UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
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[ ] Preliminary Proxy Statement. [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
TRICO BANCSHARES
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TRICO BANCSHARES
[TRICO BANCSHARES LOGO]
TriCo Bancshares
63 Constitution Drive
Chico, California 95973
Phone: (530) 898-0300
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
To Our Shareholders:
On Tuesday, May 24, 2005, 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 29, 2005, 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 be asked to:
1. Elect ten directors for terms expiring at the 2006 annual meeting of
shareholders.
2. Amend our 2001 stock option plan to (i) provide that annual grants
of stock options to directors upon their re-election or appointment
as Board chairman or audit committee chairman may continue to occur
through 2008 and (ii) eliminate the mandatory vesting schedules for
options granted to directors and instead allow the compensation and
management succession committee to determine the vesting schedules.
3. Ratify the selection of KPMG, LLP as our independent accountants for
2005.
4. 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 2004 Annual Report is enclosed. This notice and proxy
statement, a proxy and voting instruction card, and the 2004 Annual Report are
being distributed on or about April 15, 2005.
By Order of the Board of Directors,
/s/ Wendell J. Lundberg
Secretary
Chico, California
April 15, 2005
YOUR VOTE IS IMPORTANT TO TRICO. Regardless of whether you plan to
attend the meeting in person, we urge you to vote in favor of each
of theproposals as soon as possible.
PROXY STATEMENT TABLE OF CONTENTS
QUESTIONS AND ANSWERS................................................. 1
PROPOSALS TO BE VOTED ON.............................................. 4
BOARD OF DIRECTORS.................................................... 7
GOVERNANCE, BOARD NOMINATION AND BOARD COMMITTEES..................... 9
COMPENSATION OF DIRECTORS............................................. 13
OWNERSHIP OF VOTING SECURITIES........................................ 15
EXECUTIVE OFFICERS AND KEY EMPLOYEES.................................. 17
COMPENSATION OF EXECUTIVE OFFICERS.................................... 18
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE........ 25
REPORT OF THE AUDIT COMMITTEE......................................... 27
INDEPENDENT PUBLIC ACCOUNTANTS........................................ 29
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN....................... 30
OTHER INFORMATION..................................................... 31
QUESTION AND ANSWER
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 24, 2005.
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 2004
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
29, 2005, may vote at the meeting. As of the record date,
15,745,017 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 to be 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 ten nominees to serve on our Board of
Directors for terms expiring at the next annual meeting, to amend
our stock option plan to continue to allow directors to receive
grants of stock options and to ratify the selection of KPMG, LLP as
our independent accountants for 2005.
1
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 ten listed director nominees, FOR amendment of the 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 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 29,
2005, may attend the meeting. You may indicate on the enclosed proxy
card if you plan to attend the meeting.
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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 ten directors, amendment of the stock option
plan and ratification of our accountants for 2005. 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 2005 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 2006 ANNUAL MEETING DUE?
A: All shareholder proposals to be considered for inclusion in our
proxy statement for the 2006 annual meeting must be received at our
principal office by December 16, 2005. Shareholder nominations for
directors must be received by our president as described on page 11.
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.
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PROPOSALS TO BE VOTED ON
1. ELECTION OF DIRECTORS
Ten directors will be elected this year for terms expiring at our annual
meeting in 2006. Each nominee is currently serving as a director of TriCo.
The nominees for election are:
William J. Casey Donald E. Murphy
Donald J. Amaral Steve G. Nettleton
Craig S. Compton Richard P. Smith
John S. A. Hasbrook Carroll R. Taresh
Michael W. Koehnen Alex A. Vereschagin, Jr.
Wendell Lundberg is retiring from his service on our Board and will not be
standing for re-election. The ten 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" beginning on page 11.
The Board recommends a vote to elect these ten nominees.
2. AMENDMENT OF 2001 STOCK OPTION PLAN
Our stock option plan was adopted in 2001 and amended by shareholders in
2004. Sections 7.2 and 7.3 of the plan currently provide that each
director shall receive options for 4,000 shares of our common stock upon
his re-election to the Board through the 2005 annual meeting of
shareholders, and that each director who is appointed as Board chairman,
Board vice-chairman or chairman of a Board committee may receive options
for 1,000 shares of our common stock upon his appointment each year
through the 2005 annual meeting of shareholders. Sections 7.1, 7.2 and 7.3
currently set forth mandatory vesting schedules for options granted to
directors under the plan. The 2001 stock option plan is described in more
detail beginning on page 20.
We are asking shareholders to amend these sections to provide that
directors may continue to receive options for 4,000 shares upon their
re-election and that each director who is appointed as the Board chairman
or chairman of the audit committee may receive options for 1,000 shares of
our common stock through the 2008 annual meeting of shareholders. In
addition, we are asking shareholders to eliminate the mandatory vesting
schedules for options granted to directors and allow the compensation and
management succession committee to determine the vesting schedule. The
amended sections would provide:
4
7.1 Grant Upon Election of a New Director to the Board. A new
Director to the Board may receive Options for 20,000 Shares upon his
or her election to the Board. These Options shall become exercisable
as determined by the Committee.
7.2 Grant Upon Re-election of a Director to the Board. Beginning
with the 2001 annual meeting of the Company's shareholders and
continuing each year through the 2008 annual meeting of the
Company's shareholders, a Director who is re-elected to the Board
may receive Options for 4,000 Shares upon his or her re-election to
the Board. These Options shall become exercisable as determined by
the Committee.
7.3 Grants to Board Chairmen. Beginning with the 2001 annual meeting
of the Company's shareholders and continuing for each year through
the 2008 annual meeting of the Company's shareholders, each Director
who is appointed as Chairman of the Board or as Chairman of the
Audit Committee may receive Options for 1,000 Shares upon his or her
appointment, in addition to any other Options granted pursuant to
this Section 7. These Options shall become exercisable as determined
by the Committee.
We believe that allowing for continued ownership of our common stock by
directors will continue to align their interests with those of our
shareholders. Grants of stock options also help us retain qualified
directors, particularly since we do not pay our directors additional fees
for meeting attendance. The compensation received by our directors is
described beginning on page 13. Allowing the compensation and management
succession committee to determine the vesting schedules will allow the
committee to have increased flexibility in selecting appropriate
parameters for awards of stock options.
If the plan is amended, options for approximately 160,000 shares of our
common stock may be granted to directors through 2008, assuming that the
Board remains composed of ten directors through 2008, leaving
approximately 388,940 shares available for grant to officers and
employees. As of March 29, 2005, there were 548,940 shares available for
future grant under the plan.
The affirmative vote of a majority of those shareholders present and
voting will amend the 2001 stock option plan.
The Board recommends a vote to amend the 2001 stock option plan.
3. RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The firm of KPMG, LLP has served as our independent certified public
accountants since 2002 and our audit committee has selected the firm as
our accountants for 2005. Representatives of KPMG will be present at the
meeting and will have the opportunity to make a statement and to answer
questions.
Neither TriCo's governing documents nor applicable law require shareholder
ratification of the appointment of KPMG as our independent accountant.
However, the audit committee recommended, and the Board of Directors
determined, to submit the appointment of KPMG to the shareholders for
ratification as a matter of good corporate practice. If shareholders fail
to ratify the appointment, the audit committee will reconsider whether or
not to retain that firm. Even if appointment is ratified, the audit
committee in its discretion may direct the appointment of different
independent accountants at any time.
The following audit services were performed by KPMG for the year ended
December 31, 2004:
- 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, internal controls and regulatory compliance.
5
Additional information concerning KPMG's services for TriCo can be found
on pages 27-29. The affirmative vote of a majority of those shareholders
present and voting will ratify the selection of KPMG as our independent
accountants.
The Board recommends a vote to ratify the selection of KPMG, LLP as
our accountants for 2005.
6
BOARD OF DIRECTORS
The following persons are currently serving as Board members of both TriCo
Bancshares and Tri Counties Bank. They are each nominated for re-election,
except for Mr. Lundberg who is retiring. 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 60, 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. 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 69, has been a director since 1975. 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 52, has been a director since 2003. Mr. Amaral is chairman
of our audit 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, and a Chapter 11 trustee was appointed on March 7, 2002. On
October 27, 2004, the Bankruptcy Court confirmed the trustee's plan of
reorganization. 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 49, has been a director since 1989. Mr. Compton is a
member of 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 45, has been a director since 2002. Mr. Hasbrook is a
member of our compensation and management succession committee. He is active in
several agricultural and investment enterprises. He is president of SunWest Wild
Rice Co., Inc., a rice farm; president of Hasbrook-Fetter Farms, Inc., a rice
farm; vice president of SunWest Foods, Inc., a packaging and food marketing
company; and serves as an officer for other agricultural-related entities. Mr.
Hasbrook also serves on the boards of various charitable and civic
organizations.
Biographies
- William J. Casey
- Donald E. Murphy
- Donald J. Amaral
- Craig S. Compton
- John S. A. Hasbrook
7
MICHAEL W. KOEHNEN*
Michael W. Koehnen, age 44, has been a director since 2002. Mr. Koehnen is a
member of our compensation and management succession committee. He owns and
operates C.F. Koehnen & Sons, a third-generation family farming and beekeeping
company. Mr. Koehnen is also president and owner of Riverwest Processing, an
almond and walnut processing company.
WENDELL J. LUNDBERG*
Wendell J. Lundberg, age 74, has been a director since 1975 and is retiring
after his 30 years of service to TriCo and Tri Counties Bank effective at the
annual meeting of shareholders. He is the secretary of our Board and also a
member of our nominating and corporate governance committee. Mr. Lundberg has
owned and operated Lundberg Family Farms, a rice and grain farming operation,
since 1970.
STEVE G. NETTLETON*
Steve G. Nettleton, age 66, 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 47, 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 67, has been a director since 1998. Mr. Taresh is a
member of 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 69, has been a director since 1975. Mr.
Vereschagin is a member of our audit committee. 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.
*Determined to be independent as described under Director Independence on page
9.
- 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 rules of the Securities and Exchange
Commission and the listing standards of Nasdaq. Since our 2004 annual meeting we
have:
- updated the charter for our nominating and corporate governance
committee,
- 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.
You can view our 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. The charter for our audit committee was
included with our 2003 proxy statement. The charter for our nominating and
corporate governance committee is not available on our web site but was included
with our 2004 proxy statement.
DIRECTOR INDEPENDENCE
We believe that independent directors play an important role in TriCo's
corporate governance and are committed to ensuring that at least a majority of
our directors are independent. Our board has affirmatively determined that the
following ten of our eleven directors are independent as defined by Nasdaq
Marketplace Rule 4200(a)(15) and our corporate governance guidelines: Mr.
Amaral, Mr. Casey, Mr. Compton, Mr. Hasbrook, Mr. Koehnen, Mr. Lundberg, Mr.
Murphy, Mr. Nettleton, Mr. Taresh and Mr. Vereschagin. Our corporate governance
guidelines provide that a director is independent if he does not have a material
relationship with TriCo directly or indirectly as a partner, shareholder or
officer of an organization that has a relationship with TriCo, and he otherwise
qualifies as independent under the applicable rules of the Securities Exchange
Act of 1934, as amended, and Nasdaq. These independence determinations were
based upon a review of all relevant transactions and relationships between
TriCo, our senior management and our accountants, on the one hand, and each
director and his family members, on the other hand. Mr. Smith is not considered
independent because of his employment as president and chief executive officer.
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 2004, including serving on the compensation committee for any other
entity.
9
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 a written
charter. The Board has affirmatively determined that each member of our Board
committees is independent as defined by Nasdaq Marketplace 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), William Casey, Donald Murphy, Steve
Nettleton and Alex Vereschagin. The board has determined that Mr. Amaral is an
audit committee financial expert under the rules of the Securities and Exchange
Commission and that each member of the committee is financially literate as
defined by Nasdaq listing standards and is independent under special standards
established by the Securities and Exchange Commission for audit committee
members. 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.
The committee also annually retains our independent accountant and approves the
terms and scope of work to be performed. Our audit committee met five times
during 2004. For more information on the audit committee, please see the report
of the audit committee on page 27.
Compensation and Management Succession Committee. The current members of the
compensation and management succession committee are William Casey (chairman),
Craig Compton, John Hasbrook, Michael Koehnen and Donald Murphy. This committee:
- determines TriCo's salary philosophy,
- sets the compensation levels for our president and chief executive
officer,
- 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 five meetings in 2004.
Additional information on the compensation and management succession committee
is found beginning on page 25.
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 met two times in 2004.
10
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 in the future
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 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
11
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 met twelve times and the Board of Directors of
Tri Counties Bank met thirteen times during 2004. 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, except for Mr. Murphy. In addition, our independent
directors met one time in executive session to discuss our chief executive
officer's performance. Executive sessions are chaired by the independent
director then serving as lead director. In 2004 our lead director was Mr. Casey.
Mr. Casey will continue to serve as lead director in 2005.
Our corporate governance guidelines provide that each director must attend our
annual shareholders meeting. In 2004 all of our directors attended the annual
shareholders meeting except for Mr. Compton.
12
COMPENSATION OF DIRECTORS
COMPENSATION
During 2004 each non-employee director received a $1,500 monthly retainer, the
chairman of the Board received a $2,000 yearly retainer and the chairman of the
audit committee received an $1,800 yearly retainer. Each director also:
- received nonqualified options for 4,000 shares of our common stock
as described on page 14, which vest in May 2005,
- participates 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,
- has split dollar life insurance with premiums paid by TriCo,
- has a long-term care agreement with TriCo described on page 18, and
- was reimbursed for expenses incurred in connection with their
attendance at Board meetings.
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
non-employee directors with supplemental retirement benefits which was amended
effective June 30, 2004, and January 1, 2005. Under the plan, each director may
defer all or part of his retainer fees into a separate account up to a maximum
life-time deferral amount of $1.5 million. 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.
Until January 1, 2008, 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. Beginning January 1, 2008,
the interest will be reduced to a rate that is 1% higher than the Moody's
corporate bond yield index. Upon a director's retirement, his account will earn
interest at the Moody's 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. In 2004 none of the directors elected to
defer some or all of their annual compensation.
DIRECTOR SUPPLEMENTAL RETIREMENT PLANS
In 1987 we adopted a supplemental retirement plan for directors to provide
additional retirement benefits to directors who retired on or before December
31, 2003. Any outside director of TriCo or Tri Counties Bank who served as a
director for at least ten years was eligible to participate. Full benefits
applied 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.
Effective January 1, 2004, we adopted a new supplemental retirement plan for
directors who retire on or after January 1, 2004. The 2004 plan is substantially
similar to the 1987 plan except that the vesting schedule has been changed from
13
10 years to 15 years and the discount for early retirement has been changed from
4% per year to 6% per year.
STOCK OPTION PLAN
In 2004 directors received stock options under our 2001 stock option plan
described on page 20. In 2004 we granted directors options for 20,000 shares if
they were 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 4,000
shares of common stock when they were reelected to the Board. These options may
be exercised on the first anniversary of the grant date. We are asking
shareholders to amend the plan to provide that directors may continue to receive
grants of stock options through 2008 and the Board chairman and chairman of the
audit committee may each receive options for 1,000 shares upon their appointment
through 2008. The amendments are described in more detail beginning on page 4.
14
OWNERSHIP OF VOTING SECURITIES
This chart shows the common stock ownership for each TriCo director and director
nominee, the executive officers named on page 18, and owners of more than 5
percent of our outstanding common stock as of March 29, 2005. 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 and include stock options granted under TriCo's stock option plans which
are exercisable through May 29, 2005.
COMMON STOCK OWNERSHIP NOT COMMON STOCK OWNERSHIP INCLUDING
INCLUDING STOCK
STOCK OWNED AS OWNED AS A TRUSTEE
A TRUSTEE OF THE ESOP OF THE ESOP
------------------------------ -----------------------------------
NUMBER OF PERCENTAGE OF
SHARES COMMON NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY STOCK BENEFICIALLY COMMON STOCK
BENEFICIAL OWNERS OWNED OUTSTANDING OWNED OUTSTANDING
--------------------------------- --------------- ------------- ------------------- -------------
5% Holders
TriCo Bancshares 1,274,650 (1) 8.10% 1,274,650 (1) 8.10%
Employee Stock Ownership
Plan and Trust (ESOP)
63 Constitution Drive
Chico, CA 95973
Directors and Executive Officers
Donald J. Amaral 16,000 (2) * 16,000 (2) *
Craig Carney 105,567 (3) * 105,567 (3) *
William J. Casey 636,948 (4) 4.05% 1,911,598 (4) (19) 12.14%
Craig S. Compton 151,110 (5) * 151,110 (5) *
Rick Hagstrom 45,864 (6) * 45,864 (6) *
John S. A. Hasbrook 17,717 (7) * 17,717 (7) *
Michael W. Koehnen 121,916 (8) * 121,916 (8) *
Wendell J. Lundberg 366,234 (9) 2.33% 1,640,884 (9) (19) 10.42%
Andrew Mastorakis 146,573 (10) * 146,573 (10) *
Donald E. Murphy 394,408 (11) 2.50% 394,408 (11) 2.50%
Steve G. Nettleton 346,735 (12) 2.20% 346,735 (12) 2.20%
Richard O'Sullivan 296,967 (13) 1.89% 296,967 (13) 1.89%
Thomas J. Reddish 143,092 (14) * 143,092 (14) *
Richard P. Smith 396,411 (15) 2.52% 1,654,821 (15)(19) 10.81%
Carroll R. Taresh 161,300 (16) 1.02% 161,300 (16) 1.02%
Alex A. Vereschagin, Jr. 137,424 (17) * 137,424 (17) *
All TriCo directors and executive
officers as a group (18 persons) 3,587,063 (18) 22.81% 4,845,473 (18)(19) 30.80%
*Less than 1%.
15
(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 25, 2005, participants in the ESOP could direct the
voting of all 1,274,650 shares held by the ESOP. Of that total, 104,377
shares had been allocated to the accounts of TriCo's executive officers.
(2) Includes stock options for 16,000 shares.
(3) Includes stock options for 97,660 shares and 7,907 shares allocated to Mr.
Carney's account in the ESOP.
(4) Includes stock options for 14,000 shares, 864 shares held in an IRA
account for the benefit of Mr. Casey and 122,000 shares held by a family
trust of which Mr. Casey is manager.
(5) Includes 34,026 shares held by Mr. Compton as executor of his father's
estate, 1,208 shares held by Mr. Compton's minor children, 34,814 shares
held in an IRA account for the benefit of Mr. Compton and stock options
for 16,000 shares.
(6) Includes 11,065 shares held by Mr. Hagstrom's spouse, stock options for
11,500 shares and 8,122 shares allocated to Mr. Hagstrom's account in the
ESOP.
(7) Includes stock options for 16,000 shares.
(8) Includes 65,214 shares owned by CF Koehnen & Sons, of which Mr. Koehnen is
an owner, 8,600 shares owned by the CF Koehnen & Sons Profit Sharing Plan
of which Mr. Koehnen is trustee, 4,400 shares owned by the Helen Koehnen
Trust of which Mr. Koehnen is trustee, 1,200 shares owned by Mr. Koehnen's
minor children, 2,300 shares owned by Mr. Koehnen's wife and stock options
for 16,000 shares.
(9) Includes stock options for 16,000 shares and 1,328 shares held in an IRA
account for the benefit of Mr. Lundberg.
(10) Includes stock options for 121,800 shares and 4,457 shares allocated to
Mr. Mastorakis' account in the ESOP.
(11) Includes 7,116 shares owned by the J. H. McKnight Ranch, of which Mr.
Murphy is an officer, 26,622 shares owned by the J. H. McKnight Ranch
Profit Sharing Plan, 288,428 shares held by Blavo LLC of which Mr. Murphy
is a manager and stock options for 15,000 shares.
(12) Includes 272,085 shares held jointly with his spouse, 66,650 shares held
in an IRA account for the benefit of Mr. Nettleton and stock options for
8,000 shares.
(13) Includes stock options for 198,000 shares and 26,594 shares allocated to
Mr. O'Sullivan's account in the ESOP.
(14) Includes 2,197 shares held by Mr. Reddish's minor children, stock options
for 126,000 shares and 10,019 shares allocated to Mr. Reddish's account in
the ESOP.
(15) Includes 166 shares held by Mr. Smith's wife, stock options for 379,804
shares and 16,240 shares allocated to Mr. Smith's account in the ESOP.
(16) Includes stock options for 4,000 shares, 8,000 shares held by Mr. Taresh's
wife and 26,856 shares held in an IRA account for the benefit of Mr.
Taresh.
(17) Includes stock options for 8,000 shares. (18) Includes stock options for
1,139,524 shares.
(19) Includes 1,274,650 shares held by the ESOP of which Messrs. Smith, Casey
and Lundberg are trustees of which 104,377 shares have been allocated to
the accounts of executive officers under the ESOP.
16
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 48, 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 and executive director of the Boys
and Girls Club of the North Valley.
ANDREW MASTORAKIS
Andrew Mastorakis, age 46, 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 59, 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.
THOMAS J. REDDISH
Tom Reddish, age 45, 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.
CRAIG CARNEY
Craig Carney, age 46, 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 61, 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.
RAYMOND RIOS
Ray Rios, age 48, 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
- Thomas J. Reddish
- Craig Carney
- Richard A. Miller
- Raymond Rios
17
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 2004, 2003 and 2002.
LONG-TERM
COMPENSATION
------------
ANNUAL SECURITIES
COMPENSATION(1) UNDERLYING
---------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) GRANTED COMPENSATION(4)
---------------------------------- ---- --------- -------- ------------ ---------------
Richard Smith 2004 $410,000 $237,750 55,520 $18,923
President and Chief Executive 2003 371,875 168,750 52,000 17,219
Officer 2002 300,000 111,562 2,000 16,801
Richard O'Sullivan 2004 205,834 107,000 25,000 27,847
Executive Vice President--- 2003 196,096 75,000 20,000 28,808
Wholesale Banking 2002 176,556 40,000 0 15,861
Andrew Mastorakis 2004 205,004 141,000 25,000 34,001
Executive Vice President---Retail 2003 195,836 70,000 20,000 30,259
Banking 2002 177,197 100,000 0 15,705
Rick Hagstrom 2004 158,750 64,000 25,000 15,408
Executive Vice President--Risk 2003 144,094 55,000 20,000 12,842
Management 2002 114,564 50,000 0 9,165
Thomas Reddish 2004 205,000 77,000 25,000 26,712
Executive Vice President and Chief 2003 177,402 55,000 20,000 23,757
Financial Officer 2002 144,194 50,000 0 11,535
Craig Carney 2004 166,668 51,000 20,000 26,250
Senior Vice President and Chief 2003 163,595 45,000 15,000 22,970
Credit Officer 2002 151,530 40,000 0 11,187
(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 and country club memberships for Mr. Smith, Mr. O'Sullivan and
Mr. Carney. 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 19.
(3) Bonus amounts are shown for the year earned and are paid in the following
year.
(4) Includes TriCo contributions to the employee stock ownership plan
described on page 24 which generally vest over a seven-year period,
interest credits on deferred compensation under our executive deferred
compensation 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 19.
18
EXECUTIVE DEFERRED COMPENSATION PLAN
Our executive deferred compensation plan was adopted in 1987 and amended
effective June 30, 2004, and January 1, 2005. It provides our key employees with
supplemental funds for retirement or death. Under the plan, each executive may
defer all or part of his compensation into a separate account up to a maximum
life-time deferral amount of $1.5 million. 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.
Until January 1, 2008, 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. Beginning January 1, 2008, the
interest will be reduced to a rate that is 1% higher than the Moody's corporate
bond index. Upon an executive's retirement, his account will earn interest at
the Moody's corporate bond 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. In 2004 Mr. Smith, Mr. O'Sullivan, Mr.
Mastorakis, Mr. Hagstrom and Mr. Carney each elected to defer some or all of
their compensation.
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 25.
This plan provides bonus compensation to our chief executive officer, Richard
Smith.
EXECUTIVE EMPLOYMENT AGREEMENT
In 2004 we entered into an amended employment agreement with Richard Smith which
provided Mr. Smith with a base annual salary of $410,000 for 2004 with future
increases as determined by the compensation committee. 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 25. The agreement also provides that he shall receive
benefits under our supplemental executive retirement plan and other benefit
plans, vacation days and a car allowance. If a change of control of TriCo
occurs, Mr. Smith is entitled to receive twice his annual salary then in effect
and twice his most recent bonus.
CHANGE OF CONTROL AGREEMENTS
Mr. O'Sullivan, Mr. Mastorakis, Mr. Hagstrom, Mr. Reddish and Mr. Carney have
each entered into agreements with TriCo that provide them with benefits if TriCo
experiences a change of control. If a change of control occurs, each executive
is entitled to receive twice the combined amount of his annual salary in effect
at the time 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. 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.
19
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 2004 we recognized
an expense of $128,629 relating to the long-term care insurance.
EQUITY COMPENSATION PLAN INFORMATION
The following table shows shares reserved for issuance for outstanding options,
stock appreciation rights and warrants granted under our equity compensation
plans as of December 31, 2004. All of our equity compensation plans have been
approved by shareholders.
NUMBER OF SECURITIES
TO BE ISSUED UPON WEIGHTED AVERAGE NUMBER OF SECURITIES
EXERCISE OF EXERCISE PRICE OF REMAINING AVAILABLE FOR
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, ISSUANCE UNDER EQUITY
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COMPENSATION PLANS
----------------------------- -------------------- -------------------- ------------------------
Equity compensation plans not
approved by stockholders 0 NA 0
Equity compensation plans 1,661,547 $10.52 613,940
approved by stockholders
--------- ------ -------
Total 1,661,547 $10.52 613,940
--------- ------ -------
2001 STOCK OPTION PLAN
In 2001 we adopted a stock option plan for key officers, employees, directors
and consultants which was amended by shareholders at the 2004 annual meeting to
provide that an aggregate of 2,124,650 shares of our common stock may be granted
under the plan. On March 29, 2005, there were options for 1,347,376 shares
outstanding and options for 549,436 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 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.
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 29, 2005, approximately 648
individuals were eligible to participate in the plan. 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
- 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 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
20
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. A new director to the Board receives options for 20,000 shares
when he is first elected. These options become exercisable in five equal
installments of 4,000 shares each beginning on the first anniversary of the
grant date. Through the 2005 annual shareholder meeting, each director who is
re-elected to the Board receives options for 4,000 shares upon re-election, and
each director who is appointed as chairman of the Board, vice-chairman of the
Board or chairman of a Board committee may receive options for 1,000 shares.
These shares are exercisable on the first anniversary of the grant date. We are
asking shareholders to amend the plan to provide that these annual grants of
stock options to directors upon their re-election or appointment as Board
chairman or audit committee chairman may occur through 2008. In addition, we are
asking shareholders to amend the plan to eliminate the mandatory vesting
schedules for options granted to directors and instead allow the compensation
and management succession committee to determine the vesting schedules. The
amendments are described beginning on page 4. 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.
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 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.
21
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 $1 million deduction limit and therefore
remains fully deductible by TriCo. TriCo intends that the following grants will
qualify as "performance-based compensation" so that these awards will not be
subject to the Section 162(m) deduction limitations:
- performance awards,
- options granted with an exercise price at least equal to 100% of the
fair market value of the underlying shares of common stock at the
grant date, and
- options granted to employees that the committee expects to be named
executive officers at the time a deduction arises.
Old Stock Option Plans. In 1993 we adopted a stock option plan for directors. On
March 29, 2005, there were options for 16,800 shares outstanding under this plan
and no additional options were available for grant. In 1995 we adopted a stock
option plan for key employees. On March 29, 2005, there were options for 337,875
shares outstanding under this plan and no additional options were available for
grant. Vesting schedules were determined individually for each grant under both
plans.
STOCK OPTION GRANTS IN 2004
The following table presents information concerning stock options granted to
each of the named executive officers in 2004 and the potential realizable value
for those stock options based on future appreciation assumptions:
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED # 2004 ($) DATE 5%($) 10%($)
------------------ ---------- ------------ -------- ---------- --------- -----------
Richard P. Smith 4,000(2) 2.0% 17.400 05-04-14 43,771 110,924
51,520 26.4% 17.375 02-17-14 562,961 1,426,655
Richard O'Sullivan 25,000 12.8% 17.375 02-17-14 273,176 692,282
Andrew Mastorakis 25,000 12.8% 17.375 02-17-14 273,176 692,282
Rick Hagstrom 25,000 12.8% 17.375 02-17-14 273,176 692,282
Thomas Reddish 25,000 12.8% 17.375 02-17-14 273,176 692,282
Craig Carney 20,000 10.2% 17.375 02-17-14 218,541 553,826
(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.
22
OPTIONS EXERCISED IN 2004 AND 2004 YEAR-END OPTION VALUES
The following table presents information about the number and value of stock
options exercised in 2004 and held at December 31, 2004, 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 VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES RECEIVED OPTIONS AT 12-31-04 AT 12-31-04(1)
ACQUIRED ON UPON -------------------------- ---------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ ----------- -------- ----------- ------------- ----------- -------------
Richard P. Smith 0 0 379,804 145,216 $8,887,413 $3,398,054
Richard O'Sullivan 20,175 $670,819 191,000 64,000 $4,469,400 $1,497,600
Andrew Mastorakis 5,000 $175,100 113,800 43,960 $2,662,920 $1,028,664
Rick Hagstrom 6,000 $101,640 5,000 32,000 $ 117,000 $ 748,800
Thomas Reddish 0 0 119,000 60,000 $2,784,600 $1,404,000
Craig Carney 12,000 $269,040 92,160 46,180 $2,156,544 $1,080,612
(1) Based on the closing price per share of TriCo stock as quoted on the
Nasdaq National Market on December 31, 2004 ($23.40 per share).
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
In 1987 we adopted a supplemental executive retirement plan which provides
supplemental retirement benefits to key employees who retired on or before
December 31, 2003. 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 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.
Effective January 1, 2004, we adopted a new supplemental executive retirement
plan which provides supplemental retirement benefits to key employees retiring
on or after January 1, 2004. The 2004 plan is substantially similar to the 1987
plan except that the retirement age is reduced from 65 to 62, the vesting
schedule is reduced from 20 years to 15 years and a forfeiture provision was
added if voluntary termination occurs prior to full vesting.
23
The following table shows estimated annual retirement benefits that would be
payable to the named executive officers under the 2004 plan, assuming a minimum
of ten years of service at normal retirement age of age 62 under various
assumptions as to final average annual compensation and years of credited
service. The benefits are not subject to any reduction for social security
benefits.
ESTIMATED ANNUAL RETIREMENT BENEFITS
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
Final average compensation includes salary and annual bonus as set forth in the
summary compensation table. All of the named executive officers are participants
in the plan. At March 29, 2005, they had accrued the following years of service
in the plan: Mr. Smith--eleven years; Mr. O'Sullivan--twenty years; Mr.
Mastorakis--four years; Mr. Hagstrom--nine years; Mr. Reddish--ten years and Mr.
Carney--eight years.
OTHER BENEFIT PLANS
We do not provide any actuarial plan that is payable upon retirement or any
long-term incentive plans that provide compensation for performance that is
measured over a period longer than one fiscal year. The named executive officers
may also participate in other benefits available to all employees, some of which
are described below.
ESOP. 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.
401(k). We have a 401(k) plan for all employees age 21 and over completing at
least 90 days of service with TriCo or Tri Counties Bank. Participants may
contribute a portion of their compensation subject to certain limits based on
federal tax laws. Contributions are not included in a participant's current
taxable income. TriCo does not make matching contributions to the plan. Plan
assets are held in trust. A participant can direct the investment of his
contribution into one or more of 19 mutual funds. Generally, contributions are
distributable upon a participant's retirement, disability, death or other
separation from employment.
24
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE
TO OUR SHAREHOLDERS:
The report of the compensation and management succession committee for 2004
includes our activities related to compensation review and recommendations for
the chief executive officer and, to a certain extent, the other executive
officers named on page 18. In 2003 the committee engaged Benmark as independent
compensation consultant to conduct a comprehensive assessment of our overall
executive compensation program to ensure that our compensation levels are
reasonable, appropriate and compatible. In 2004 the committee again reviewed
Benmark's recommendations and evaluated the executive compensation program as it
relates to the performance of executives.
COMPENSATION POLICY
The committee's compensation policy approved on February 17, 2004, provides that
our officers will be compensated consistent with our stated compensation
strategy of optimizing our ability to attract and retain officers consistent
with internal equity considerations, competitive practice and regulatory
oversight. The committee determines the compensation of Richard P. Smith, our
chief executive officer. The committee also reviews 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 executive compensation to TriCo's
performance, reward individual performance and attract and retain a highly
qualified management team. Our executive officers also received the change of
control agreements described on page 19 which the committee believes provides
continuity in leadership which benefits our shareholders and employees. As a
result, the committee believes 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 2004 amended
employment agreement described on page 19. In determining the annual adjustments
to his base salary, the committee annually considers compensation levels of
chief executive officers with similar qualifications and experience at banks of
similar size and type located on the West Coast. In 2004 the committee increased
Mr. Smith's salary 10.25% to $410,000 from $371,875 in 2003.
Annual Bonus. The bonus permits annual recognition of individual performance and
is based on the CEO Incentive Plan adopted in 2001. In 2004 the bonus schedule
for Mr. Smith was based on a sliding scale from 90% to 120% of TriCo's budget as
pre-established by the Board prior to 2004. If TriCo achieved 90% of the
forecasted budget, Mr. Smith would be entitled to a bonus of 22.5% of his annual
salary. If TriCo achieved 120% of the forecasted budget, Mr. smith would be
entitled to a bonus of 150% of his annual salary. Under this plan, the committee
evaluates Mr. Smith's performance annually based on the following four
components:
- TriCo's financial performance,
- TriCo's asset and liability quality, and internal growth,
- TriCo's common stock price, and
- Mr. Smith's leadership skills.
Based on the committee's evaluation under each of these guidelines and whether
TriCo met the budgeted performance goals, the committee recommended that Mr.
Smith receive an incentive bonus of $237,750 for 2004 which was paid in 2005.
This bonus represented 63.9% of Mr. Smith's 2004 base salary in 2004. The full
Board approved payment of this bonus.
Stock Options. The number of stock options granted to Mr. Smith under our 2001
stock option plan described beginning on page 20 is determined by a subjective
evaluation of Mr. Smith's ability to influence TriCo's long-term growth and
profitability. Since the value of an option bears a direct relationship to
TriCo's stock price, the committee believes it is an effective incentive to
create value for
25
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 2004 Mr. Smith received
stock options for 4,000 shares of common stock for his re-election to the Board
of Directors and stock options for 51,520 shares for his employment as chief
executive officer. The 51,520 shares vest 20% immediately and 20% on each
anniversary of the grant date for four years. The 4,000 shares vest on the first
anniversary of the grant date.
COMPENSATION OF OTHER EXECUTIVES
The salaries and annual bonuses for all other officers are recommended by Mr.
Smith each year for the committee's approval. 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 located on the
West Coast. In addition, he considers factors such as relative company
performance, the individual's past performance at TriCo and future potential.
The committee believes that the long-term interests of stockholders and our
officers are more closely linked when the officers are given the opportunity to
own our common stock. This provides incentives to reach TriCo's long-term goals.
The number of stock options granted to top executives by the committee each year
is determined by a subjective evaluation of the executive's ability to influence
TriCo's long-term growth and profitability. In 2004 our executives other than
Mr. Smith together received stock options for an aggregate 44,280 shares of
common stock. These shares vest 20% immediately and 20% on each anniversary of
the grant date for four years.
To attract and retain talented executives who will focus on achieving TriCo's
long-term goals, our executive officers, including Mr. Smith, also receive:
- change of control agreements described on page 19,
- contributions through our employee stock ownership plan described on
page 24,
- interest credits on deferred compensation under our executive
deferred compensation plan described on page 19,
- participation in our supplemental executive retirement plan
described on page 23,
- long-term care agreements described on page 19, and
- perquisites referenced on page 18.
INTERNAL REVENUE CODE SECTION 162(m)
The committee also considers the potential impact of section 162(m) of the
Internal Revenue Code of 1986, as amended. Section 162(m) disallows a tax
deduction for any publicly held corporation for individual compensation
exceeding $1 million in any taxable year for the chief executive officer and the
other senior executive officers, other than is approved by the shareholders of
the corporation and that meets certain other technical requirements. Based on
these requirements, the committee believes that section 162(m) will not prevent
TriCo from receiving a tax deduction for any of the compensation paid to our
executive officers.
SUMMARY
The committee believes that our policy of tying executive compensation to
TriCo's performance was met and that the compensation for our executive officers
has been competitive and comparable to the compensation received by executive
officers of similarly-sized banks on the West Coast. In addition, TriCo's
executive compensation policies support our overall objective to enhance
shareholder value through profitable management of TriCo's operations. The
committee is firmly committed to the ongoing review and evaluation of our
executive compensation program.
RESPECTFULLY SUBMITTED:
William J. Casey (Chairman)
Craig S. Compton
John S. A. Hasbrook
Michael Koehnen
Donald E. Murphy
26
REPORT OF THE AUDIT COMMITTEE
TO OUR SHAREHOLDERS
The Board has affirmatively determined that all members of TriCo' audit
committee are independent directors as defined in Nasdaq Rule 4200(a)(15) and
the special standards established by the Securities and Exchange Commission. The
committee assists the Board in fulfilling its responsibility for oversight of
the quality and integrity of TriCo's accounting, the system of internal controls
established by management, auditing and reporting practices. The
responsibilities of the committee are described on page 8 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 audit committee monitors these processes and reports
its findings to the full Board. The committee has reviewed and discussed TriCo's
audited consolidated financial statements with management and KPMG. The
committee has also 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 rules of the Securities and Exchange Commission and the
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 2004, the committee met
privately in executive session with KPMG, TriCo's chief executive officer and
the director of the internal audit department to review:
- overall audit scope and plans,
- results of internal and external audit examinations,
- TriCo's audited consolidated financial statements,
- management's discussion and analysis of financial condition and results of
operations contained in TriCo's quarterly and annual reports,
- evaluations of TriCo's internal controls by KPMG, and
- quality of TriCo's financial reporting.
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. All audit services and fees payable to KPMG for audit
services must be pre-approved by the committee. The committee's charter requires
that any other services, including any permitted non-audit services, also be
pre-approved by the committee. The committee then communicates its approval to
management. All audit and non-audit services performed by KPMG during 2004 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 29 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
12.48% of our total fees paid in 2004. The committee approved these services and
determined that those services were compatible with maintaining the independence
of KPMG as TriCo's principal accountant.
27
Based on the audit committee's review and discussions with management and KPMG
referenced in this report, 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,
2004, for filing with the Securities and Exchange Commission.
RESPECTFULLY SUBMITTED:
Donald J. Amaral (Chairman)
William J. Casey
Donald E. Murphy
Steve G. Nettleton
Alex A. Vereschagin, Jr.
28
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG, LLP has audited our financial statements for the years ending December 31,
2004 and December 31, 2003. The audit committee selected KPMG, LLP as our
independent accountant for 2005. Representatives of KPMG, LLP are expected to
attend the annual meeting and will have the opportunity to make a statement and
answer questions.
FEES
The following table shows the fees we paid to KPMG, LLP in 2004 and 2003.
2004 2003
-------- --------
Audit fees(1) $226,920 $177,750
Audit-related fees(2) 25,000 21,000
Tax fees(3) 35,910 21,400
All other fees 0 0
-------- --------
Total $287,830 $220,150
======== ========
(1) For auditing our annual consolidated financial statements and our interim
financial statements in our reports filed with the Securities and Exchange
Commission and auditing our internal controls over financial reporting and
management's assessments of those controls.
(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.
29
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph presents the cumulative total yearly shareholder return from
investing $100 on December 31, 1999, in each of TriCo common stock, Standard &
Poor's 500 Stock Index, the Russell 3000 Index and the SNL Western Bank Index.
The SNL Western Bank Index compiled by SNL Financial includes banks located in
California, Oregon, Washington, Montana, Hawaii and Alaska with market
capitalizations similar to that of TriCo's. We are changing our broad equity
market index from Standard & Poor's 500 Index to the Russell 3000 Index for
future proxy statements. We believe this change is appropriate because our stock
is included in the Russell 3000 Index. The amounts shown assume that any
dividends were reinvested. TriCo's stock is listed on the Nasdaq National Market
under the symbol "TCBK."
[PERFORMANCE GRAPH]
PERIOD ENDING
-------------------------------------------------------------------------
INDEX 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
---------------------- -------- -------- -------- -------- -------- --------
TriCo Bancshares $ 100.00 $ 87.30 $ 108.44 $ 145.32 $ 191.88 $ 290.89
S&P 500* 100.00 91.20 80.42 62.64 80.62 89.47
Russell 3000 100.00 92.54 81.94 64.29 84.25 94.32
SNL Western Bank Index 100.00 132.40 115.78 126.67 171.59 195.00
----------
* Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2005. Used with permission. All rights
reserved. crsp.com.
30
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, 2004, to all
directors, director nominees and executive officers (including their associates
and members of their immediate family) was approximately $10,074,000,
representing 7.3% of shareholders' equity at that time. Our audit committee
reviews the adequacy and fairness of the loans to our directors and officers.
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: Corporate Secretary. These materials may
also be accessed on our website at www.tricountiesbank.com under "investor
information."
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 2004 were properly made in a timely fashion, except that
Mr. Amaral, Mr. Hagstrom, Mr. Hasbrook, Mr. Koehnen, Mr. Rios and Mr. Reddish
each inadvertently filed one late report and Mr. Mastorakis and Mr. O'Sullivan
each inadvertently filed two late reports. In making these statements, we have
relied on the representations of the persons involved and on copies of their
reports filed with the Commission.
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 2005 is Mr. Casey. We also encourage shareholders to
attend the annual meeting to ask questions of directors concerning TriCo.
Employees and others may confidentially or anonymously report potential
violations of laws, rules, regulation or our code of business conduct, including
questionable accounting or auditing practices, by calling our hotline at (866)
519-1882. Employee comments will be promptly delivered to the chairman of the
audit committee, Mr. Amaral.
31
TRICO BANCSHARES
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, MAY 24, 2005
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 April 15, 2005, 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 24, 2005, 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 ten nominees: William J. Casey, Donald
J. Amaral, Craig S. Compton, John S.A. Hasbrook, Michael W. Koehnen,
Donald E. Murphy, Steve G. Nettleton, Richard P. Smith, Carroll R. Taresh
and Alex A. Vereschagin, Jr.
______ FOR
______ WITHHELD FOR ALL
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
2. To amend our 2001 stock option plan to (i) provide that annual grants of
stock options to directors upon their re-election or appointment as Board
chairman or audit committee chairman may continue to occur through 2008
and (ii) eliminate the mandatory vesting schedules for options granted to
directors and instead allow the compensation and management succession
committee to determine the vesting schedules.
______ FOR
______ AGAINST
______ ABSTAIN
3. To approve the proposal to ratify the selection of KPMG, LLP as the
independent public accountants of the Company for 2005.
______ FOR
______ AGAINST
______ ABSTAIN
4. 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 2001 STOCK
OPTION PLAN AND "FOR" THE SELECTION OF KPMG, LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE COMPANY FOR 2005. 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 ________________________________________________
Signature ___________________________________________________
Signature if Held Jointly ___________________________________
PLEASE DATE AND SIGN EXACTLY AS YOUR NAME(S) APPEAR. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. ALL JOINT
OWNERS SHOULD SIGN. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY AN
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
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.