UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
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Trico Bancshares
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[TRICO BANCSHARES LOGO]
TriCo Bancshares
63 Constitution Drive
Chico, California 95973
Phone: (530) 898-0300
NOTICE OF MEETING AND PROXY STATEMENT
To Our Shareholders:
On Tuesday, May 4, 2004, TriCo Bancshares will hold its annual meeting
of shareholders at its headquarters located at 63 Constitution Drive, Chico,
California. The meeting will begin at 6:00 p.m. Pacific Time.
Shareholders who owned shares of our stock at the close of business on
March 8, 2004, may attend and vote at the meeting. We request that all
shareholders be present at the meeting in person or by proxy to ensure that we
have a quorum. At the meeting, shareholders will:
1. Elect eleven directors for terms expiring at the 2005 annual
meeting of shareholders.
2. Amend our articles of incorporation to increase by 30,000,000
the number of authorized shares of common stock from
20,000,000 to 50,000,000.
3. Amend our 2001 stock option plan to increase by 450,000 the
number of shares which may be granted under the plan.
4. Ratify the selection of KPMG, LLP as our independent
accountants for 2004.
5. Attend to any other business properly presented at the
meeting.
We do not know of any other business that will come before the meeting.
In order to vote without attending the meeting, you may sign and date the
enclosed proxy and voting instruction card and return it in the postage prepaid
envelope.
A copy of our 2003 Annual Report is enclosed. This notice and proxy
statement, a proxy and voting instruction card, and the 2003 Annual Report are
being distributed on or about March 31, 2004.
Regardless of whether you plan to attend the meeting in person, we urge
you to vote in favor of each of the proposals as soon as possible.
By Order of the Board of Directors,
Wendell J. Lundberg
Secretary
Chico, California
March 31, 2004
PROXY STATEMENT TABLE OF CONTENTS
QUESTIONS AND ANSWERS................................................................................... 1
PROPOSALS TO BE VOTED ON................................................................................ 4
BOARD OF DIRECTORS...................................................................................... 7
GOVERNANCE AND BOARD COMMITTEES......................................................................... 9
COMPENSATION OF DIRECTORS............................................................................... 12
OWNERSHIP OF VOTING SECURITIES.......................................................................... 13
EXECUTIVE OFFICERS...................................................................................... 15
COMPENSATION OF EXECUTIVE OFFICERS...................................................................... 16
REPORT OF THE COMPENSATION AND
MANAGEMENT SUCCESSION COMMITTEE......................................................................... 21
AMENDMENT OF 2001 STOCK OPTION PLAN..................................................................... 22
REPORT OF THE AUDIT COMMITTEE........................................................................... 25
INDEPENDENT PUBLIC ACCOUNTANTS.......................................................................... 26
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN......................................................... 27
OTHER INFORMATION....................................................................................... 28
QUESTIONS AND ANSWERS
1 Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors of TriCo Bancshares is providing these
proxy materials to you in connection with TriCo's annual
meeting of shareholders which will take place on May 4, 2004.
As a shareholder, you are invited to attend the meeting and
may vote on the proposals described in this proxy statement.
2. Q: WHAT INFORMATION IS CONTAINED IN THESE MATERIALS?
A: The information included in this proxy statement relates to
the proposals to be voted on at the meeting, the voting
process, the compensation of our directors and executive
officers and certain other required information. Our 2003
Annual Report is also enclosed.
3. Q: WHO MAY VOTE AT THE MEETING?
A: Only shareholders of record at the close of business on March
8, 2004, may vote at the meeting. As of the record date,
7,817,761 shares of our common stock were issued and
outstanding. Each shareholder is entitled to one vote for each
share of common stock held on the record date.
4. Q: WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A SHAREHOLDER
OF RECORD AND AS A BENEFICIAL OWNER?
A: Most shareholders hold shares through a stockbroker, bank or
other nominee rather than directly in their own name. The
distinctions between shares held of record and shares owned
beneficially are summarized below.
Shareholder of Record
If your shares are registered directly in your name with our
transfer agent, Mellon Investor Services, LLC, you are
considered to be the shareholder of record of those shares and
these proxy materials are being sent directly to you by TriCo.
As the shareholder of record, you have the right to vote by
proxy or to vote in person at the meeting. In that case, we
have enclosed a proxy card for you to use.
Beneficial Owner
If your shares are held in a stock brokerage account or by a
bank or other nominee, you are considered the beneficial owner
of shares held in street name, and these proxy materials are
being forwarded to you by your broker or nominee which is
considered to be the shareholder of record of those shares. As
the beneficial owner, you have the right to direct your broker
how to vote and are also invited to attend the meeting. If you
wish to vote these shares at the meeting, you must contact
your bank or broker for instructions. Your broker or bank has
enclosed a voting instruction card for you to use in directing
the broker or bank how to vote your shares for you.
5. Q: WHAT MAY I VOTE ON AT THE MEETING?
A: You may vote to:
- elect eleven nominees to serve on our Board of Directors
for terms expiring at the next annual meeting,
- amend our articles of incorporation to increase by
30,000,000 the authorized shares of common stock from
20,000,000 to 50,000,000,
- amend our 2001 stock option plan to increase by 450,000
the number of shares which may be granted under the
plan, and
- ratify the selection of KPMG, LLP as our independent
accountants for 2004.
6. Q: HOW DOES THE BOARD OF DIRECTORS RECOMMEND I VOTE?
A: The Board of Directors recommends that you vote your shares
FOR each of the eleven listed director nominees, FOR amendment
of our articles of incorporation, FOR amendment of our 2001
stock option plan, and FOR the ratification of the
accountants.
7. Q: HOW CAN I VOTE MY SHARES?
A: You may vote either in person at the meeting or by appointing
a proxy. Please refer to the instructions included on your
proxy card to vote by proxy. If you hold your shares through a
bank, broker or other nominee, then you may vote by the
methods your bank or broker makes available, using the
instructions the bank or broker has included with this proxy
statement.
8. Q: HOW ARE VOTES COUNTED?
A: In the election of directors, you may vote FOR all of the
director nominees or your vote may be WITHHELD with respect to
one or more nominees. You may vote FOR, AGAINST or ABSTAIN on
the proposals to amend the articles of incorporation, to amend
the stock option plan and to ratify the accountants.
9. Q: HOW ARE ABSTENTIONS AND BROKER NON-VOTES TREATED?
A: Since the affirmative vote of the holders of a majority of the
shares of our common stock present and voting is required to
approve the proposals (other than the election of directors),
abstentions and broker non-votes will be counted for purposes
of determining whether a quorum is present. Abstentions will
be counted as voting shares and will have the effect of a vote
"against" the proposals. Broker non-votes will not be counted
as shares voting on the proposals.
10. Q: CAN I CHANGE MY VOTE?
A: You have the right to revoke your proxy at any time before the
meeting by:
- providing written notice to TriCo's corporate secretary
and voting in person at the meeting, or
- appointing a new proxy before the meeting begins.
Attending the meeting will not by itself revoke a proxy unless
you specifically revoke your proxy in writing.
11. Q: WHAT IF I OWN SHARES THROUGH TRICO'S EMPLOYEE STOCK OWNERSHIP
PLAN AND TRUST?
A: For present or past employees of TriCo, your proxy includes
any shares held in your account under our employee stock
ownership plan and trust.
12. Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: If your shares are registered differently and are held in more
than one account, then you will receive more than one card. Be
sure to vote all of your accounts so that all of your shares
are voted. We encourage you to have all accounts registered in
the same name and address. You can accomplish this by
contacting Mellon Investor Services LLC, 235 Montgomery
Street, 23rd Floor, San Francisco, California 94104, telephone
1-800-676-0712.
13. Q: WHO MAY ATTEND THE MEETING?
A: All shareholders who owned shares of our common stock on
March 8, 2004 may attend the meeting. You may indicate on
the enclosed proxy card if you plan to attend the meeting.
2
14. Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: We do not know of any business to be considered at the meeting
other than:
- election of eleven directors,
- amendment of our articles to increase the authorized
shares of common stock from 20,000,000 to 50,000,000,
- amendment of our 2001 stock option plan to increase by
450,000 the number of shares which may be granted under
the plan, and
- ratification of our accountants for 2004.
If any other business is properly presented at the meeting,
your proxy gives Richard P. Smith, our president and chief
executive officer, and Richard O'Sullivan, executive vice
president of our subsidiary, Tri Counties Bank, authority to
vote on these matters in their discretion.
15. Q: WHERE AND WHEN WILL I BE ABLE TO FIND THE RESULTS OF THE
VOTING?
A: The results of the voting will be announced at the meeting. We
will also publish the final results in our quarterly report on
Form 10-Q for the second quarter of 2004 to be filed with the
Securities and Exchange Commission.
16. Q: IS MY VOTE CONFIDENTIAL?
A: Proxy instructions, ballots and voting tabulations that
identify individual shareholders are handled in a manner that
protects your voting privacy. Your vote will not be disclosed
either within TriCo or to third parties except:
- as necessary to meet applicable legal requirements,
- to allow for the counting and certification of votes, or
- to help our Board solicit proxies.
17. Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING
DUE?
A: All shareholder proposals to be considered for inclusion in
our proxy statement for the 2005 annual meeting must be
received at our principal office by November 28, 2004.
Shareholder nominations for directors must be received by our
president as described on page 10.
18. Q: WHO WILL BEAR THE COST OF SOLICITING PROXIES FOR THE MEETING
AND HOW WILL THESE PROXIES BE SOLICITED?
A: We will pay the cost of preparing, assembling, printing,
mailing and distributing these proxy materials, including the
charges and expenses of brokers, banks, nominees and other
fiduciaries who forward proxy materials to their principals.
Proxies may be solicited by mail, in person, by telephone or
by electronic communication by our officers and employees who
will not receive any additional compensation for these
solicitation activities.
3
PROPOSALS TO BE VOTED ON
1. ELECTION OF DIRECTORS
Eleven directors will be elected this year for terms expiring at our annual
meeting in 2005. The nominees for election are:
William J. Casey
Donald J. Amaral
Craig S. Compton
John S. A. Hasbrook
Michael W. Koehnen
Wendell J. Lundberg
Donald E. Murphy
Steve G. Nettleton
Richard P. Smith
Carroll R. Taresh
Alex A. Vereschagin, Jr.
Each nominee is currently serving as a director of TriCo, except for Mr.
Hasbrook and Mr. Koehnen who are currently serving as directors of Tri Counties
Bank.
The eleven nominees receiving the most affirmative votes cast at the meeting
will be elected as directors assuming a quorum is present. Consequently, any
shares not voted at the meeting, whether by abstention or otherwise, will have
no effect on the election of directors. If any of the nominees should
unexpectedly decline or become unable to serve, the proxies we are soliciting
may be voted for a substitute nominee or the Board may reduce the size of the
Board.
Brief biographies of the director nominees begin on page 7. These biographies
include their age, business experience and the names of publicly held and
certain other corporations of which they are also directors. Unless stated
otherwise, each director has been engaged in his present occupation for at least
the past five years.
Shareholders may cumulate their votes when electing directors. To do so, you
must follow the procedures set forth in our bylaws which are described at
"Governance, Board Nomination and Board Committees--Nomination and Election of
Directors" on page 10.
The Board recommends a
vote to elect these eleven
nominees.
2. AMENDMENT OF OUR ARTICLES OF INCORPORATION TO INCREASE OUR AUTHORIZED
SHARES OF COMMON STOCK FROM 20,000,000 TO 50, 000,000
The Proposal. On February 24, 2004, our Board approved an amendment to our
articles of incorporation to increase the number of authorized shares of common
stock by 30,000,000 from 20,000,000 to 50,000,000, subject to shareholder
approval. This additional common stock would have identical rights to our common
stock currently outstanding. The amended Article 4(a) of our articles of
incorporation would read:
"The corporation is authorized to issue two classes of shares designated
"Preferred Stock" and "Common Stock," respectively. The number of shares of
Preferred Stock authorized to be issued is one million (1,000,000), and the
number of shares of Common Stock authorized to be issued is fifty million
(50,000,000)."
On March 8, 2004, we had:
- 7,817,761 shares of common stock issued and outstanding,
- 956,641 shares reserved for issuance under our stock option plans,
and
- 100,000 shares reserved for issuance under our dividend reinvestment
plan.
On March 11, 2004, we reserved an additional 7,817,761 shares to be issued in
4
connection with the 2-for-1 stock split declared by our Board to be effective
for the holders of record of our common stock at the close of business on April
9, 2004.
Reasons for the Increase in Shares. After the stock split to be effective on
April 9, 2004, only 2,251,196 shares of our common stock would not be reserved
for any specific use and would be available for future issuance. The Board
recommends this increase in authorized shares primarily to give us appropriate
flexibility to issue shares for such purposes as:
- raising capital,
- acquiring other businesses,
- attracting and retaining valuable employees by issuing shares under
our 2001 stock option plan, and
- effecting a stock split or issuing stock dividends.
We have no present arrangements, agreements, commitments or understandings to
issue any of the proposed additional shares, except in connection with existing
stock options and the 2-for-1 stock split to be effective April 9, 2004. These
shares may be issued by the Board in its discretion, subject to any further
shareholder action required under Nasdaq rules or required by law. Any future
issuance will have the effect of diluting the percentage of stock ownership and
voting rights of current shareholders.
Potential Antitakeover Considerations. The Board is aware that increasing the
number of our authorized shares of common stock may have a potential
anti-takeover effect by delaying, deferring or preventing changes in control or
management. We could use the increased shares to frustrate persons trying to
gain control of TriCo. For example, the Board could privately place shares with
purchasers who may side with the Board in opposing a hostile takeover or issue
securities that would dilute the stock ownership of persons seeking to gain
control of TriCo. Our corporate documents contain certain provisions that also
could have an anti-takeover effect, such as:
- authorized preferred stock which can be issued by the Board in its
discretion,
- procedures which the Board may follow in evaluating and potentially
rejecting a tender offer or acquisition of TriCo's assets, and
- a shareholder's rights plan which could deter a tender offer by
requiring a potential acquiror to pay a substantial premium over the
market price of our stock.
This proposal to increase the number of authorized shares of common stock is not
being recommended by the Board as part of an anti-takeover strategy and we are
not aware of any efforts by any party to accumulate our stock or to obtain
control of TriCo.
Effectiveness. The amendment to our articles of incorporation must be approved
by the affirmative vote of a majority of our outstanding shares and then filed
with the California Secretary of State before it becomes effective. The increase
in authorized shares would not affect the rights of existing holders of common
stock except to the extent that future issuances of common stock will reduce
each existing shareholder's proportionate ownership.
The Board recommends a vote to
approve the amendment to our
articles of incorporation to increase the
number of authorized shares of common
stock from 20,000,000 to 50,000,000.
5
3. AMENDMENT OF OUR 2001 STOCK OPTION PLAN TO INCREASE BY 450,000 THE NUMBER
OF SHARES WHICH MAY BE GRANTED UNDER THE PLAN
On February 24, 2004, our Board approved an amendment to our 2001 stock option
plan to increase by 225,000 the number of shares which may be granted under the
plan, subject to shareholder approval. On March 11, 2004, the Board declared a
2-for-1 stock split to be effective on April 9, 2004, and revised the amendment
to the 2001 stock option plan to reflect the stock split. The proposed amendment
to the plan (post-stock split) is to increase by 450,000 from 1,674,650 to
2,124,650 the number of shares which may be granted under the plan. The
amendment is described in more detail beginning on page 22.
The amendment to our 2001 stock option plan will be effective if it is approved
by the affirmative vote of a majority of our outstanding shares.
Our 2001 stock option plan promotes the interests of TriCo and our stockholders
by:
- attracting and retaining key officers, employees, directors and
consultants,
- motivating these individuals by granting them performance-related
incentives to achieve long-range performance goals, and
- linking their compensation to the long-term interests of TriCo and
our stockholders.
The Board recommends a vote to
approve the amendment to our
2001 stock option plan to increase
by 450,000 the number of shares
which may be issued under the plan.
4. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The firm of KPMG, LLP served as our independent certified public accountants for
2003 and our audit committee has selected the firm as our accountants for 2004.
Representatives of KPMG will be present at the meeting and will have the
opportunity to make a statement and to answer questions.
The following audit services were performed by KPMG for the year ended December
31, 2003:
- examination of our financial statements and our employee benefit
plans,
- services related to our filings with the Securities and Exchange
Commission, and
- consultation on matters related to accounting, financial reporting,
tax returns and regulatory compliance.
Additional information concerning KPMG's services for TriCo can be found on
pages 25 and 26. The affirmative vote of a majority of our outstanding shares
will ratify the selection of KPMG as our independent accountants.
The Board recommends a vote to
ratify selection of KPMG, LLP
as our accountants for 2004.
6
BOARD OF DIRECTORS
The following nominees to the Board are currently serving as Board members of
both TriCo Bancshares and Tri Counties Bank, except for Mr. Amaral who is a
director of only TriCo, and Mr. Hasbrook and Mr. Koehnen who are directors of
only Tri Counties Bank. These Board members also serve on committees of the
Board of Directors of Tri Counties Bank, in addition to the TriCo Board
committees discussed below.
WILLIAM J. CASEY
William J. Casey, age 59, has been a director since 1989. He is the chairman of
our Board of Directors, chairman of our compensation and management succession
committee, chairman of our nominating and corporate governance committee and a
member of our audit committee. Mr. Casey has been a self-employed healthcare
consultant since 1983. He is also a director of Coram Healthcare Corporation, a
home infusion therapy company. Mr. Casey received a Masters degree in public
administration and has served on the audit committees of other public companies.
DONALD E. MURPHY
Donald E. Murphy, age 68, has been a director since 1974. He is the
vice-chairman of the Board of Directors and also a member of our audit
committee, our nominating and corporate governance committee and our
compensation and management succession committee. Mr. Murphy has served as the
vice president and general manager of J. H. McKnight Ranch, Inc., a family
farming company, for over 40 years. He is also a partner of New Generation
Software, a software company, and a partner of Murphy Brothers, a farming
operation.
DONALD J. AMARAL
Donald J. Amaral, age 51, has been a director since 2003. Mr. Amaral is chairman
of our audit committee and a member of our compensation and management
succession committee. He was chairman and chief executive officer of Coram
Healthcare Corporation, a home infusion therapy company, from 1995 to 1999 and
continues to serve as a director. Coram Healthcare filed a voluntary petition
for reorganization under Chapter 11 of the United States Bankruptcy Code on
August 28, 2000. Mr. Amaral has a Bachelor's degree in accounting and an MBA
degree. He served as chief executive officer and chief financial officer of
various companies for over 25 years.
CRAIG S. COMPTON
Craig S. Compton, age 48, has been a director since 1989. Mr. Compton is a
member of our audit committee and our compensation and management succession
committee. He is the president, chief executive officer and chief financial
officer of AVAG, Inc., an aerial application business. Mr. Compton is also a
principal in a family rice farming partnership and a director of Environmental
Alternatives Foster Care Agency.
JOHN S. A. HASBROOK
John S. A. Hasbrook, age 44, has been a director since 2002. He is active in
several agricultural and investment enterprises. He is an executive officer of
SunWest Foods, Inc., a packaging and food marketing company; Hasbrook-Fetter
Farms, Inc., a rice farm; Northland Foods International, a packaging and food
marketing company; Northland Farming Company, an agricultural real estate
investment firm; LandBrook Enterprises, Inc., an equipment leasing company; and
other agricultural-related entities. Mr. Hasbrook also serves on various
charitable and civic organizations.
Biographies
- William J. Casey
- Donald E. Murphy
- Donald J. Amaral
- Craig S. Compton
- John S. A. Hasbrook
7
WENDELL J. LUNDBERG
Wendell J. Lundberg, age 73, has been a director since 1974. He is the secretary
of our Board and also a member of our audit committee, our nominating and
corporate governance committee and our compensation and management succession
committee. Mr. Lundberg owns and operates Lundberg Family Farms, a rice and
grain farming operation.
MICHAEL W. KOEHNEN
Michael W. Koehnen, age 43, has been a director since 2002. He owns and operates
C.F. Koehnen & Sons, a third-generation family farming and beekeeping company.
Mr. Koehnen is also president of Riverwest Processing, an almond and walnut
processing company.
STEVE G. NETTLETON
Steve G. Nettleton, age 65, has been a director since 2003. He is a member of
our audit committee and our nominating and corporate governance committee. Mr.
Nettleton was the owner of the Chico Heat professional baseball club from 1996
to 2002 and served as the chairman of the board of directors for North State
National Bank prior to its merger into Tri Counties Bank in 2003. He also serves
as a director of Enloe Health Systems, the Chico Foundation of California State
University and the University Advisory Board of California State University.
RICHARD P. SMITH
Richard P. Smith, age 46, has been a director since 1999. He has served as the
president and chief executive officer of TriCo and Tri Counties Bank since 1999.
Mr. Smith joined Tri Counties Bank in 1994 as vice president and chief
information officer. He was senior vice president-customer/employee support and
control from 1997 until 1998, when he was promoted to executive vice president
in the same capacity. Mr. Smith was named president of Tri Counties Bank and
executive vice president of TriCo in 1998. Mr. Smith is also a member of the
board of directors of the California Banker's Association.
CARROLL R. TARESH
Carroll R. Taresh, age 66, has been a director since 1998. Mr. Taresh is a
member of our audit committee and our nominating and corporate governance
committee. He was executive vice president and chief operating officer of Tri
Counties Bank from 1989 until his retirement in 1996. He also serves as
president and director of CNT, Inc., a farming operation.
ALEX A. VERESCHAGIN, JR.
Alex A. Vereschagin, Jr., age 68, has been a director since 1974. He is a
self-employed farmer and also the secretary and treasurer of Plaza Farms, a
family-owned corporation. He is managing partner of the Vereschagin Company, a
real estate rental company, and senior partner of Three V Ranch, a farming
operation.
- Michael W. Koehnen
- Wendell J. Lundberg
- Steve G. Nettleton
- Richard P. Smith
- Carroll R. Taresh
- Alex A. Vereschagin, Jr.
8
GOVERNANCE, BOARD NOMINATION AND BOARD COMMITTEES
CORPORATE GOVERNANCE
We have long believed that good corporate governance is important to ensure that
TriCo is managed for the long-term benefit of its shareholders. We continue to
review our corporate governance policies and practices along with provisions of
the Sarbanes-Oxley Act of 2002, the new rules of the Securities and Exchange
Commission and the new listing standards of Nasdaq. Since our 2003 annual
meeting we have:
- updated our audit committee charter,
- affirmatively determined that all of our directors except for Mr.
Smith qualify as independent directors under the rules of Nasdaq and
our corporate governance guidelines,
- affirmatively determined that Mr. Amaral is an audit committee
financial expert under the rules of the Securities and Exchange
Commission,
- updated our corporate governance guidelines, and
- updated our code of business conduct which applies to all officers,
directors and employees.
The charter for our nominating and corporate governance committee is attached to
this proxy statement as Exhibit A. The charter for our audit committee was
included with our 2003 proxy statement. You can view our current code of
business conduct, our code of ethics for our principal executive officers and
senior financial officers, and our audit committee charter on our website at
www.tricountiesbank.com under "investor information--corporate information," or
receive copies by writing to our corporate secretary at TriCo Bancshares, 63
Constitution Drive, Chico, California 95973, phone (530) 898-0300.
BOARD PROCEDURES AND COMMITTEES
Our full Board of Directors considers all major decisions. However, we have
established three standing committees so that some matters can be addressed in
more depth than may be possible in a full Board meeting: a compensation and
management succession committee, a nominating and corporate governance committee
and an audit committee. These three committees each operate under written
charter. The Board has affirmatively determined that each member of our Board
committees are independent as defined by NASD Rule 4200(a)(15) and our corporate
governance guidelines. Following is a description of each of these committees.
Our subsidiary, Tri Counties Bank, also has an audit committee and other Board
committees.
Audit Committees. We have a standing audit committee of TriCo and a standing
audit committee of Tri Counties Bank. The current members of both audit
committees are Donald Amaral (chairman), Donald Murphy, William Casey, Craig
Compton, Wendell Lundberg, Steve Nettleton, Carroll Taresh and Alex Vereschagin.
The board has determined that Mr. Amaral is an audit committee financial expert
and that each member of the committee is financially literate and independent as
defined by NASD listing standards. Their qualifications and business expertise
are described beginning on page 7. The committee monitors:
- the integrity of our financial statements, including the financial
reporting process and systems of internal controls regarding
finance, accounting and legal and regulatory compliance,
- our compliance with legal and regulatory requirements,
- the independence, qualifications and performance of our financial
executives, independent auditor and internal auditing department,
and
- the communication among our independent auditor, management, our
internal auditing function and the Board.
Our audit committee met seven times during 2003. For more information on the
audit committee, please see the report of the audit committee on page 25.
Compensation and Management Succession Committee. The current members of the
compensation and management succession
9
committee are William Casey (chairman), Donald Amaral, Craig Compton, Wendell
Lundberg and Donald Murphy. This committee:
- determines TriCo's salary philosophy,
- sets the compensation levels for our president and chief executive
officer, o reviews the compensation of our other executive officers,
- administers our stock option plans,
- reviews the benefits provided to our executive officers and
directors, and
- establishes and reviews our management succession policies.
The compensation and management succession committee held four meetings in 2003.
Additional information on the compensation and management succession committee
is found on page 21 and at Exhibit A to this proxy statement.
Nominating and Corporate Governance Committee. The current members of the
nominating and corporate governance committee are William Casey (chairman),
Wendell Lundberg, Donald Murphy, Steve Nettleton and Carroll Taresh. This
committee:
- determines nominees to the Board in the manner described below,
- reviews our Board committee structure and members,
- annually evaluates the Board,
- monitors director independence, and
- reviews our corporate governance guidelines and code of business
ethics.
The committee was formed in 2003 and met for the first time in 2004.
NOMINATION AND ELECTION OF DIRECTORS
Qualifications. Our nominating and corporate governance committee determines the
director nominees for each annual meeting of shareholders using the criteria set
forth in our corporate governance guidelines. Our guidelines provide that all
directors must be committed to representing the long-term interests of our
shareholders and possess:
- the highest personal and professional ethics, integrity and values,
- informed judgment,
- sound business experience,
- the ability to make independent analytical inquiries, and
- an understanding of our business environment.
The committee has not established any specific minimum qualification standards
for directors, except that no person may serve as a director who is seventy-five
years of age or older at the time of election. However, the committee may
identify certain skills or attributes as being particularly desirable for
specific director nominees in order to complement the existing Board
composition. To date the committee has identified and evaluated nominees for
directors based on several factors, including:
- referrals from our management, existing directors and advisors,
- business or banking experience,
- education,
- leadership abilities,
- professional reputation and affiliation, and
- personal interviews.
We do not currently pay any fee to a third party to identify or evaluate
potential director nominees, although we may retain search firms to assist in
finding qualified candidates.
Shareholder Nominations. The committee will consider nominees recommended by
shareholders if those nominations are submitted under Section 15 of our bylaws.
Section 15 provides that nomination for election of members of the Board of
Directors may be made by the Board of Directors or by any shareholder of any
outstanding class of capital stock of TriCo entitled to vote for the election of
directors. Notice of intention to make any nominations shall be made in writing
and shall be delivered or mailed to the president of TriCo not less than
twenty-one (21) days nor more than sixty (60) days prior to any meeting of
shareholders called for the election of directors; provided, however, that if
less than twenty-one (21) days' notice of the meeting is given to shareholders,
such notice of intention to nominate shall be mailed or delivered to the
president of TriCo not later than the close of business on the tenth (10th) day
following the day on which the notice of meeting was mailed; provided further,
that if notice of such meeting is sent by third-class mail as permitted by
Section 6 of the bylaws, no notice of intention to make nominations shall be
required. Such notification shall contain the
10
following information to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of each
proposed nominee; (c) the number of shares of capital stock of TriCo owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of TriCo owned by the
notifying shareholder. Nominations not made in accordance with these provisions
may, in the discretion of the chairman of the meeting, be disregarded and upon
the chairman's instructions, the inspectors of election can disregard all votes
cast for each such nominee.
Nominees recommended by shareholders are evaluated in the same manner as other
nominees. We have not received any proposals for director nominees from
shareholders for this election.
Cumulative Voting. Each shareholder may cumulate votes in the election of
directors. This means that a shareholder can cast votes for the number of shares
owned multiplied by the number of directors to be elected. For example, if you
own 1,000 shares, you could cast 9,000 votes since we will be electing eleven
directors at the meeting. You may cast those votes for a single candidate or
distribute your votes among any or all of the candidates. However, you may not
cumulate votes for a candidate unless that candidate has been properly nominated
prior to the voting and you have given notice of your intention to cumulate your
votes. You must express your intention to cumulate votes at the meeting prior to
the election. If any shareholder gives notice to cumulate his shares, all other
shareholders shall be allowed to cumulate their votes as well. We will provide
an opportunity at the meeting for any shareholder who desires to cumulate votes
to announce his intention to do so. We are soliciting discretionary authority to
vote proxies cumulatively.
ATTENDANCE AT MEETINGS
The Board of Directors of TriCo and Tri Counties Bank each met 14 times during
2003. Each director attended at least 75% of the meetings of the Boards of
Directors of both TriCo and Tri Counties Bank and the meetings of the committees
of TriCo and Tri Counties Bank on which they served. In addition, our
independent directors meet in executive session at least semi-annually to
discuss our chief executive officer's performance.
Our corporate governance guidelines provide that each director must attend our
annual shareholders meeting. In 2003 all of our directors attended the annual
meeting except for Mr. Vereschagin.
COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
No member of our compensation and management succession committee is an officer,
former officer or employee of TriCo or Tri Counties Bank. No executive officer
of TriCo had any interlocking relationship with any other for-profit entity
during 2003, including serving on the compensation committee for any other
entity.
11
COMPENSATION OF DIRECTORS
COMPENSATION
During 2003 each non-employee director received a $1,500 monthly retainer, the
chairman of the Board received a $2,000 monthly retainer and the chairman of the
audit committee received an $1,800 monthly retainer. Each director also:
- received options for shares of our common stock described on page
23,
- was eligible to participate in the deferred compensation plan and
supplemental retirement plan described below,
- has an indemnity agreement under which TriCo will indemnify him in
his capacity as a director,
- was covered by directors' and officers' liability insurance, and
- has a long-term care agreement with TriCo described on page 18.
We do not pay our directors any additional compensation to attend board or
committee meetings. Directors who are employees of TriCo do not receive
additional compensation for their service on the Board.
DIRECTOR DEFERRED COMPENSATION PLAN
In 1992 we adopted a deferred compensation plan for directors to provide our
directors with supplemental retirement benefits. Under the plan, directors may
defer all or part of their retainer fees into a separate account. The amount
deferred cannot be less than $200 per month. The plan permits us to make
discretionary contributions to a director's account. It also requires us to make
an annual contribution to each director's account based on amounts contributed
to other retirement and benefit plans.
Accounts maintained under the plan are credited with interest each month at a
rate that is three percent higher than the annual yield of the Moody's average
corporate bond yield index. Directors are immediately 100% vested in their own
contributions and associated interest. We determine the vesting rate for all
discretionary contributions. To date, we have not made any discretionary
contributions to directors' accounts.
This plan is nonqualified, unsecured and unfunded. However, we do maintain
corporate-owned life insurance on the lives of the directors who participate in
the plan to offset some of the costs.
DIRECTOR SUPPLEMENTAL RETIREMENT PLAN
In 1987 we adopted a supplemental retirement plan for directors to provide our
directors with additional retirement benefits. Any outside director of TriCo or
Tri Counties Bank who has served as a director for at least ten years is
eligible to participate. Full benefits apply to all directors who are at least
65 years old.
When a qualified director retires, he can immediately receive 15 times the
amount of the retainer fees we paid him during his final year of service. We pay
that amount in 15 equal annual installments. If a director has been on our Board
for at least ten years but is not yet 65, we will pay the supplemental
retirement benefit at a discounted rate. If we experience a change of control,
we will pay all vested retirement benefits immediately. This plan is
nonqualified, unsecured and unfunded.
STOCK OPTION PLAN
In 2003 directors received stock options under our 2001 stock option plan
described on page 18. In 2003 we granted directors options for 10,000 shares
when they are first elected to the Board which vest over five years beginning on
the first anniversary of the grant date. We also granted directors options for
2,000 shares of common stock when they are reelected to the Board. These options
may be exercised on the first anniversary of the grant date.
12
OWNERSHIP OF VOTING SECURITIES
This chart shows the common stock ownership for each TriCo director and director
nominee, the executive officers named on page 15, and owners of more than 5
percent of our outstanding common stock as of March 8, 2004. These figures do
not reflect the two-for-one stock split to be effective on April 9, 2004. Each
shareholder has direct ownership and sole voting and investment power for the
shares listed unless otherwise noted. The share amounts have been rounded to the
nearest full share.
COMMON STOCK OWNERSHIP NOT
INCLUDING COMMON STOCK OWNERSHIP INCLUDING STOCK
STOCK OWNED AS OWNED AS A TRUSTEE
A TRUSTEE OF THE ESOP OF THE ESOP
--------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES PERCENTAGE OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNERS BENEFICIALLY COMMON STOCK BENEFICIALLY COMMON STOCK
----------------- OWNED OUTSTANDING OWNED OUTSTANDING
--------------------------------------------------------------------------------------------------------------------
5% Holders
TriCo Bancshares 592,450 (1) 7.58% 592,450 (1) 7.58%
Employee Stock Ownership
Plan and Trust (ESOP)
63 Constitution Drive
Chico, CA 95973
Directors and Executive Officers
Craig Carney 44,713 (2) * 44,713 (2) *
Donald J. Amaral 0 - 0 -
William J. Casey 314,474 (3) 4.02% 906,924 (3)(15) 11.60%
Craig S. Compton 71,555 (4) * 71,555 (4) *
John S. A. Hasbrook 760 * 760 *
Michael W. Koehnen 52,958 (5) * 52,958 (5) *
Wendell J. Lundberg 171,117 (6) 2.19% 763,566 (6)(16) 9.77%
Andrew Mastorakis 51,391 (7) * 51,391 (7) *
Donald E. Murphy 193,704 (8) 2.48% 193,704 (8) 2.48%
Steve G. Nettleton 163,211 (9) 2.09% 163,211 (9) 2.09%
Richard O'Sullivan 129,759 (10) 1.66% 129,759 (10) 1.66%
Thomas J. Reddish 55,471 (11) * 55,471 (11) *
Richard P. Smith 165,635 (12) 2.12% 750,534 (12)(16) 9.60%
Carroll R. Taresh 76,650 (13) * 76,650 (13) *
Alex A. Vereschagin, Jr. 68,712 (14) * 68,712 (14) *
All TriCo directors and executive 1,633,333 (15) 20.89% 2,216,232 (15)(16) 28.35%
officers as a group (18 persons)
*Less than 1%.
13
(1) Each ESOP participant may direct the ESOP trustees how to vote the
shares allocated to his account. The ESOP's advisory committee directs
the ESOP trustees how to vote shares which are not allocated to
participant's accounts. As of March 8, 2004, participants in the ESOP
could direct the voting of all 592,450 shares held by the ESOP. Of that
total, 48,748 shares had been allocated to the accounts of TriCo's
executive officers.
(2) Includes 41,170 shares for which options are currently exercisable
under TriCo's stock option plans and 3,543 shares allocated to Mr.
Carney's account in the ESOP.
(3) Includes 4,000 shares for which options are currently exercisable under
TriCo's stock option plans and 60,000 shares held by a family trust of
which Mr. Casey is manager.
(4) Includes 17,013 shares held by Mr. Compton as executor of his father's
estate, 604 shares held by Mr. Compton's minor children and 4,000
shares for which options are currently exercisable under TriCo's stock
option plans.
(5) Includes 32,607 shares owned by CF Koehnen & Sons, of which Mr. Koehnen
is an owner, 4,300 shares owned by the CF Koehnen & Sons Profit Sharing
Plan of which Mr. Koehnen is trustee, 2,200 shares owned by the Helen
Koehnen Trust of which Mr. Koehnen is trustee, 600 shares owned by Mr.
Koehnen's minor children and 1,150 shares owned by Mr. Koehnen's wife.
(6) Includes 4,000 shares for which options are currently exercisable under
TriCo's stock option plans and 664 shares held in an IRA account for
the benefit of Mr. Lundberg.
(7) Includes 39,620 shares for which options are currently exercisable
under TriCo's stock option plans and 1,771 shares allocated to Mr.
Mastorakis' account in the ESOP.
(8) Includes 3,558 shares owned by the J. H. McKnight Ranch, of which Mr.
Murphy is an officer, 13,311 shares owned by the J. H. McKnight Ranch
Profit Sharing Plan, 144,214 shares held by Blavo LLC of which Mr.
Murphy is a manager and 4,000 shares for which options are currently
exercisable under TriCo's stock option plans.
(9) Includes 129,886 shares held jointly with his spouse and 33,325 shares
held in an IRA account for the benefit of Mr. Nettleton.
(10) Includes 81,500 shares for which options are currently exercisable
under TriCo's stock option plans and 12,826 shares allocated to Mr.
O'Sullivan's account in the ESOP.
(11) Includes 1,080 shares held by Mr. Reddish's minor children, 47,500
shares for which options are currently exercisable under TriCo's stock
option plans and 4,503 shares allocated to Mr. Reddish's account in the
ESOP.
(12) Includes 82 shares held by Mr. Smith's wife, 157,902 shares for which
options are currently exercisable under TriCo's stock option plans and
7,551 shares allocated to Mr. Smith's account in the ESOP.
(13) Includes 4,000 shares for which options are currently exercisable under
TriCo's stock option plans, 4,000 shares held by Mr. Taresh's wife and
13,428 shares held in an IRA account for the benefit of Mr. Taresh.
(14) Includes 4,000 shares for which options are currently exercisable by
Mr. Vereschagin under TriCo's stock option plans.
(15) Includes 434,692 shares for which options held by TriCo executive
officers and directors are currently exercisable under TriCo's stock
option plans.
(16) Includes 592,450 shares held by the ESOP of which Messrs. Smith, Casey
and Lundberg are trustees of which 48,748 shares have been allocated to
the accounts of executive officers under the ESOP.
14
EXECUTIVE OFFICERS AND KEY EMPLOYEES
RICHARD P. SMITH
Information about Mr. Smith can be found on page 8.
RICHARD O'SULLIVAN
Richard O'Sullivan, age 47, has served as executive vice president wholesale
banking of Tri Counties Bank since 1997. He was our senior vice
president customer sales and service from 1995 to 1997. He served as vice
president and manager of our Park Plaza branch from 1992 until 1995. Mr.
O'Sullivan is also a partner in a family farm.
ANDREW MASTORAKIS
Andrew Mastorakis, age 45, has served as executive vice president retail
banking of Tri Counties Bank since 2000. Prior to joining Tri Counties Bank, Mr.
Mastorakis was a senior vice president of Wells Fargo Bank in charge of its
Central California Division. He also acted as the market president of Wells
Fargo's East Bay Division.
W. R. "RICK" HAGSTROM
Rick Hagstrom, age 58, has been executive vice president --- risk management of
Tri Counties Bank since March 2003. From 1996 to 2003 he served as vice
president real --- estate manager.
CRAIG CARNEY
Craig Carney, age 45, has been senior vice president and chief credit officer of
Tri Counties Bank since 1997. From 1985 to 1996 Mr. Carney was employed by Wells
Fargo Bank in various lending capacities. His most recent position with Wells
Fargo was as vice president, senior lender in commercial banking from 1991 to
1996. Mr. Carney served as a consultant to Tri Counties Bank from 1996 until his
employment in 1997.
RICHARD A. MILLER
Rick Miller, age 60, has served as senior vice president human resources
director of Tri Counties Bank since 2001. From 1998 to 2001 he served as senior
vice president and chief administrative officer of Key Equipment Finance Group.
From 1983 to 1998 Mr. Miller held a variety of senior human resource positions
at Bank of America, US Leasing and World Savings.
THOMAS J. REDDISH
Tom Reddish, age 44, has served as vice president and chief financial officer of
both TriCo and Tri Counties Bank since 1999. Mr. Reddish became senior vice
president in 2003 and executive vice president in 2004. He was vice president
and controller of TriCo and vice president of Tri Counties Bank from 1998 until
1999. He served as controller of Tri Counties Bank from 1994 until 1998.
RAYMOND RIOS
Ray Rios, age 47, has served as vice president information systems manager of
Tri Counties Bank since 1997.
Biographies
- Richard P. Smith
- Richard O'Sullivan
- Andrew Mastorakis
- W. R. "Rick" Hagstrom
- Craig Carney
- Richard A. Miller
- Thomas J. Reddish
- Raymond Rios
15
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table presents information concerning all compensation received by
our chief executive officer and the four other most highly compensated executive
officers for all services rendered during 2003, 2002 and 2001.
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
--------------------------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS OPTIONS GRANTED COMPENSATION(3)
-----------------------------------------------------------------------------------------------------------------
Richard Smith 2003 $371,875 $168,750 52,000 $16,922
President and Chief Executive 2002 300,000 111,562 2,000 16,781
Officer 2001 263,554 100,000 132,000 14,561
Richard O'Sullivan 2003 196,096 40,000 20,000 17,338
Executive Vice President--- 2002 176,556 25,000 0 15,463
Wholesale Banking 2001 175,226 16,500 80,000 21,618
Andrew Mastorakis 2003 195,836 100,000 20,000 19,015
Executive Vice President---Retail 2002 174,996 101,000 0 15,606
Banking 2001 145,000 95,000 50,000 11,291
Thomas Reddish 2003 177,402 50,000 20,000 13,952
Executive Vice President and Chief 2002 146,412 26,600 0 11,536
Financial Officer 2001 133,104 30,250 40,000 10,648
Craig Carney 2003 157,595 40,000 15,000 12,591
Senior Vice President and Chief 2002 145,530 20,790 0 11,184
Credit Officer 2001 138,550 6,600 30,000 11,437
(1) The named executive officers also received other personal benefits from
TriCo in the form of payments made by TriCo for premiums for health
insurance, life insurance, long-term disability insurance and dental
insurance, as well as use by Mr. Smith and Mr. O'Sullivan of
TriCo-owned automobiles. Mr. Smith, Mr. O'Sullivan and Mr. Carney each
received country club memberships. The total amount of such
compensation did not exceed the lesser of either $50,000 or 10% of the
total of annual salary and bonus reported for each of the named
executive officers.
(2) Includes cash compensation earned and received by the executive
officers and amounts earned but deferred at the election of the
officers under our executive deferred compensation plan described on
page 17.
(3) Includes TriCo contributions to the ESOP described on page 20 which
generally vest over a seven-year period, interest credits on deferred
compensation under our supplemental executive retirement plan described
on page 19 that are considered by the Securities and Exchange
Commission to be at above-market rates, and the cost of insurance
premiums for the long-term care agreements described on page 18.
16
EXECUTIVE DEFERRED COMPENSATION PLAN
In 1987 we adopted an executive deferred compensation plan to provide our key
employees with supplemental funds for retirement or death. Under the plan,
executives may defer all or part of their compensation into a separate account.
The plan permits us to make discretionary contributions to an executive's
account. It also requires us to make an annual contribution to each executive's
account based on amounts contributed to other retirement and benefit plans.
Accounts maintained under the plan are credited with interest each month at a
rate that is 3% higher than the annual yield of the Moody's average corporate
bond yield index. Executives are immediately 100% vested in their own
contributions and associated interest. We determine the vesting rate for all
discretionary contributions. So far, we have not made any discretionary
contributions.
This plan is nonqualified, unsecured and unfunded. However, we do maintain
corporate-owned life insurance on the lives of the executives who participate in
the plan to offset some of the costs.
CEO INCENTIVE PLAN
In 2001 the Board adopted the CEO Incentive Plan which is described in the
"Report of the Compensation and Management Succession Committee" on page 21.
This plan provides bonus compensation to our chief executive officer, Richard
Smith.
EXECUTIVE EMPLOYMENT AGREEMENTS
We have an employment agreement with Richard Smith which provided Mr. Smith with
a base annual salary of $371,875 for 2003 with future increases as determined by
the Board of Directors. Mr. Smith is also eligible to receive an annual
incentive bonus under the CEO Incentive Plan and stock options under our 2001
stock option plan. Mr. Smith's compensation is described in the "Report of the
Compensation and Management Succession Committee" on page 21. Also, he receives
benefits under our supplemental executive retirement plan and other benefit
plans.
We also have an employment agreement with Richard O'Sullivan which provided him
with an annual base salary of $196,096 in 2003 with future increases as
determined by the Board of Directors. Mr. O'Sullivan is also eligible to receive
an annual incentive bonus, stock options under our 2001 stock option plan and
benefits under our supplemental executive retirement plan and other benefit
plans.
CHANGE OF CONTROL AGREEMENTS
Four of the named executive officers have entered into agreements with TriCo
that provide them with benefits if TriCo experiences a change of control. If a
change of control occurs, they are entitled to receive the following payments in
certain circumstances:
- Mr. Smith and Mr. O'Sullivan: 2 times the combined amount of his
annual salary and most recent annual bonus,
- Mr. Reddish: 2 times the amount of his annual salary and 1 1/2 times
the amount of his most recent annual bonus, and
- Mr. Carney: 1 1/2 times the combined amount of his annual salary and
most recent annual bonus.
LONG-TERM CARE AGREEMENTS
In 2003 we entered into long-term care agreements with all eligible directors
and all executive officers and paid a one-time premium for long-term care
insurance for each participant. The single premiums cost approximately $50,000
for each participant and will be amortized by TriCo over five years. The
long-term care insurance provides long-term care benefits if a participant
becomes disabled or has a long-term medical condition.
17
The agreements generally provide that if a participant's service with TriCo
terminates for any reason, the participant will reimburse a percentage of the
premium paid by TriCo. The reimbursement obligation decreases 20% for each year
of service following adoption of this agreement. For example, if a participant's
service is terminated immediately following his third year of service following
adoption of this agreement, he would generally be required to reimburse TriCo
for 40% of the premium. During 2003 we recognized an expense of $128,000
relating to the long-term care insurance.
EQUITY COMPENSATION PLAN INFORMATION
The following table presents information about shares reserved for issuance for
outstanding options, stock appreciation rights and warrants granted under our
equity compensation plans as of December 31, 2003. All of our equity
compensation plans have been approved by shareholders.
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED AVERAGE ISSUANCE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
-----------------------------------------------------------------------------------------------------------
Equity compensation plans not 0 NA 0
approved by stockholders
Equity compensation plans 824,348 $ 17.87 199,730
approved by stockholders
Total 824,348 $ 17.87 199,730
STOCK OPTION PLANS
In 1993 we adopted a stock option plan for directors. On March 8, 2004, there
were options for 8,400 shares outstanding under this plan and no additional
options were available for grant. In 1995 we adopted a stock option plan for key
employees. On March 8, 2004, there were options for 193,875 shares outstanding
under this plan and no additional options were available for grant. Vesting
schedules were determined individually for each grant under both plans.
In 2001 we adopted a stock option plan for key officers, employees, directors
and consultants. On March 8, 2004, there were options for 647,896 shares
outstanding and options for only 106,470 shares were available for future grant.
Vesting schedules are determined individually for each grant. The stock options
we have issued to the named executive officers under all of our stock option
plans were granted at exercise prices equal to the fair market value of TriCo
stock at the date of grant and vest over a five-year period. Any comment we make
in this proxy statement regarding stock options granted to directors, executive
officers and employees uses option prices and share amounts that have been
adjusted for past stock dividends but do not reflect the two-for-one stock split
to be effective on April 9, 2004.
Shareholders are being asked to amend the 2001 stock option plan to increase by
450,000 the number of shares which may be issued under the plan. Additional
information concerning the plan and the proposed amendment can be found
beginning at page 22.
18
STOCK OPTION GRANTS IN 2003
The following table presents information concerning stock options granted to
each of the named executive officers in 2003 and the potential realizable value
for those stock options based on future appreciation assumptions:
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------ AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -------------------------
NAME GRANTED # 2003 ($) DATE 5%($) 10%($)
-------------------------------------------------------------------------------------------------------------
Richard P. Smith 2,000(2) 0.9% $25.20 5-13-13 $ 31,696 $ 80,325
50,000 21.8% 25.41 7-8-13 799,011 2,024,850
Richard O'Sullivan 20,000 8.7% 25.41 7-8-13 319,604 809,940
Andrew Mastorakis 20,000 8.7% 25.41 7-8-13 319,604 809,940
Thomas Reddish 20,000 8.7% 25.41 7-8-13 319,604 809,940
Craig Carney 15,000 6.6% 25.41 7-8-13 239,703 607,455
(1) Potential realizable value is based on an assumption that the market
price of our common stock will appreciate at the stated rates (5% and
10%), compounded annually from the date of grant until the end of the
term. The values are calculated based on rules of the Securities and
Exchange Commission and do not reflect our estimate or projection of
future stock prices. Actual gains, if any, on stock option exercises
will depend on the future performance of the price of our common stock
and the timing of exercises.
(2) Received as a director of TriCo.
OPTIONS EXERCISED IN 2003 AND 2003 YEAR-END OPTION VALUES
The following table presents information about the number and value of stock
options exercised in 2003 and held at December 31, 2003, by each named executive
officer. A stock option is "in-the-money" if the closing market price of TriCo
stock exceeds the exercise price of the stock option.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT 12-31-03 AT 12-31-03(1)
ACQUIRED ON RECEIVED ---------------------------- -----------------------------
NAME EXERCISE UPON EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------------------------------------------------------------------------------------------------
Richard P. Smith 0 - 146,750 88,000 $ 4,631,430 $ 2,777,280
Richard O'Sullivan 0 - 93,175 42,000 2,940,603 6,325,520
Andrew Mastorakis 5,000 $ 167,750 42,120 39,280 1,329,307 1,239,677
Thomas Reddish 0 - 42,500 39,500 1,341,300 1,088,820
Craig Carney 7,330 $ 183,616 38,670 26,500 1,220,425 836,340
(1) Based on the closing price per share of TriCo stock as quoted on the
Nasdaq National Market on December 31, 2003 ($31.56 per share).
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In 1987 we adopted a supplemental executive retirement plan to provide
supplemental retirement benefits to key employees. This plan is administered by
our compensation and management succession committee. In general terms, the
benefits are payable if a participant retires at the age of 65, if he dies or
becomes disabled, or if he is terminated within 24 months after a change in
control. We do not pay benefits if an
19
employee is terminated for cause. The plan is nonqualified, unsecured and
unfunded. The purpose of the plan is to provide an incentive to key executives
to remain in TriCo's service by providing additional compensation that is
payable only if the executive remains with TriCo until retirement, disability or
death. Participants in the plan are approved by the compensation and management
succession committee.
The plan provides for payments of 70% of the participant's final average
compensation, including salary and bonus for the highest paid 36 months out of
the last 60 months of the participant's employment. The benefit amount is
reduced by the sum of amounts payable to the officer from social security
benefits and the annuity received from TriCo's ESOP, profit sharing plans,
frozen tax-qualified retirement benefit plan and other defined benefit plans.
The normal retirement age under the plan is age 65 with at least ten years of
service. The plan also allows for early retirement at age 55 with at least ten
years of service. If a participant retires prior to age 65, the 70% payment
under the plan is reduced by 2% per year for each year the participant's
retirement date precedes his normal retirement date for the first five years and
4% for the next five years to age 55. Benefit payments under the plan will be
made for the lifetime of the participant, with a minimum of ten years of
payments if the participant dies after retirement.
The following table shows payments under the plan, assuming a minimum of ten
years of service at retirement age.
RETIREMENT PLAN TABLE
FINAL ANNUAL BENEFIT AFTER SPECIFIED YEAR IN PLAN
AVERAGE ----------------------------------------------------------------------
COMPENSATION 5 10 15 20+
------------ ------- ------- ------- -------
$ 100,000 17,500 35,000 52,500 70,000
200,000 35,000 70,000 105,000 140,000
300,000 52,500 105,000 157,500 210,000
400,000 70,000 140,000 210,000 280,000
500,000 87,500 175,000 262,500 350,000
600,000 105,000 210,000 315,000 420,000
All of the named executive officers are participants in the plan. At March 8,
2004, they had accrued the following years of service in the plan: Mr.
Smith--ten years; Mr. O'Sullivan--nineteen years; Mr. Mastorakis--three years;
Mr. Reddish--nine years and Mr. Carney--seven years.
OTHER BENEFIT PLANS
We have an employee stock ownership plan and trust for all employees completing
at least 1,000 hours of service with TriCo or Tri Counties Bank. Annual
contributions are made by TriCo in cash at the discretion of the Board.
Contributions to the plan are held in trust and invested primarily in our common
stock. Contributions are allocated to participants on the basis of salary in the
year of allocation. In general, benefits become vested after seven years.
We do not have any long-term incentive plans that provide compensation for
performance that is measured over a period longer than one fiscal year. We do
not provide any actuarial plan that is payable upon retirement. The named
executive officers may also participate in other benefits available to all
employees.
20
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE
TO OUR SHAREHOLDERS:
The report of the compensation and management succession committee for 2003
includes our activities related to compensation review and recommendations for
the chief executive officer and, to a certain extent, the other named executive
officers.
COMPENSATION POLICIES
The purpose of the committee is to ensure that TriCo's officers are compensated
in a manner consistent with our stated compensation strategy, internal equity
considerations, competitive practice and the requirements of bank regulatory
agencies. The committee determines the compensation of Richard P. Smith, our
chief executive officer. We also review Mr. Smith's compensation decisions
concerning other officers.
The compensation program for executive officers consists of three key elements:
- base salary,
- performance-based annual bonus, and
- periodic grants of stock options.
This three-part program enables us to tie compensation to TriCo's performance.
As a result, we believe that this program best serves the interests of TriCo and
its shareholders.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Base Salary. Mr. Smith's salary was originally set forth in his employment
agreement. In determining the annual adjustments to his base salary, we
considered compensation levels at banks of similar size and type. In 2003 Mr.
Smith received a salary of $371,875.
Annual Bonus. The bonus permits annual recognition of individual performance and
is based on the CEO Incentive Plan adopted in 2001. Under this plan, we evaluate
Mr. Smith's performance annually based on the following four components:
- financial performance,
- asset and liability quality,
- internal growth of TriCo and our common stock, and
- Mr. Smith's leadership skills.
Based on our evaluation under each of the four guidelines outlined in the CEO
Incentive Plan, we recommended that Mr. Smith receive an incentive bonus of
$168,750 for 2003. The Board approved payment of this bonus.
Stock Options. The number of stock options granted is determined by a subjective
evaluation of Mr. Smith's ability to influence our long-term growth and
profitability. Since the value of an option bears a direct relationship to
TriCo's stock price, we believe it is an effective incentive to create value for
shareholders. All options are granted at exercise prices not less than the fair
market value of the stock on the date of the grant. In 2003 Mr. Smith received
stock options for 2,000 shares of common stock for his re-election to the Board
of Directors and stock options for 50,000 shares for his employment as chief
executive officer.
COMPENSATION OF OTHER EXECUTIVES
The salaries and annual bonuses for all other officers are established by Mr.
Smith subject to our review. Mr. Smith seeks to establish base salaries that are
within the range of salaries for persons holding similarly responsible positions
at other banks and bank holding companies. In addition, he considers factors
such as relative company performance, the individual's past performance and
future potential.
As with Mr. Smith's compensation, the number of stock options granted to top
executives is determined by a subjective evaluation of the executive's ability
to influence TriCo's long-term growth and profitability. In 2003 our executives
other than Mr. Smith together received stock options for 105,000 shares of
common stock.
RESPECTFULLY SUBMITTED:
William J. Casey (Chairman)
Donald Amaral
Craig S. Compton
Wendell J. Lundberg
Donald E. Murphy
21
AMENDMENT OF 2001 STOCK OPTION PLAN
PROPOSED AMENDMENT
Our 2001 stock option plan provides that options may be granted for shares of
our common stock to our officers, directors, employees and consultants. As of
March 8, 2004, the maximum number of shares of common stock which may be granted
under the plan was 837,325. On that date, we had granted stock options for
730,855 shares with only 106,470 shares available for future grant under the
plan. On March 11, 2004, the Board declared a two-for-one stock split to be
effective on April 9, 2004. After effectiveness of the stock split, there would
only be 212,940 shares available for future grant under the plan from a total of
1,674,650 reserved for grant.
Also on March 11, 2004, our Board revised the amendment to our 2001 stock option
plan to increase by 450,000 from 1,674,650 to 2,124,650 the number of shares
which may be granted under the plan subject to stockholder approval. The
compensation and management succession committee believes that the number of
shares remaining for grant under the plan is not sufficient to make future
awards to our directors, officers and employees. Our Board believes it to be in
our best interest to adopt this amendment in order to continue to use the stock
options as incentives to attract and retain qualified officers, directors and
employees in a competitive labor market, and encourage their increased stock
ownership. The plan is summarized below. Please also review the equity
compensation chart on page 18 when considering approval of the amendment to this
plan.
The additional 450,000 shares that would be reserved for issuance under the plan
if the amendment is approved by shareholders represented approximately 2.98% of
our outstanding shares on March 8, 2004, assuming the 2-for-1 stock split had
been effective on that date. Based solely on the closing price of our common
stock as reported on Nasdaq on that date of $35.34 per share, the total market
value of the 450,000 additional shares which may then be issued under the plan
would be $7,951,500, assuming the 2-for-1 stock split had been effective on that
date and the estimated post-split closing price was $17.67.
ELIGIBILITY AND ADMINISTRATION
Current and prospective officers, employees, directors and consultants of TriCo
or its subsidiaries or affiliates may be granted awards under the plan. As of
March 8, 2004, approximately 623 individuals were eligible to participate in the
plan. Our compensation and management succession committee has not yet
determined the individuals who will receive new awards under the plan if the
amendment is approved by stockholders.
The plan is administered by our compensation and management succession
committee. Awards to directors serving on the committee are determined and
administered by the full Board of Directors. The committee may:
- select participants,
- determine the type and number of options to be granted,
- determine the exercise price and vesting period of any option,
- determine and later amend the terms and conditions of any option,
- interpret the rules relating to the plan, and o otherwise
administer the plan.
STOCK OPTIONS
The committee may grant both incentive stock options, which can result in
potentially favorable tax treatment to the participant, and non-qualified stock
options. The committee determines the terms and vesting provisions, including
the exercise price that generally may not be less than the fair market value of
a share of common stock on the grant date. The maximum term of each option, the
times at which each option will
22
be exercisable, and the provisions requiring forfeiture of unexercised options
following termination of employment generally are fixed by the committee, except
that no option may have a term exceeding ten years. Incentive stock options that
are granted to holders of more than 10% of our stock are subject to certain
additional restrictions, including a five-year maximum term and a minimum
exercise price of 110% of the fair market value.
Shares subject to options that are cancelled, expire unexercised, forfeited,
settled in cash or otherwise terminated remain available for awards under the
plan. Shares issued under the plan may be either newly issued shares or shares
which we have reacquired. The plan imposes individual limitations on the amount
of certain awards in order to comply with Section 162(m) of the Internal Revenue
Code of 1986. Under these limitations no single participant may generally
receive options in any calendar year that relate to more than $1 million.
Finally, options may generally be adjusted to prevent dilution or enlargement of
benefits when certain events occur, such as a stock dividend, reorganization,
recapitalization, stock split, combination, merger or consolidation.
DIRECTOR OPTIONS
In 2003 a new director to the Board received options for 10,000 shares when he
was elected. These options were exercisable in five equal installments of 2,000
shares each beginning on the first anniversary of the grant date. Each director
who was re-elected to the Board received options for 2,000 shares upon
re-election which were exercisable on the first anniversary of the grant date.
In addition, each director who was appointed as chairman of the Board,
vice-chairman of the Board or chairman of a Board committee received options for
500 shares when he was appointed which were exercisable on the first anniversary
of the grant date. The option price for all options granted to directors is the
fair market value on the grant date. The Board determines the terms and
conditions of any other options granted to directors.
OTHER TERMS
Termination of Employment. All options not exercised within 90 days after an
optionee ceases to serve as a director, officer, employee or consultant of TriCo
are forfeited.
Change in Control. All outstanding awards vest, become immediately exercisable
or payable and have all restrictions lifted immediately when TriCo experiences a
change in control.
Amendment and Termination. The Board may amend, suspend or terminate the plan
subject to applicable shareholder approval. The committee may waive any
conditions or amend the terms of any option. However, the committee may not
amend the terms of previously granted options to reduce the exercise price or
cancel options and grant substitute options with a lower exercise price than the
cancelled options. The committee also may not adversely affect the rights of any
award holder without the award holder's consent.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Following is a brief description of the federal income tax consequences
generally arising for awards under the plan. Tax consequences to TriCo and to
participants receiving options will vary with the type of option. The plan is
not intended to be a "qualified plan" under Section 401(a) of the Internal
Revenue Code.
Effects on Participants. Generally, a participant will not recognize income, and
TriCo is not entitled to take a deduction, when an incentive stock option or a
nonqualified option are granted. A participant generally will not have taxable
income when he exercises an incentive stock option. When a participant exercises
a nonqualified option, he must generally recognize ordinary income equal to the
difference between the exercise price and fair market value of the shares
acquired on the exercise date.
If a participant sells shares of common stock acquired from an incentive stock
option before the end of two years from the grant date and one year from the
exercise date, the
23
participant must generally recognize ordinary income equal to the difference
between the fair market value of the shares at the exercise date and the
exercise price. Otherwise, a participant's disposition of shares acquired when
an option is exercised generally will result in short-term or long-term capital
gain or loss measured by the difference between the sale price and the
participant's tax basis in the shares.
Effects on TriCo. TriCo generally may receive a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option. TriCo generally is not entitled to a tax deduction relating to amounts
that represent a capital gain to a participant. Accordingly, TriCo will not be
entitled to any tax deduction for an incentive stock option if the participant
holds the shares of common stock for the incentive stock option holding periods
prior to selling the shares.
Performance-based Compensation. Section 162(m) of the Internal Revenue Code
generally disallows a public company's tax deduction for compensation paid in
excess of $1 million in any tax year to its five most highly compensated
executives. However, compensation that qualifies as "performance-based
compensation" is excluded from this $1 million deduction limit and therefore
remains fully deductible by TriCo. TriCo intends that the following grants will
qualify as "performance-based compensation" so that these awards will not be
subject to the Section 162(m) deduction limitations:
- performance awards,
- options granted with an exercise price at least equal to 100% of the
fair market value of the underlying shares of common stock at the
grant date, and
- options granted to employees that the committee expects to be named
executive officers at the time a deduction arises.
24
REPORT OF THE AUDIT COMMITTEE
The audit committee of the Board of Directors is composed entirely of
independent directors as defined in NASD Rule 4200(a)(15). The committee assists
the Board in fulfilling its responsibility for oversight of the quality and
integrity of TriCo's accounting, auditing and reporting practices. The
responsibilities of the committee are described on page 10 and are set forth in
its charter which can be accessed on our website at www.tricountiesbank.com
under "investor information--corporate information--Board of Directors."
Management is responsible for internal controls and the financial reporting
process, including the system of internal controls. KPMG, LLP, our independent
accountant, is responsible for expressing an opinion on the conformity of
TriCo's audited consolidated financial statements with generally accepted
accounting principles. The committee has reviewed and discussed the audited
consolidated financial statements with management and KPMG. The committee has
discussed with KPMG the matters required to be discussed by Statement on
Auditing Standards No. 61 (communication with audit committees).
The audit committee has reviewed and implemented the provisions of the
Sarbanes-Oxley Act, the new rules of the Securities and Exchange Commission and
the new Nasdaq listing standards. The committee may also engage independent
legal counsel to review assets and make recommendations on procedures required
by the Sarbanes-Oxley Act. At four of its regular meetings in 2003, the
committee met privately in executive session with KPMG, TriCo's chief executive
officer and the director of the internal audit department.
The audit committee considered the need to ensure the independence of TriCo's
accountants while recognizing that in certain situations KPMG may possess the
expertise and be in the best position to advise TriCo on issues other than
accounting and auditing. Any audit services and fees payable to KPMG for audit
services must be pre-approved by the committee. The charter requires that any
other services, including any permitted non-audit services, be pre-approved by
the committee. The committee then communicates its approval to management. All
audit and non-audit services performed by KPMG during 2003 were pre-approved by
the committee.
KPMG has provided the committee with the written disclosures required by
Independence Standards Board Standard No. 1 (independence discussions with audit
committees), and the committee discussed with KPMG their independence. The audit
committee has considered the effect that provision of the services described
under "tax fees" and "all other fees" under Independent Public Accountants on
page 26 may have on the independence of KPMG. These fees amounted to
approximately 9.72% of our total fees paid to KPMG in 2003 and approximately
1.16% of our total fees paid in 2002. The committee approved these services and
determined that those services were compatible with maintaining the independence
of KPMG as TriCo's principal accountant.
Based on the audit committee's review and discussions with management and KPMG,
the audit committee recommended to the Board of Directors, and the Board
approved, that the audited financial statements be included in TriCo's annual
report on Form 10-K for the year ending December 31, 2003, for filing with the
Securities and Exchange Commission.
RESPECTFULLY SUBMITTED:
Donald J. Amaral (Chairman)
Donald E. Murphy
William J. Casey
Craig S. Compton
Wendell J. Lundberg
Steve G. Nettleton
Carroll R. Taresh
Alex A. Vereschagin, Jr.
25
INDEPENDENT PUBLIC ACCOUNTANTS
CHANGE IN INDEPENDENT ACCOUNTANTS
On March 20, 2002, the Board of Directors, on recommendation of the audit
committee, dismissed our independent accountants, Arthur Andersen LLP, and
engaged the services of KPMG, LLP as our new independent accountants. KPMG
audited our financial statements for the years ending December 31, 2002 and
December 31, 2003. The audit committee selected KPMG, LLP as our independent
accountant for 2004.
During the years ended December 31, 2001 and 2000, and the following interim
period through March 20, 2002, there were no disagreements between TriCo and
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to Arthur Andersen's satisfaction, would have caused Arthur
Andersen to make reference to the subject matter of the disagreement in
connection with its reports on our financial statements for such periods.
During the years ended December 31, 2001 and 2000, and the following interim
period through March 20, 2002, we did not consult with Arthur Andersen regarding
any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-K. Also, none of the reportable events described under Item
304(a)(1)(v) of Regulation S-K occurred within the years ended December 31, 2001
and 2000 or within the following interim period through March 20, 2002.
The audit reports of Arthur Andersen on the consolidated financial statements of
TriCo as of and for the years ended December 31, 2001 and 2000 did not contain
any adverse opinion or disclaimer of opinion, nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. We requested
Arthur Andersen to furnish us a letter addressed to the Securities and Exchange
Commission stating whether they agreed with the above statements. A copy of that
letter was filed with a Form 8-K on March 27, 2002.
FEES
The following table shows the fees we paid to KPMG, LLP in 2003 and 2002. We
also paid Arthur Andersen $165,000 for audit work performed in 2002.
2003 2002
------------------------------------------------------
Audit fees(1) $177,750 $158,500
Audit-related fees(2) 21,000 21,000
Tax fees(3) 21,400 2,100
All other fees 0 0
-------- --------
Total $220,150 $181,600
======== ========
(1) For auditing our annual consolidated financial statements and our
interim financial statements in our reports filed with the Securities
and Exchange Commission.
(2) For accounting and auditing consultation services, audits of our
employee benefit plans, assistance with registration statements filed
with the Securities and Exchange Commission and audits of separate
subsidiary financial statements.
(3) For tax compliance, tax advice and planning.
26
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph presents the cumulative total yearly shareholder return from
investing $100 on December 31, 1998, in each of TriCo common stock, Standard &
Poor's 500 Stock Index (a broad equity market index), the SNL Securities Index
of $500 million to $1 billion Independent Western Banks and the SNL Western Bank
Index. We are changing our peer group index from the SNL Securities Index of
$500 million to $1 billion Independent Western Banks to the SNL Western Bank
Index for future proxy statements. We believe that this change is appropriate
due to the increase in TriCo's assets. The SNL Western Bank Index includes banks
located in California, Oregon, Washington, Montana, Hawaii and Alaska with
market capitalizations more similar to that of TriCo's. Both our old peer group
index and our new peer group index were compiled by SNL Financial. The amounts
shown assume that any dividends were reinvested. TriCo's stock is listed on the
Nasdaq National Market under the symbol "TCBK."
[TOTAL RETURN PERFORMANCE GRAPH]
DECEMBER 31,
-------------------------------------------------------------------------
1998 1999 2000 2001 2002 2003
-------------------------------------------------------------------------------------------------------
TriCo Bancshares $100.00 $121.19 $105.80 $131.42 $176.12 $232.54
S&P 500 Index 100.00 121.11 110.34 97.32 75.75 97.40
SNL $500M-$1B Bank Index 100.00 92.57 88.60 114.95 146.76 211.62
SNL Western Bank Index 100.00 103.35 136.83 119.65 130.91 177.34
27
OTHER INFORMATION
CERTAIN TRANSACTIONS
Some of our directors, executive officers and their associates are customers of
Tri Counties Bank and we expect to have banking transactions with them in the
future. In our opinion, all loans and commitments to lend were made in the
ordinary course of our business and complied with applicable laws. Terms,
including interest rates and collateral, were substantially the same as those
prevailing for comparable transactions with other persons of similar
creditworthiness.
In our opinion, these transactions did not involve more than a normal risk of
collectibility or present other unfavorable features. The aggregate amount of
all loans and credit extensions outstanding as of December 31, 2003, to all
directors, director nominees and executive officers (including their associates
and members of their immediate family) was approximately $5,053,256,
representing 3.9% of shareholders' equity at that time. Our audit committee
reviews the adequacy and fairness of the loans to our directors and officers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors, executive officers and some other shareholders are required to
report their ownership of our common stock and any changes in that ownership to
the Securities and Exchange Commission and Nasdaq. To the best of our knowledge,
all required filings in 2003 were properly made in a timely fashion, except that
Mr. Reddish, Mr. O'Sullivan, Mr. Casey, Mr. Compton, Mr. Nettleton, Mr. Hagstrom
and Mr. Smith each inadvertently filed one late report. In making these
statements, we have relied on the representations of the persons involved and on
copies of their reports filed with the Commission.
FINANCIAL MATERIALS
Shareholders may request free copies of our financial materials (annual report,
Form 10-K and proxy statement) from TriCo Bancshares, 63 Constitution Drive,
Chico, California 95973, Attention: Wendell Lundberg, Corporate Secretary. These
materials may also be accessed on our website at www.tricountiesbank.com under
"investor information."
CONTACT THE BOARD
Shareholders may direct questions to the independent lead director by sending an
e-mail to leaddirector@tricountiesbank.com. All communications required by law
or regulation to be relayed to the Board will be promptly delivered to the lead
director. The lead director monitors these messages and replies appropriately.
The lead director for 2004 is Mr. Casey. We also encourage shareholders to
attend the annual meeting to ask questions of directors concerning TriCo.
28
EXHIBIT A
CHARTER OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
I. PURPOSE
The purpose of the Nominating and Corporate Governance Committee (the
"Committee") of the Board of Directors (the "Board") of TriCo Bancshares (the
"Company") is to: (a) identify individuals qualified to become Board members,
(b) recommend director nominees to the Board for each annual meeting of the
stockholders of the Company, (c) lead the Board in its periodic evaluation of
the performance of the Board and its committees, and (d) periodically review and
recommend changes to the Company's Corporate Governance Guidelines and the
Company's Codes of Ethics.
II. COMMITTEE MEMBERSHIP
The Committee shall consist of at least three members, each of whom shall be
independent directors. The term "independent directors" describes directors (a)
who qualify as independent directors pursuant to the applicable provisions or
the Securities Exchange Act of 1934, the rules promulgated thereunder and the
rules and regulations of the Nasdaq Stock Market, Inc. and (b) who, in the
Board's judgment, do not have a material relationship with the Company (either
directly or as a partner, stockholder or officer of an organization that has a
relationship with the Company).
Members of the Committee shall be appointed by the Board. The Board shall
appoint one member of the Committee to act as its Chair. The Board may remove
members of the Committee, with or without cause.
III. RESPONSIBILITIES AND DUTIES
1. Selection of New Director Nominees. The Committee shall actively
identify, recruit, interview and evaluate individuals qualified to become Board
members. The Committee shall recommend to the Board the persons to be nominated
by the Board for elections as directors at the annual meeting of stockholders
and the persons to be elected by the Board to fill any vacancies on the Board.
2. Criteria for Selecting Directors. The Board's criteria for selecting
Directors is set forth in the Company's Corporate Governance Guidelines. Such
criteria shall guide the Committee when selecting director nominees. The
Committee shall review, on an annual basis, the requisite skills and criteria
for new Board members as well as the composition of the Board as a whole. This
review shall include consideration of diversity, age, skills and experience in
the context of the needs of the Board.
3. Committees. The Committee shall periodically review the Board's
committee structure and recommend to the Board the directors to be appointed to
each of the Board's committees.
4. Evaluation of the Board. The Committee shall develop an annual
self-evaluation process for the Board in order to determine whether the Board
and its committees are functioning effectively. The Committee shall oversee this
annual self-evaluation process and prepare an assessment of the Board's
performance, which shall be discussed with the Board.
5. Independence of the Board. The Committee shall monitor the independence
of the Board, assuring that the majority of the Board consists of independent
directors (as defined in Section II above) and review and assess any potential
conflicts of interest between directors and the Company.
6. Director Orientation. The Committee will establish, or identify and
provide access to, appropriate orientation programs, sessions or materials for
newly elected directors of the Company for their benefit either prior to or
within a reasonable period of time after their nomination or election as a
director.
A-1
7. Corporate Governance Guidelines. The Committee shall periodically
review and reassess the adequacy of the Company's Corporate Governance
Guidelines and recommend any proposed changes to the Board for approval.
8. Code of Ethics. The Committee shall periodically review and reassess
the adequacy of the Company's Code of Business Conduct and Ethics and the
Company's Code of Ethics for Principal Executive Officers and Senior Financial
Officers and recommend any proposed changes to the Board for approval.
9. Charter. The Committee shall periodically review and reassess the
adequacy of this Charter and recommend any proposed changes to the Board for
approval.
IV. POWERS
1. Search Firms. The Committee shall have the sole authority to retain and
terminate any search firm used to identify director nominees. The Committee
shall have the sole authority to approve the terms of any such engagement,
including fees. The Committee is empowered to cause the Company to pay the
compensation of any search firm engaged by the Committee.
2. Independent Advisors. The Committee shall have the authority to retain
independent advisors (including legal and accounting advisors) to assist in
carrying out its responsibilities and duties. The Committee shall have the sole
authority to approve the terms of any such engagement, including fees. The
Committee is empowered to cause the Company to pay the compensation of any such
advisors engaged by the Committee.
3. Subcommittees. The Committee shall have the authority to delegate any
of its responsibilities to subcommittees, as the Committee deems appropriate in
its sole discretion.
V. PROCEDURES AND ADMINISTRATION
1. Meetings. The Committee shall meet at such times as it deems necessary
or appropriate, but not less than semiannually.
2. Minutes. The Committee shall maintain written minutes of each Committee
meeting. Such minutes shall be distributed to each member of the Committee and
to the other members of the Board.
3. Reports. The Committee shall report to the Board concerning each
meeting of the Committee and as otherwise requested by the Chairman of the
Board.
4. Self-Evaluation. The Committee shall evaluate its own performance at
least annually.
A-2
TRICO BANCSHARES
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL MEETING OF SHAREHOLDERS, MAY 4, 2004
The undersigned holder of Common Stock acknowledges receipt of a copy
of the Notice of Annual Meeting of Shareholders of TriCo Bancshares and the
accompanying Proxy Statement dated March 31, 2004, and revoking any proxy
heretofore given, hereby appoints Richard P. Smith and Richard O'Sullivan, 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 TriCo Bancshares, a California
corporation (the "Company"), standing in the name of the undersigned which the
undersigned could vote if personally present and acting at the Annual Meeting of
Shareholders of TriCo Bancshares, to be held at the Headquarters Building of Tri
Counties Bank located at 63 Constitution Drive, Chico, California, on Tuesday,
May 4, 2004, at 6:00 p.m., or at any postponements or adjournments thereof, upon
the following items as set forth in the Notice of Annual Meeting and Proxy
Statement and to vote according to their discretion on all other matters which
may be properly presented for action at the meeting or any adjournments thereof.
All properly executed proxies will be voted as indicated. 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.
(To be continued and signed on the reverse side.)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
1. To elect as directors the following eleven nominees: William J. Casey,
Donald J. Amaral, Craig S. Compton, John S.A. Hasbrook, Michael W.
Koehnen, Wendell J. Lundberg, Donald E. Murphy, Steve G. Nettleton,
Richard P. Smith, Carroll R. Taresh and Alex A. Vereschagin, Jr.
______ FOR ALL nominees (except as indicated to the contrary below).
______ WITHHOLD AUTHORITY to vote for all nominees.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
2. To approve the proposal to amend the Company's Articles of
Incorporation to increase by 30,000,000 the number of authorized shares
of Common Stock from 20,000,000 to 50,000,000.
______ FOR
______ AGAINST
______ ABSTAIN
3. To approve the proposal to amend the Company's 2001 Stock Option Plan
to increase by 450,000 the number of shares which may be granted under
the plan.
______ FOR
______ AGAINST
______ ABSTAIN
4. To approve the proposal to ratify the selection of KPMG, LLP as the
independent public accountants of the Company for 2004.
______ FOR
______ AGAINST
______ ABSTAIN
5. In their discretion, the proxy holders are authorized to vote upon such
other business as may properly come before the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSALS. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, IT
WILL BE VOTED "FOR" THE NOMINEES LISTED ABOVE, "FOR" AMENDMENT OF THE ARTICLES
OF INCORPORATION, "FOR" AMENDMENT OF THE 2001 STOCK OPTION PLAN AND "FOR" THE
SELECTION OF KPMG, LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR
2004. THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS AND MAY
BE REVOKED PRIOR TO ITS EXERCISE.
__________ WE DO ___________ DO NOT EXPECT TO ATTEND THIS MEETING.
Date ___________________________
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Signature if Held Jointly _________________________________
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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.