approved by the shareholders of First
National Bank at the 1997 Annual Meeting, held on October 15, 1997. Pursuant to
the holding company reorganization which became effective March 15, 2002, the
Bank Stock Option Plan became the FNB Bancorp Stock Option Plan. As of December
31, 2002, a total of 116,718 shares were reserved for options previously granted
and outstanding under the FNB Bancorp Stock Option Plan, including options for
an aggregate of 32,764 shares of Common Stock (as adjusted for stock dividends
paid in 1998, 1999, 2000, 2001 and 2002) which have been granted to the five
officers of the Company identified in the table of "Executive Compensation"
above. Also, see "Board Compensation Committee Report" above. All such options
granted and currently outstanding are incentive stock options, vesting at the
rate of 20 percent per year over the period of 5 years from date of grant and
are exercisable for a period of 10 years from the grant date. Directors Angelot,
Modena, Vannucci, Watson and Wyman have been granted non-statutory stock options
for an aggregate of 3,666 shares of Common Stock (as adjusted for stock
dividends paid in 1998, 1999, 2000, 2001 and 2002) which were fully vested on
the dates of grant and are exercisable (at a price of $32.00 per share for
options granted in 1998; at a price of $28.00 per share for options granted in
1999; at a price of $25.13 per share for options granted in 2000; at a price of
$25.05 per share for options granted in 2001; and at a price of $27.50 per share
for options granted in 2002) over a period of 10 years from the grant dates.
Upon consummation of any plan of reorganization, merger or consolidation of the
Company with one or more other banks or corporations as a result of which the
Company is not the surviving entity, or upon the sale of all or substantially
all the assets of the Company to another bank or corporation, then all
outstanding unexercised options shall become immediately exercisable in
accordance with the terms of the FNB Bancorp Stock Option Plan and the Plan
shall terminate.
FNB Bancorp 2002 Stock Option Plan. The Board of Directors of the
Company adopted the FNB Bancorp 2002 Stock Option Plan on June 28, 2002. See the
description of the Plan under "Proposal No. 2" below.
20
Profit Sharing Plan
On August 26, 1969, the Bank established The First National Bank Profit
Sharing and 401(k) Plan (the "Plan") under provisions which allow the Bank to
make a contribution on behalf of each eligible employee. Each year, the Board of
Directors of the Bank decides whether to make a profit sharing contribution to
the Plan, and the amount of that contribution. The profit sharing contribution
to the Plan for 2002 was $535,835. Each participant in the Plan who is employed
on the last day of the Plan year receives a share of that contribution based on
the amount of his or her compensation relative to the compensation of all other
participants. The accounts of the participants vest according to a schedule of
years of service with the Bank. The Mechanics Bank acts as Trustee for the
Profit Sharing Plan Trust, and the Trustee invests all the assets of the Plan in
four common trust funds maintained by the Trustee. On January 1, 1998, the Plan
was amended to allow any eligible employee to make voluntary contributions to
the Plan, and to direct the investment of such voluntary contributions from a
menu of available options. Both the profit sharing provisions and the employee
contribution provisions are elements of the 401(k) Plan. The profit sharing
element of the Plan is funded by the Bank. The employee contribution element of
the Plan is funded by the employee.
Comparison of First National Bank/FNB Bancorp Shareholder Return
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on First National Bank common stock and FNB
Bancorp common stock with the cumulative total return of the SNL Securities
Index of Pink Banks (asset size of $100 million to $500 million) and the Russell
2000 Index as of the end of each of the last five fiscal years. Effective March
15, 2002, First National Bank became the wholly owned subsidiary of FNB Bancorp.
Thereafter, the common stock of FNB Bancorp has been quoted on the OTC Bulletin
Board under the symbol "FNBG.OB."
The graph assumes that $100.00 was invested on December 31, 1997 in
First National Bank common stock and each index, and that all dividends were
reinvested. Returns have been adjusted for any stock dividends and stock splits
declared by First National Bank and FNB Bancorp. Shareholder returns over the
indicated period should not be considered indicative of future shareholder
returns.
21
- --------------------------------------------------------------------------------
FNB BANCORP
- --------------------------------------------------------------------------------
Total Return Performance
[GRAPHIC CHART OMITTED]
Period Ending
---------------------------------------------------------------------
Index 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
- -----------------------------------------------------------------------------------------------------------
FNB Bancorp 100.00 120.42 103.54 110.13 117.28 114.62
Russell 2000 100.00 97.45 118.17 114.60 117.45 93.39
SNL $100M-$500M OTC-BB/Pink 100.00 117.85 107.32 90.72 104.50 125.36
Banks*
* SNL $100M-$500M Pink Banks Index consists of Pink Sheet and OTC Bulletin
Board-traded banks with between $100M and $500M in total assets.
SNL Financial LC
(C) 2003
Note: The foregoing graph was prepared by SNL Financial LC ("SNL") at the
request of the Company for purposes of this Proxy Statement. All information
provided by SNL in the graph has been gathered by SNL from sources believed by
SNL to be reliable and true and accurate in both form and substance.
22
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and any
persons who own more than 10% of a registered class of the Company's equity
securities to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and any greater
than 10% shareholders are required by the SEC to furnish the Company with copies
of all Section 16(a) forms they file.
On March 15, 2002, the Company registered its common stock under
Section 12(g) of the Exchange Act, at which time the Company's directors,
officers and any person who owned more than 10% of such common stock became
subject to Section 16(a) of the Exchange Act.
To the Company's knowledge, based solely on a review of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended December 31, 2002, all Section 16(a)
filing requirements applicable to its officers, directors and any greater than
10% shareholders were complied with on a timely basis.
Certain Relationships and Related Transactions
Through its banking subsidiary, First National Bank, the Company has
had, and expects in the future to have banking transactions, including loans and
other extensions of credit, in the ordinary course of its business with many of
the Company's directors and officers and their associates, including
transactions with corporations of which such persons are directors, officers or
controlling shareholders, on substantially the same terms (including interest
rates and collateral) as those prevailing for comparable transactions with
others. Management believes that in 2002 such transactions comprising loans did
not involve more than the normal risk of collectibility or present other
unfavorable features. Loans to executive officers of First National Bank are
subject to limitations as to amount and purposes prescribed in part by the
Federal Reserve Act, as amended, and the regulations of the Office of the
Comptroller of the Currency.
PROPOSAL NO. 2
2002 STOCK OPTION PLAN
Introduction
Shareholders are being asked to approve the FNB Bancorp 2002 Stock
Option Plan (the "Plan"). On June 28, 2002, the Board of Directors of the
Company adopted the Plan and authorized 158,613 shares of Common Stock to be
reserved for issuance upon exercise of options to be granted under the Plan. On
March 28, 2003, the Board of Directors of the Company authorized an additional
33,457 shares of Common Stock to be reserved for issuance upon exercise of
options to be granted under the Plan. A total of 200,000 shares of Common Stock
have been reserved under the Plan (after giving effect to the Company's 2002
stock dividend). The Plan provides for the grant of incentive stock options
("Incentive Options ") and nonstatutory stock options (" Nonstatutory Options").
23
The terms and provisions of the Plan are summarized below, which summary is
qualified in its entirety by reference to the Plan, a copy of which is attached
as Appendix A to this Proxy Statement.
The terms of the Plan are substantially the same as the Bank's 1997
Stock Option Plan, which was assumed by the Company and became the FNB Bancorp
Stock Option Plan as of March 15, 2002, upon consummation of the plan of
reorganization approved by the shareholders of the Bank on February 27, 2002.
Effective March 15, 2002, the Bank became a wholly owned subsidiary of the
Company. A total of 96,620 shares of Common Stock of the Company were reserved
under the successor FNB Bancorp Stock Option Plan, for issuance upon exercise of
the options previously granted and still outstanding under the Bank's 1997 Stock
Option Plan on March 15, 2002.
No options have been granted under the FNB Bancorp Stock Option Plan
since March 15, 2002, and no further options are expected to be granted under
the FNB Bancorp Stock Option Plan, except that if any outstanding option should
expire, terminate or become unexercisable for any reason without having been
exercised in full, the unpurchased shares which were subject to the option
shall, unless the FNB Bancorp Stock Option Plan shall have been terminated,
become available for future grants under the FNB Bancorp Stock Option Plan.
Options for a total of 32,503 shares of Common Stock have been granted
under the FNB Bancorp 2002 Stock Option Plan since its adoption by the Board of
Directors on June 28, 2002, and all such options are still outstanding under the
Plan (except options for 367 shares which terminated in connection with
termination of employment). Continuance of the Plan is subject to approval by
the shareholders of the Company within twelve (12) months after the date the
Plan was adopted by the Board of Directors. The Plan provides that any option
outstanding under the Plan which is exercised before such shareholder approval
is obtained shall be rescinded and the shares issued upon exercise of such
option shall not be counted in determining whether such shareholder approval has
been obtained. No option outstanding under the Plan has been exercised.
Purpose
The Board has adopted the Plan in order to attract and retain the best
available personnel for positions of substantial responsibility and to provide
additional incentive to the officers and directors of the Company and its
affiliates, by encouraging them to acquire a proprietary interest in the
Company, and in general, to promote the success of the Company's business.
Shares Subject to the Plan
The aggregate number of shares available for issuance pursuant to the
exercise of options granted under the Plan may not exceed 200,000 shares of the
Company's Common Stock. Should any option granted under the Plan expire or
become unexercisable for any reason without having been exercised in full, the
shares subject to the portion of the option not so exercised will become
available for subsequent option grants.
24
Administration
The Plan will be administered by the Board of Directors of the Company
or a Stock Option Committee appointed by the Board ("Committee"). The Committee
must be composed of at least three (3) nonemployee directors. Nonemployee
directors are eligible to receive option grants under the Plan. To date, the
Board of Directors has not delegated administration of the Plan to a Committee.
The Committee will have full authority, subject to the provisions of
the Plan, to determine the eligible individuals who are to receive options under
the Plan, the number of shares to be covered by each granted option, the date or
dates upon which the option is to become exercisable and the maximum term for
which the option is to remain outstanding. The Committee will also have the
authority to determine whether the granted option is to be an Incentive Option
(under the federal tax laws) or a Nonstatutory Option and to establish the rules
and regulations for proper plan administration. The Committee also has the
authority to cancel outstanding options granted under the Plan, with the consent
of the optionee, and to issue replacement options for such canceled options.
Eligibility
Options granted under the Plan may be granted to officers and directors
of the Company or First National Bank or any of their affiliates which may be
created in the future. Officers, including officers who are also directors of
the Company, will be eligible for the grant of Incentive Options and
Nonstatutory Options. Nonemployee directors of the Company will be eligible for
the grant of Nonstatutory Options only. Currently, there are approximately 57
officers in addition to five non-officer directors of the Company who would be
eligible for option grants under the Plan. The terms of the Plan do not specify
nor do they require the Board of Directors or the Committee to designate the
number of shares allocated for the grant of options among executive officers,
directors, or officers eligible for grants under the Plan.
Exercise Price and Exercisability
The Committee has the authority to determine the term of each option
granted under the Plan; provided, however, that the maximum period during which
any option may remain exercisable may not exceed ten years. In addition, each
option must vest at the rate of at least 20 percent per year over the five years
from the date of grant. Options issued under the Plan may either be immediately
exercisable for the full number of shares purchasable thereunder or may become
exercisable in cumulative increments over a period of months or years as
determined by the Committee.
The exercise price of both Incentive Options and Nonstatutory Options
granted under the Plan may not be less than 100% of the fair market value of the
Company's Common Stock on the date of grant. The exercise price may be paid in
cash or in shares of Common Stock valued at fair market value on the exercise
date. Options may also be exercised through a same-day sale program, pursuant to
which a designated brokerage firm would effect an immediate sale of the shares
25
purchased under the option and pay over to the Company, out of the sales
proceeds available on the settlement date, sufficient funds to cover the
exercise price for the purchased shares plus applicable withholding taxes. For
purposes of establishing the exercise price and for all other valuation purposes
under the Plan, the fair market value per share of Common Stock on any relevant
date will be determined by the Committee in the good faith exercise of its
discretion. In the exercise of its discretion, the Committee will consider a
number of relevant factors in determining fair market value, including but not
limited to the reported prices at which the shares of Common Stock are traded.
On April 7, 2003, based on information available to Management, the fair market
value was estimated to be approximately $25.70 per share of Common Stock.
Shareholder Rights and Transferability of Options
No optionee is to have any shareholder rights with respect to his or
her option shares until such optionee has exercised the option, paid the
exercise price and been issued a stock certificate for the purchased shares.
Options are not assignable or transferable other than by will or by the laws of
inheritance, and with respect to Nonstatutory Options, pursuant to qualified
domestic relations orders. During the optionee's lifetime, Incentive Options may
be exercised only by the optionee.
Termination of Employment or Directorship
If an optionee ceases to be employed by the Company or any of its
affiliates for any reason other than cause, as defined under the Plan,
disability or death, or if a nonemployee director optionee ceases to be a
director for any reason other than disability or death, the optionee may, within
three (3) months after the date of termination of employment or directorship, as
the case may be, exercise his or her option to the extent the optionee was
entitled to exercise the option at the date of such termination; provided that
the date of exercise is in no event after the expiration of the term of the
option. To the extent that the option is not exercised within such three-month
time period, the option will terminate. If an employee's termination of
employment is for cause, as described in the Plan, the optionee may, within
thirty (30) days after the date of termination of employment, exercise his or
her option to the extent the optionee was entitled to exercise the option at the
date of such termination, provided that the date of exercise is in no event
after the expiration of the term of the option.
In the event an optionee's employment is terminated due to the
optionee's disability or death, or if a nonemployee director optionee ceases to
be a director due to such optionee's disability or death, the optionee, or the
optionee's estate, as applicable, may, within twelve (12) months following the
date of termination of employment or the termination of directorship, as the
case may be, exercise the option to the extent the option was exercisable at the
date of such termination of employment or directorship; provided that the date
of exercise is in no event after the expiration of the term of the option. If
the option is not exercised within such twelve-month period, the option will
terminate.
26
Adjustment Upon Changes in Capitalization or Other Corporate Event
The number of shares of Common Stock reserved for issuance under the
Plan, the number of shares of Common Stock covered by each outstanding option
and the exercise price as to outstanding options shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Company's Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company. Upon the dissolution,
liquidation or sale of the Company, or a merger or consolidation in which the
Company is not the surviving entity, outstanding options which would otherwise
terminate in accordance with the Plan will become exercisable in full for such
period as is determined by the Committee (but in any event not more than 15
days) prior to the consummation of such event. After the consummation of such an
event, outstanding options will terminate.
Amendment and Termination of the Plan
The Plan became effective upon its adoption by the Board of Directors.
Subject to shareholder approval of the Plan within twelve (12) months after the
date the Plan was adopted by the Board of Directors, the Plan will continue in
effect for a term of ten (10) years unless sooner terminated by the Board of
Directors. The Board of Directors may amend or terminate the Plan from time to
time as the Board deems advisable. No such amendment or termination will affect
outstanding options without the consent of the affected optionees.
The Board may not, without the approval of the Company's shareholders
(to the extent such shareholder approval is required by applicable law), amend
the Plan which would (i) materially increase the benefits accruing to
participants under the Plan, (ii) materially increase the number of shares which
may be issued under the Plan, or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
Summary of Federal Tax Consequences
The following is only a brief summary of the effect of federal income
taxation on an optionee under the Plan. Options granted under the Plan may be
either Incentive Options which satisfy the requirements of Section 422 of the
Internal Revenue Code or Nonstatutory Options which do not meet such
requirements. The federal income tax treatment for the two types of options
differs as follows:
Incentive Options. No taxable income is recognized by an optionee
at the time of the option grant, and no taxable income is generally recognized
at the time the option is exercised. However, the excess of the fair market
value of the Common Stock received upon the exercise of an Incentive Option over
the exercise price is includable in the employee' s alternative minimum taxable
27
income ("AMTI") and may be subject to the alternative minimum tax ("AMT"). For
AMT purposes only, the basis of the Common Stock received upon exercise of an
Incentive Option is increased by the amount of such excess.
An optionee will recognize taxable income in the year in which the
purchased shares acquired upon exercise of an Incentive Option are sold or
otherwise disposed. For federal tax purposes, dispositions are divided into two
categories: (i) qualifying and (ii) disqualifying. An optionee will make a
qualifying disposition of the purchased shares if the sale or disposition is
made more than two years after the grant date of the option and more than one
year after the exercise date. If an optionee fails to satisfy either of these
two holding periods prior to sale or disposition, then a disqualifying
disposition of the purchased shares will result.
Upon a qualifying disposition, an optionee will recognize long-term
capital gain or loss in an amount equal to the difference between the amount
realized upon the sale or other disposition of the purchased shares and the
exercise price paid for the shares except that for AMT purposes, the gain or
loss would be the difference between the amount realized upon the sale or other
disposition of the purchased shares and the employee's basis increased as
described above. If there is a disqualifying disposition of the shares, then the
optionee will generally recognize ordinary income to the extent of the lesser of
the difference between the exercise price and (i) the fair market value of the
Common Stock on the date of exercise, or (ii) the amount realized on such
disqualifying disposition. Any additional gain recognized upon the disposition
will be capital gain. If the amount realized is less than the exercise price,
the optionee will, in general, recognize a capital loss. If the optionee makes a
disqualifying disposition of the purchased shares, then the Company will be
entitled to an income tax deduction, for the taxable year in which such
disposition occurs, to the extent the optionee recognizes ordinary income. In no
other instance will the Company be allowed a deduction with respect to the
optionee's disposition of the purchased shares.
Nonstatutory Options. No taxable income is recognized by an optionee
upon the grant of a Nonstatutory Option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of purchased shares on the date of exercise over
the exercise price paid for such shares, and the optionee will be required to
satisfy the tax withholding requirements applicable to such income. Upon a
subsequent sale of the purchased shares, the optionee will generally recognize
either a capital gain or a capital loss depending on whether the amount realized
is more or less than the exercise price. The Company will be entitled to a
business expense deduction equal to the amount of ordinary income recognized by
the optionee with respect to an exercised Nonstatutory Option. The deduction
will in general be allowed for the taxable year of the Company in which ordinary
income is recognized by the optionee in connection with the acquisition of the
option shares.
Vote Required
Adoption of the Plan is subject to approval by the Company's
shareholders. The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Annual Meeting is required to approve the adoption of the Plan provided that
the number of affirmative votes equals at least a majority of the shares
constituting the required quorum. Abstentions will be counted for purposes of
28
determining the number of shares entitled to vote on the proposal and will have
the effect of a vote against the proposal. Although any shares which may be
treated as broker non-votes with respect to Proposal No. 2 will be counted to
determine the presence or absence of a quorum, they will not be counted in
determining the number of shares entitled to vote on Proposal No. 2.
The Board of Directors recommends a vote "FOR" Proposal No. 2.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of KPMG LLP, which served the Company as independent auditors
for the 2002 fiscal year, has been recommended by the Audit Committee of the
Board of Directors of the Company to serve as independent auditors for the 2003
fiscal year, and the Board of Directors has approved the Audit Committee
recommendation. In this Proposal No. 3, the shareholders of the Company are
being asked to ratify the appointment of KPMG LLP as independent auditors of the
Company, to serve for the 2003 fiscal year.
The firm of Grant Thornton LLP served First National Bank of Northern
California as its independent auditors for the 2001 fiscal year. Upon
consummation of a plan of reorganization approved by the shareholders of the
Bank, effective March 15, 2002, the Bank became a wholly owned subsidiary of the
Company. On September 27, 2002, the Board of Directors of the Company approved
the recommendation of the Audit Committee of the Board of Directors to change
the firm serving as the independent auditors for the Company and the Bank. On
September 30, 2002, Grant Thornton LLP was notified of its dismissal and
termination as the Company's independent auditors and the Company engaged KPMG
LLP as the Company's independent auditors for the 2002 fiscal year, effective as
of September 30, 2002.
The reports of Grant Thornton LLP on the financial statements of First
National Bank of Northern California, as of and for the fiscal years ended
December 31, 2000 and 2001, did not contain an adverse opinion or a disclaimer
of opinion, and were not qualified or modified as to uncertainty, audit scope or
accounting principles
During the fiscal years of First National Bank of Northern California
ended December 31, 2000 and 2001, and during the subsequent interim period
through September 30, 2002, there were no disagreements with Grant Thornton LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Grant Thornton LLP, would have caused it to make a
reference to the subject matter of the disagreements in connection with its
reports.
A representative of KPMG LLP is expected to attend the Annual Meeting
and will have an opportunity to make a statement if the representative desires
to do so, and the representative is expected to be available to respond to
appropriate questions.
29
During the fiscal years of First National Bank of Northern California
ended December 31, 2000 and 2001, and during the subsequent interim period
through September 30, 2002, neither the Company nor First National Bank of
Northern California consulted with KPMG LLP regarding (i) the application of
accounting principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the financial statements
of the Company or First National Bank of Northern California, or (ii) any matter
that was either the subject of a disagreement or a reportable event under the
rules of the Securities and Exchange Commission.
Audit Fees
The aggregate fees billed by Grant Thornton LLP to the Company for
professional services rendered for the audit of the financial statements of
First National Bank of Northern California for the fiscal years ended December
31, 2000 and 2001, included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002, and for the review of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 2002, and June 30, 2002, were $25,243.
The aggregate fees billed by KPMG to the Company for professional
services rendered for the audit of the Company's consolidated financial
statements for the fiscal year ended December 31, 2002, and for the review of
the financial statements included in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2002, were $116,450.
All Other Fees
Other than the fees for services described above under "Audit Fees," no
fees were billed to the Company by Grant Thornton LLP or KPMG LLP for services
rendered to the Company or First National Bank of Northern California for the
fiscal year ended December 31, 2002.
The Audit Committee of the Board of Directors of the Company has
approved each professional service rendered by Grant Thornton LLP and KPMG LLP
during the fiscal year 2002, and the Audit Committee has considered whether the
provision of non-audit services would be compatible with maintaining the
independence of Grant Thornton LLP and KPMG LLP.
Vote Required
Ratification of the appointment of KPMG LLP as the Company's
independent auditors for the 2003 fiscal year requires the affirmative vote of
the holders of a majority of the shares of Common Stock present or represented
by proxy and voting at the Annual Meeting.
Recommendation of Management
The Board of Directors of the Company has approved the recommendation
of the Audit Committee of the Board of Directors to appoint KPMG LLP as
independent auditors of the Company for the 2003 fiscal year, and recommends a
vote "FOR" ratification of the appointment of KPMG LLP.
30
AUDIT COMMITTEE REPORT
The Audit Committee consists of the following members of the Company's
Board of Directors: Edward J. Watson (Chairman), Neil J. Vannucci and Daniel J.
Modena. Each of the members of the Committee is independent as defined under the
National Association of Securities Dealers' listing standards. The Committee
operates under a written charter adopted by the Board of Directors which is
included in this Proxy Statement as Appendix B.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted accounting principles and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes.
The Audit Committee's responsibilities include assisting the Board of
Directors in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing, internal control and financial reporting
practices of the Company. The Committee's primary responsibilities are to: (1)
serve as an independent and objective party to monitor the Company's financial
reporting process and internal control system; (2) review and evaluate the audit
efforts of the Company's independent accountants and the outsource internal
audit firm; (3) evaluate the Company's quarterly financial performance as well
as its compliance with laws and regulations; (4) oversee management's
establishment and enforcement of financial policies and business practices; and
(5) facilitate communication among the independent accountants, financial and
senior management, counsel, the outsource internal audit firm and the Board of
Directors.
During 2002, the Audit Committee reviewed the Company's audit
requirements in view of its new holding company structure, the passage of the
Sarbanes-Oxley Act of 2002, and the need for broad-based, local financial
institution resources. The Audit Committee decided to solicit bids for these
services. After considering the submissions, it was unanimously decided by the
Audit Committee that KPMG LLP best suited the Company's needs as to resources,
local expertise, financial institution practice and cost. On September 27, 2002,
the Board of Directors of the Company approved the recommendation of the Audit
Committee to change the firm serving as the independent auditors for the Company
and the Bank. The Company engaged KPMG LLP as the Company's independent auditors
for the 2002 fiscal year, effective as of September 30, 2002, and KPMG LLP began
providing audit review services to the Company with respect to the preparation
of the Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2002.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2002, with the
Company's management. The Committee has discussed with KPMG LLP, the Company's
independent auditors, the matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees). The Committee
31
has also received the written disclosures and the letter from KPMG LLP required
by Independence Standards Board Standard No. 1 (Independence Discussion with
Audit Committees) and the Committee has discussed the independence of KPMG LLP
with that firm.
Based on the Audit Committee's review and discussions noted above, the
Committee recommended to the Board of Directors that the Bank's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, for the filing with the Securities and
Exchange Commission.
Submitted by the Audit Committee:
Edward J. Watson, Chairman
Neil J. Vannucci
Daniel J. Modena
SHAREHOLDERS' PROPOSALS
Next year's Annual Meeting of Shareholders will be held on May 19,
2004. The deadline for shareholders to submit proposals for inclusion in the
proxy statement and form of proxy for the 2004 Annual Meeting of Shareholders is
January 31, 2004. All proposals should be submitted by Certified Mail, Return
Receipt Requested, to the Secretary, FNB Bancorp, 975 El Camino Real, South San
Francisco, California 94080.
South San Francisco, California
April 17, 2003
32
APPENDIX A
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FNB BANCORP 2002 STOCK OPTION PLAN
(As adopted by the Board of Directors of FNB Bancorp
on June 28, 2002, and amended March 28, 2003)
1. Purposes of the Plan. The purposes of the FNB Bancorp 2002 Stock
Option Plan are to attract and retain the best available personnel for positions
of substantial responsibility and to provide additional incentive to the key
Officers and Directors of FNB Bancorp and its Affiliates (hereinafter
collectively referred to as "FNB") by encouraging them to acquire a proprietary
interest in FNB, and, in general, to promote the success of FNB's business.
Options granted hereunder to Officers may be either Incentive Stock
Options or Nonstatutory Stock Options, at the discretion of the Committee and as
reflected in the terms of the particular option agreements. Options granted
hereunder to Nonemployee Directors may be Nonstatutory Stock Options only.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Affiliates" shall mean any parent corporation or bank, or
subsidiary corporation or bank, as defined in Sections 424(e) and (f),
respectively, of the Code.
(b) "Board of Directors" shall mean the Board of Directors of
FNB Bancorp, as constituted from time to time.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the Board of Directors and any
committee(s) appointed by the Board of Directors in accordance with paragraphs
(a) and (b) of Section 4 of the Plan, except where otherwise expressly provided
or where the context requires otherwise.
(e) "Common Stock" shall mean shares of FNB's Common Stock, no
par value.
(f) "Director" shall mean a member of the Board of Directors.
(g) "FNB" shall mean FNB Bancorp and its Affiliates.
(h) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
33
(i) "Nonemployee Director" shall mean a Director who is not
also an employee of FNB, and who meets the definition of "nonemployee director"
as stipulated in Rule 16b-3 of the Securities and Exchange Commission (the
"SEC"), promulgated under Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), as said Rule 16b-3 may be amended from time to
time and as interpreted by the SEC ("Rule 16b-3").
(j) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option within the meaning of Section
422 of the Code.
(k) "Officer" shall mean any person employed by FNB or any
Affiliate of FNB as an officer, including an employee of FNB who is also a
Director. The payment of a director's fee by FNB or any of its Affiliates shall
not alone be sufficient to constitute "employment" by FNB or any of its
Affiliates.
(l) "Option" shall mean a stock option granted pursuant to the
Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(n) "Optionee" shall mean an Officer or Director who receives
an Option.
(o) "Plan" shall mean the FNB Bancorp 2002 Stock Option Plan.
(p) "Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 10 of the Plan.
3. Stock Subject to the Plan. Subject to the provisions of Section
10 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is two hundred thousand (200,000) Shares. If an Option
should expire, terminate, or become unexercisable for any reason without having
been exercised in full, the unpurchased Shares which were subject thereto shall,
unless the Plan shall have been terminated, become available for future grant
under the Plan. Any Shares which are withheld by FNB upon exercise of an Option
at the direction of an Optionee or which are delivered by an Optionee to pay the
exercise price of an Option, as permitted by Section 7(c), shall become
available for future grant under the Plan to Officers who are not subject to
Section 16 of the Exchange Act.
4. Administration of the Plan. The following provisions shall govern
the administration of the Plan:
(a) Subject to paragraph (b) below, the Plan shall be
administered by the Board of Directors or by one or more committees of the Board
of Directors duly appointed for this purpose by the Board of Directors. Once
appointed, a committee shall administer the Plan on behalf of the Board of
Directors, subject to such terms and conditions as the Board of Directors may
prescribe and shall continue to serve until otherwise directed by the Board of
Directors. Subject to the foregoing, from time to time the Board of Directors
may increase the size of the committee and appoint new members to the committee,
remove members of the committee, and fill vacancies however caused. The Board of
Directors may designate a Chairman and Vice-Chairman of the committee from among
34
the committee members. Acts of the committee (i) at a meeting, held at a time
and place and in accordance with rules adopted by the committee, at which a
quorum of the committee is present and acting, or (ii) reduced to and approved
in writing by a majority of the members of the committee, shall be the valid
acts of the committee.
(b) Discretionary grants of Options to Officers and Directors,
including Nonemployee Directors, may be made by, and all discretion with respect
to the material terms of such Options may be exercised by, either (i) the Board
of Directors or (ii) a duly appointed committee of the Board of Directors
composed solely of three (3) or more Nonemployee Directors having full authority
to act in the matter.
(c) FNB shall effect the grant of options under the Plan by
execution of instruments in writing in a form approved by the Committee. Subject
to the express terms and conditions of the Plan, and the terms of any Option
outstanding under the Plan, the Committee shall have full power to construe the
Plan and the terms of any Option granted under the Plan, to prescribe, amend and
rescind rules and regulations relating to the Plan or such Options and to make
all other determinations necessary or advisable for the Plan's administration,
including, without limitation, the power to (i) determine which persons meet the
requirements of Section 5 hereof for selection as participants in the Plan and
which persons are considered to be "employees" for purposes of the Code, and
therefore eligible to receive Incentive Stock Options under the Plan; (ii)
determine to whom of the eligible persons, if any, Options shall be granted
under the Plan; (iii) establish the terms and conditions required or permitted
to be included in every option agreement or any amendments thereto, including
whether options to be granted thereunder shall be Incentive Stock Options or
Nonstatutory Stock Options; (iv) specify the number of Shares to be covered by
each Option; (v) in the event a particular Option is to be an Incentive Stock
Option, determine and incorporate such terms and provisions, as well as
amendments thereto, as shall be required in the judgment of the Committee, so as
to provide for or conform such Option to any change in any law, regulation,
ruling or interpretation applicable thereto; (vi) determine the fair market
value of Common Stock used by an Optionee to exercise Options pursuant to
Section 7(c) hereof; (vii) to accelerate or defer (with the consent of the
Optionee) the exercise date of any Option, consistent with the provisions of
Section 6; (viii) to cancel Options outstanding under the Plan with the consent
of the affected Optionee and to issue replacement Options therefor; provided
however, that if the exercise price of such replacement Options is lower than
the exercise price of the Options which were canceled in exchange therefor, then
such replacement Options shall not become exercisable unless and until
shareholder approval of such replacement Options is obtained within twelve (12)
months of the date of grant of such options, such shareholder approval to
consist of the affirmative vote of a majority of the shares represented and
voting at a duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum) or in
such other manner as may be required by law, (ix) to amend or modify any Option
outstanding under the Plan with the consent of the affected Optionee; and (x) to
make all other determinations deemed necessary or advisable for administering
the Plan.
The Committee's determination on the foregoing matters shall be conclusive.
35
5. Eligibility.
-----------
(a) Options may be granted to Officers and Directors and an
Officer or Director who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options. Officers shall
be eligible for the grant of Incentive Stock Options and Nonstatutory Stock
Options. Nonemployee Directors shall be eligible for the grant of Nonstatutory
Stock Options only.
(b) No Incentive Stock Option may be granted to an Officer
which, when aggregated with all other Incentive Stock Options granted to such
Officer by FNB or any of its Affiliates, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more Incentive Stock Options
during any calendar year. Any excess amount which may be granted shall be
treated as a Nonstatutory Stock Option to the extent of such excess.
(c) Section 5(b) of the Plan shall apply only to an Incentive
Stock Option evidenced by an "Incentive Stock Option Agreement" which sets forth
the intention of FNB and the Optionee that such Option shall qualify as an
Incentive Stock Option. Section 5(b) of the Plan shall not apply to an Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of FNB and the Optionee that such Option shall be a Nonstatutory Stock
Option.
(d) The Plan shall not confer upon any Officer Optionee any
right with respect to continuation of employment with FNB nor any of its
Affiliates, nor shall it interfere in any way with his or her right or the right
of FNB or its Affiliates to terminate his or her employment at any time.
6. Term of Option. The term of each Option granted to an Officer or
Director shall be up to ten (10) years from the date of grant thereof or such
shorter term as may be determined by the Committee and as provided in the Option
agreement. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of FNB or any
of its Affiliates, the term of the Option shall be five (5) years from the date
of grant thereof or such shorter time as may be provided in the Option
agreement.
7. Exercise Price and Consideration.
--------------------------------
(a) The purchase price for the Shares to be issued pursuant to
the exercise of an Option shall be determined by the Committee; provided,
however, that the exercise price of a Nonstatutory Stock Option shall not be
less than one hundred percent (100%) of the fair market value of the Shares
subject thereto on the date the Nonstatutory Stock Option is granted and the
exercise price of an Incentive Stock Option shall not be less than one hundred
percent (100%) of the fair market value of the Shares on the date the Incentive
Stock Option is granted; and further provided, however, that no Incentive Stock
36
Option shall be granted to an Optionee who, at the time of the grant of such
Option, owns securities representing more than ten percent (10%) of the voting
power of all classes of stock of FNB or any of its Affiliates, at a per Share
exercise price less than one hundred ten percent (110%) of the fair market value
per Share on the date of grant.
(b) For the purpose of determining the exercise price of an
Option, fair market value per Share shall be determined by the Committee in the
good faith exercise of its discretion in accordance with any reasonable
valuation method, including the valuation methods described in Treasury
Regulation Section 20.2031-2; provided, however, that where there is a public
market for the Common Stock, the Committee shall consider, as evidence of fair
market value, the mean of the bid and asked prices (or the closing price if
listed on a stock exchange or the National Association of Securities Dealers
Automated Quotation ("Nasdaq") National Market System) of the Common Stock for
the date of grant, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by Nasdaq or the National Quotation Bureau). If
such information is not available for the date of grant, then such information
for the last preceding date for which such information is available shall be
considered as evidence of fair market value.
(c) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Committee and may consist entirely of (i) cash, (ii) check (bank,
cashier's or certified), (iii) other Shares of Common Stock (held for the
requisite period necessary to avoid a charge to FNB's reported earnings) having
a fair market value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (iv) delivery of
an election to FNB to withhold a sufficient number of Shares from the Shares
otherwise due upon exercise of the Option having an aggregate fair market value
on the date of exercise equal to the exercise price, (v) by any combination of
such methods of payment, or (vi) any other consideration and method of payment
for the issuance of Shares permitted under applicable law. In addition, full
payment for the purchased Shares may be effected through a broker-dealer sale
and remittance procedure pursuant to which the Optionee (i) shall provide
irrevocable written instructions to a designated brokerage firm to effect the
immediate sale of the purchased Shares and remit to FNB, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased Shares plus all applicable
federal, state and local income and employment taxes required to be withheld by
FNB by reason of such purchase and (ii) shall provide written directives to FNB
to deliver the certificates for the purchased Shares directly to such brokerage
firm in order to complete the sale transaction. An Optionee's election to
deliver Shares or to have FNB withhold Shares from the Shares otherwise due upon
exercise of the Option to satisfy the exercise price is subject to approval by
the Committee and must be made in accordance with rules and procedures
established by the Committee, including the time within which such an election
must be made.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Committee. The vesting of any Option shall be
determined by the Committee in its sole discretion provided , however, that each
37
Option shall vest at the rate of at least 20 percent per year over the five
years from the date such Option is granted. An Option may not be exercised for
less than ten (10) Shares or for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to FNB in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by FNB. Full payment
may, as authorized by the Committee, consist of any consideration and method of
payment allowable under Section 6(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of FNB or of a duly authorized
transfer agent of FNB) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided in
Section 10 of the Plan.
(b) Termination of Employment or Officer Status. Unless the
Committee determines otherwise, upon the termination of an Officer Optionee's
status as an employee, including the termination of the status as an employee of
an Officer who is also a Director, his or her rights to exercise an Option then
held shall be only as follows:
(i) Termination of Status as an Employee For Any Reason
Other Than Cause, Disability or Death. If an Officer ceases to serve as
an employee for any reason other than those mentioned under
sub-paragraphs (ii), (iii) and (iv) below, he or she may, within three
(3) months after the date he or she ceases to be an employee of FNB or
any of its Affiliates, exercise his or her Option to the extent that he
or she was entitled to exercise it at the date of such termination,
provided the date of exercise is in no event after the expiration of
the term of the Option. To the extent that he or she was not entitled
to exercise the Option at the date of such termination, or if he or she
does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(ii) Termination of Status as an Employee For Cause. If
an Officer is determined by the Board of Directors to have committed an
act of embezzlement, fraud, dishonesty, breach of fiduciary duty to
FNB, or to have deliberately disregarded the rules of FNB which
resulted in loss, damage or injury to FNB, or if an Officer Optionee
makes any unauthorized disclosure of any of the secrets or confidential
information of FNB, induces any client or customer of FNB to break any
contract with FNB or induces any principal for whom FNB acts as agent
to terminate such agency relations, or engages in any conduct which
constitutes unfair competition with FNB, or if an Officer Optionee is
removed from any office of FNB by any bank regulatory agency, then such
Officer shall have the right for a period of thirty (30) days following
the date of such termination to exercise the Option to the extent he or
she was entitled to exercise the Option on the date of his or her
termination of employment, provided the actual date of exercise is in
no event after the expiration of the term of the Option. In making such
determination, the Board of Directors shall act fairly and shall give
38
the Officer Optionee an opportunity to appear and be heard at a hearing
before the Board of Directors and present evidence on the Officer
Optionee's behalf. For purposes of this Section 8(b), termination of
employment shall be deemed to occur when FNB dispatches notice or
advice to the Officer Optionee that the Officer Optionee's employment
is terminated and not at the time of the Officer Optionee's receipt
thereof, whether or not after termination of employment the Officer
Optionee may receive payment from FNB 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. As used in this Section 8(b), the term "FNB" also includes
any Affiliates of FNB.
(iii) Disability of Officer Optionee. In the event an
Officer is unable to continue his or her employment with FNB or any of
its Affiliates as a result of his or her disability, he or she may,
within twelve (12) months following the date of termination, exercise
his or her Option to the extent he or she was entitled to exercise it
at the date of such termination; provided the date of exercise is in no
event after the expiration of the term of the Option. To the extent
that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or
she was entitled to exercise) within the time specified herein, the
Option shall terminate.
(iv) Death of Officer Optionee. In the event of the
death of an Officer Optionee while such Optionee is an employee of FNB
or any of its Affiliates, or during the three-month period referred to
in Section 8(b)(i) hereof, the Option may be exercised at any time
within twelve (12) months following the date of death, by the Officer
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right
to exercise that had accrued at the date of death and provided that the
date of exercise is in no event after the date of expiration of the
Option.
(c) Termination of Nonemployee Director Status. Unless the
Committee determines otherwise, upon the termination of a Nonemployee Director
Optionee's status as a member of the Board of Directors, his or her rights to
exercise an Option then held shall be only as follows:
(i) Death or Disability. If a Nonemployee Director
Optionee's tenure on the Board is terminated by death or disability,
such Optionee or such Optionee's qualified representative (in the event
of such Optionee's mental disability) or such Optionee's estate (in the
event of such Optionee's death) shall have the right for a period of
twelve (12) months following the date of such death or disability to
exercise the Option to the extent the Optionee was entitled to exercise
such Option on the date of the Optionee's death or disability; provided
the actual date of exercise is in no event after the expiration of the
term of the Option. An Optionee's "estate" shall mean the Optionee's
legal representative or any person who acquires the right to exercise
an option by reason of the Optionee's death.
39
(ii) Other Reasons. If a Nonemployee Director Optionee's
tenure on the Board is terminated for any reason other than those
mentioned above under "Death or Disability," the Optionee may, within
three (3) months following such termination, exercise the Option to the
extent such Option was exercisable by the Optionee on the date of such
termination: provided the date of exercise is in no event after the
expiration of the term of the Option.
9. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee; provided, however, that
Nonstatutory Stock Options may be transferred pursuant to a "qualified domestic
relations order," and may be exercised by the transferee of such a transfer, to
the extent allowed under Rule 16b-3, as it may be amended from time to time, or
any successor rule.
10. Tax Withholding. Where FNB deems that it is appropriate to
withhold taxes relating to the exercise of any Option, the Committee may, in its
discretion, require that such taxes be paid in a manner satisfactory to FNB. FNB
may require the payment of such taxes before Shares of FNB's Common Stock
deliverable pursuant to such exercise are transferred to the Optionee.
11. Adjustments Upon Changes in Capitalization. Subject to any
required action by the shareholders of FNB, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by FNB; provided, however, that conversion of any convertible
securities of FNB shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board of Directors, whose
determination in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by FNB of shares of stock of any class,
or securities convertible into shares of stock of any class, shall affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of Common Stock subject to an Option.
12. Dissolution, Merger or Similar Event; Acceleration. Upon
consummation of a plan of dissolution or liquidation of FNB, or upon
consummation of a plan of reorganization, merger or consolidation of FNB with
one or more banks or corporations as a result of which FNB is not the surviving
entity, or upon the sale of all or substantially all the assets of FNB to
another bank or corporation, the Plan shall automatically terminate and all
Options theretofore granted shall be terminated, unless provision is made in
connection with such transaction for assumption of Options theretofore granted,
or substitution for such Options with new stock options or rights covering stock
40
of a successor bank or corporation, or a parent or subsidiary corporation
thereof, solely at the discretion of such successor bank or corporation, or
parent or subsidiary corporation, with appropriate adjustments as to number and
kind of shares and prices.
Notwithstanding any provisions in any Option agreement pertaining to
the time of exercise of an Option, or part thereof, upon adoption by the
requisite holders of the outstanding shares of Common Stock of any plan of
dissolution, liquidation, reorganization, merger, consolidation or sale of all
or substantially all of the assets of FNB to another bank or corporation which
would, upon consummation, result in termination of an Option as described above,
all outstanding Options shall become immediately exercisable as to all
unexercised Optioned Stock for such period of time as may be determined by the
Committee, but in any event not more than fifteen (15) days, on the condition
that the terminating event described above is consummated. If such terminating
event is not consummated, Options granted pursuant to the Plan shall be
exercisable in accordance with their respective terms as in existence prior to
acceleration, except with respect to any Option exercised within the period of
accelerated exercisability.
13. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of FNB as described in Section 17 of the Plan. It shall continue in
effect for a term of ten (10) years unless sooner terminated under Section 14 of
the Plan.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) The Board of Directors may amend or terminate the Plan
from time to time in such respects as the Board of Directors may deem advisable.
FNB shall (only to the extent required, and in the manner required, by the Code
and Rule 16b-3, as amended from time to time, or by any successor rule or other
applicable law or regulation) obtain shareholder approval of any amendment to
the Plan which would (i) materially increase the benefits accruing to
participants under the Plan, (ii) materially increase the number of Shares which
may be issued under the Plan; or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
(b) Except as provided in Section 12 of the Plan, any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated, unless mutually agreed otherwise between the
Optionee and FNB, which agreement must be in writing and signed by the Optionee
and FNB.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless and until the exercise of such
Option and the issuance and delivery of such Shares pursuant thereto shall
comply with all the then applicable requirements of all regulatory agencies
having jurisdiction, and the requirements of any stock exchange or inter-dealer
quotation system upon which the Shares may then be listed, and shall be further
subject to the approval of legal counsel for FNB with respect to such
compliance.
16. Reservation of Shares. FNB, during the term of this Plan, shall
take all necessary action, and if required, submit such action for shareholder
approval, to reserve and keep available such number of Shares as shall be
41
sufficient to satisfy the requirements of the Plan. Inability of FNB to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by FNB's legal counsel to be necessary to the lawful issuance and sale of
any Shares hereunder, shall relieve FNB 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.
17. Shareholder Approval of the Plan. Continuance of the Plan shall
be subject to approval by the shareholders of FNB within twelve (12) months
after the date the Plan was adopted by the Board of Directors. Such shareholder
approval shall consist of approval by the affirmative votes of the holders of a
majority of the outstanding securities of FNB present, or represented, and
entitled to vote at a meeting duly held in accordance with applicable law, or by
the written consent of the holders of a majority of the outstanding securities
of FNB entitled to vote. Any Option exercised before such shareholder approval
is obtained shall be rescinded if such shareholder approval is not obtained
within twelve (12) months after the date the Plan was adopted by the Board of
Directors, and the Shares issued upon exercise of such Option shall not be
counted in determining whether such shareholder approval is obtained.
18. Severability. If any provision of this Plan as applied to any
person or to any circumstance shall be adjudged by a court of competent
jurisdiction to be void, invalid, or unenforceable, the same shall in no way
affect any other provision hereof, the application of any such provision in any
other circumstances, or the validity or enforceability hereof.
19. Construction. Where the context or construction requires, all
words applied in the plural herein shall be deemed to have been used in the
singular and vice versa, and the masculine gender shall include the feminine and
the neuter and vice versa.
20. Headings. The headings of the several paragraphs herein are
inserted solely for convenience of reference and are not intended to form a part
of and are not intended to govern, limit or aid in the construction of any term
or provision hereof.
21. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of California.
22. Conflict. In the event of any conflict between the terms and
provisions of this Plan, and any other document, agreement or instrument,
including, without meaning any limitation, any written Option agreement, the
terms and provision of this Plan shall control.
42
APPENDIX B
----------
AUDIT COMMITTEE CHARTER
-----------------------
This Audit Committee Charter has been adopted by the Board of Directors
of FNB Bancorp (the "Company"). The Audit Committee of the Board shall review
and reassess this charter annually and recommend any proposed changes to the
Board for approval.
Membership
The audit committee will be composed of not less than three (3) members
of the board of directors. They will be selected by the board of directors,
taking into account prior experience in matters to be considered by the
committee, probable availability at times required for consideration of such
matters, and their individual independence and objectivity.
The committee's membership will meet the requirements of the audit
committee policy of Nasdaq. Accordingly, all of the members will be directors
independent of management and free from relationships that, in the opinion of
the board of directors, would interfere with the exercise of independent
judgment as a committee member.
No officers or employees of the Company or its subsidiaries will serve
on the committee. A former officer of the Company or any of its subsidiaries may
serve on the committee (even though the former officer may by receiving pension
or deferred compensation payments from the Company) if, in the opinion of the
board of directors, the former officer will exercise independent judgment and
will significantly assist the committee to function. However, a majority of the
committee will be directors who were not formerly officers of the Company or any
of its subsidiaries.
When considering relationships that might affect independence,
including possible affiliate status, the board of directors will give
appropriate consideration, in addition to its audit committee policy, to
guidelines issued by Nasdaq, which are provided to assist boards of directors in
observing the spirit of Nasdaq policy.
The board of directors shall appoint one member of the audit committee
to serve as the chairman. The chairman shall be responsible for leadership of
the committee, including scheduling and presiding over meetings, preparing
agendas and making regular reports to the board of directors. The chairman will
also maintain regular liaison with the Chief Executive Officer, the Chief
Financial Officer, the lead independent audit partner and the outsource internal
audit firm.
43
Actions of the Committee
The committee's activities will include the following actions:
o Oversight of the financial statements and relations with the
independent auditors.
o Instruct the independent auditors that the board of directors is the
client in its capacity as the shareholders' representative.
o Expect the independent auditors to meet with the board of directors at
least annually so the board has a basis on which to recommend the
independent auditors' appointment to the shareholders or to ratify its
selection of the independent auditors.
o Expect financial management and the independent auditors to analyze
significant financial report issues and practices on a timely basis.
o Expect financial management and the independent auditors to discuss
with the audit committee:
o Qualitative judgments about whether current or proposed
accounting principles and disclosures are appropriate, not just
acceptable; and
o Aggressiveness or conservatism of accounting principles and
financial estimates.
o Expect the independent auditors to provide the audit committee with:
o Independent judgments about the appropriateness of the Company's
current or proposed accounting principles and whether current or
proposed financial disclosures are clear;
o Views on whether the accounting principles chosen by management
are conservative, moderate, or aggressive as they relate to
income, asset, and liability recognition, and whether these
accounting principles are commonly used;
o Reasons why accounting principles and disclosure practices used
for new transactions or events are appropriate;
o Reasons for accepting or questioning significant estimates made
by management; and
o Views on how selected accounting principles and disclosure
practices affect shareholder and public attitudes about the
Company.
Actions taken on the board's behalf that require board notification but not
board approval:
o Review and approve the scope of the Company's audit and that of its
subsidiaries as recommended by the independent auditors and the
President;
o Review and approve the scope of the Company's annual profit and pension
trust audits;
o Answer questions raised by shareholders during an annual shareholders'
meeting on matters relating to the committee's activities if asked to
do so by the board of directors' chairperson; and
o Ask the President to have the outsourced internal audit firm study a
particular area of interest or concern to the audit committee.
44
Matters requiring the committee's review and study before making a
recommendation for the board of directors' action:
o Appointment of the independent auditors;
o Implementation of major accounting policy changes;
o SEC registration statements to be signed by the board of directors; and
o The auditors' reports and financial statements prior to publication in
the annual report.
Matters requiring the committee's review and study before providing summary
information to the board of directors:
o Accounting policy changes proposed or adopted by organizations such as
the Financial Accounting Standards Board (FASB), the Securities and
Exchange Commission (SEC), and the American Institute of Certified
Public Accountants (AICPA), or by comparable bodies outside the United
States;
o The independent auditors' assessment of the strengths and weaknesses of
the Company's financial staff, systems, controls, and other factors
that might be relevant to the integrity of the financial statements;
o Quarterly financial statement review before publication;
o Administration of the Company's "conflict of interest" policies as may
be set by the board of directors from time to time;
o The performance of management and operating personnel under the
Company's code of ethics as may be adopted by the board of directors
from time to time;
o Gaps and exposures in insurance programs;
o Reports about the Company or its subsidiaries submitted by agencies of
governments in countries in which the Company or it subsidiaries may
operate; and
o Periodic SEC filings and the adequacy of programs and procedures to
assure compliance with SEC rules and regulations and the rules and
regulations of Nasdaq.
45
- --------------------------------------------------------------------------------
FNB BANCORP
Solicited by the Board of Directors
for the Annual Meeting of Shareholders
on May 14, 2003
The undersigned holder of Common Stock acknowledges receipt of a copy of the
Notice of Annual Meeting of Shareholders of FNB BANCORP and the accompanying
Proxy Statement dated April 17, 2003, and revoking any Proxy heretofore given,
hereby constitutes appoints Thomas C. McGraw, Neil J. Vannucci and Edward J.
Watson, and each of them, with full power of substitution, as attorneys and
proxies to appear and vote all of the shares of Common Stock of FNB BANCORP, a
California corporation, outstanding in the name of the undersigned which the
undersigned could vote if personally present and acting the Annual Meeting of
Shareholders of FNB BANCORP, to be held at the Basque Cultural Center, 599
Railroad Avenue, South San Francisco, California, on Wednesday, May 14, 2003, at
7:30 p.m. or at adjournment thereof, upon the following items as set forth in
the Notice of Meeting and Proxy Statement and to vote according to their
discretion on all matters which may be properly presented for action at the
meeting or any adjournments thereof. The above-named proxy holders are hereby
granted discretionary authority to cumulate votes represented by the shares
covered by this Proxy in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS, "FOR" RATIFICATION AND APPROVAL OF THE FNB
BANCORP 2002 STOCK OPTION PLAN, AND "FOR" RATIFICATION OF THE APPOINTMENT OF
KPMG LLP AS INDEPENDENT AUDITORS OF THE COMPANY TO SERVE FOR THE 2003 FISCAL
YEAR. THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS MADE, IT WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY
THE BOARD OF DIRECTORS, "FOR" RATIFICATION AND APPROVAL OF THE FNB BANCORP 2002
STOCK OPTION PLAN, AND "FOR" RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS
INDEPENDENT AUDITORS OF THE COMPANY TO SERVE FOR THE 2003 FISCAL YEAR.
(Continued and to be signed on other side)
FNB BANCORP
Vote by Internet or Telephone or Mail
24 Hours a Day - 7 Days a Week
-----------------------------------------------------------------------------
| Your telephone or Internet vote authorizes the named proxies to vote |
| your shares in the same manner as if you marked, signed and returned your |
| proxy card. |
-----------------------------------------------------------------------------
INTERNET TELEPHONE MAIL
-------- --------- ----
www.proxyvoting.com/fnbg OR 1-888-426-7035 OR
Use the Internet to Vote Use any touch-tone telephone Mark, sign and date
your proxy. Have your proxy to vote your proxy. Have your your proxy card
card in hand when you access proxy card in hand when you and
the web site. You will be call. You will be prompted to return it in the
prompted to enter your enter your control number, enclosed
control number, located in located in the box below, postage-paid
the box below, to create and then follow the envelope.
and submit an electronic directions given
ballot.
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
[GRAPHIC OMITTED] FOLD AND DETACH HERE [GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE FOLLOWING ITEMS:
1. To elect as directors the eight (8) nominees set forth below:
_ _
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote
(except as marked to the contrary below). for all nominees listed below.
INSTRUCTION: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below:
01. Michael R. Wyman Inc. 05. Daniel J. Modena
02. Thomas C. McGraw 06. Lisa Angelot
03. Neil J. Vannucci 07. Jim D. Black
04. Edward J. Watson 08. Anthony J. Clifford
EXCEPTION______________________________________________________________________
2. To ratify and approve the FNB Bancorp 2002 Stock Option Plan.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
3. To ratify the appointment of KPMG LLP as independent of the Company to serve
for the 2003 fiscal year.
_ _ _
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, to transact such other business as may properly come
before the meeting.
Authorized Signature(s)
_________________________________________
_________________________________________
Date: ________________, 2003
Please date and sign exactly as your
name(s) appears. When signing as
attorney, executor, administrator,
trustee, or guardian, please give full
title. If more than one trustee, all
should sign. All joint owners must sign.
WHETHER OR NOT YOU PLAN TO ATTEND THIS
MEETING, PLEASE SIGN AND RETURN THIS
PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE-PAID ENVELOPE UNLESS YOU
VOTE BY INTERNET OR TELEPHONE.
I/we do _ or do not _ expect to attend
this meeting.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF DIRECTORS AND MAY BE
REVOKED PRIOR TO ITS EXERCISE.