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 [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement. [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
TRICO BANCSHARES
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
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(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 23, 2006, 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, 2006, 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 2007 annual meeting of
shareholders.
2. Ratify the selection of KPMG, LLP as our independent accountants for
2006.
3. 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 2005 Annual Report is enclosed. This notice and proxy
statement, a proxy and voting instruction card, and the 2005 Annual Report are
being distributed on or about April 17, 2006.
By Order of the Board of Directors,
/s/ Alex A. Vereschagin, Jr.
----------------------------------------
Secretary
Chico, California
April 17, 2006
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 the
proposals as soon as possible.
PROXY STATEMENT TABLE OF CONTENTS
QUESTIONS AND ANSWERS...................................................... 1
PROPOSALS TO BE VOTED ON................................................... 4
BOARD OF DIRECTORS......................................................... 5
GOVERNANCE, BOARD NOMINATION AND BOARD COMMITTEES.......................... 7
COMPENSATION OF DIRECTORS.................................................. 10
OWNERSHIP OF VOTING SECURITIES............................................. 11
EXECUTIVE OFFICERS AND KEY EMPLOYEES....................................... 13
COMPENSATION OF EXECUTIVE OFFICERS......................................... 14
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE............. 21
REPORT OF THE AUDIT COMMITTEE.............................................. 23
INDEPENDENT PUBLIC ACCOUNTANTS............................................. 24
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN............................ 25
OTHER INFORMATION.......................................................... 26
EXHIBIT A. Audit Committee Charter
QUESTIONS AND ANSWERS
1. Q: WHY AM I RECEIVING THESE MATERIALS?
A: The Board of Directors of TriCo Bancshares is providing these proxy
materials to you in connection with TriCo's annual meeting of
shareholders which will take place on May 23, 2006. 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 2005 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,
2006, may vote at the meeting. As of the record date, 15,764,388
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 and to ratify the
selection of KPMG, LLP as our independent accountants for 2006.
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 and FOR the ratification of the
accountants.
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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. In addition, under California law and our bylaws, you may
cumulate your votes in the election of the directors by following the
procedures described at "Governance, Board Nomination and Board
Committees--Nomination and Election of Directors" at page 9. If the
proxy is not marked with respect to election of directors, authority
will be granted to the persons named in the proxy to cumulate votes if
they so choose and to allocate votes among the nominees in such a
manner as they determine is necessary in order to elect all or as many
of the nominees as possible. You may vote FOR, AGAINST or ABSTAIN on
the proposals 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,
2006, may attend the meeting. You may indicate on the enclosed proxy
card if you plan to attend the meeting.
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 and ratification of our accountants for
2006. If any other business is properly presented at the meeting, your
proxy gives Richard P. Smith, our president and chief
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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 2006 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 2007 ANNUAL MEETING DUE?
A: All shareholder proposals to be considered for inclusion in our proxy
statement for the 2007 annual meeting must be received at our
principal office by December 16, 2006. Shareholder nominations for
directors must be received by our president as described on page 9.
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 2007. Each nominee is currently serving as a director of TriCo.
The nominees for election are:
William J. Casey
Donald J. Amaral
Craig S. Compton
John S. A. Hasbrook
Donald E. Murphy
Steve G. Nettleton
Richard P. Smith
Carroll R. Taresh
Michael W. Koehnen
Alex A. Vereschagin, Jr.
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 5. These
biographies include their age, business experience and the names of
publicly held and certain other corporations of which they are also
directors. Unless stated otherwise, each director has been engaged in his
present occupation for at least the past five years.
Shareholders may cumulate their votes when electing directors. To do so,
you must follow the procedures set forth in our bylaws which are described
at "Governance, Board Nomination and Board Committees--Nomination and
Election of Directors" on page 9.
The Board recommends a vote to elect these ten nominees.
2. 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 2006. 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, 2005:
- 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.
Additional information concerning KPMG's services for TriCo can be found on
pages 23-24. 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 2006.
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BOARD OF DIRECTORS
Biographies
- William J. Casey
- Donald E. Murphy
- Donald J. Amaral
- Craig S. Compton
- John S. A. Hasbrook
The following persons are currently serving as Board members of both TriCo
Bancshares and Tri Counties Bank. They are each nominated for re-election. 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 61, 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 and has served as president of Premium Hospital
Management, Inc. since 2000. 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 70, has been a director since 1975. He is the
vice-chairman of the Board. 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 53, has been a director since 2003. Mr. Amaral is chairman
of our audit committee and a member of our nominating and corporate governance
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, 2005, 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 50, has been a director since 1989. Mr. Compton is a
member of our compensation and management succession committee and our
nominating and corporate governance committee. He has served as the president,
chief executive officer and chief financial officer of AVAG, Inc., an aerial
application business for over 20 years and has been a principal in his family
rice farming partnership for over 22 years. Mr. Compton is also a director of
Environmental Alternatives Foster Care Agency.
JOHN S. A. HASBROOK*
John S. A. Hasbrook, age 46, has been a director since 2002. Mr. Hasbrook is a
member of our compensation and management succession committee and our audit
committee. He is active in several agricultural and investment enterprises. He
is president of SunWest Wild Rice Co., Inc.; president of Hasbrook-Fetter Farms,
Inc., a rice farm; vice president of SunWest Foods, Inc., a food marketing
company; and serves as an officer for other agricultural-related entities. Mr.
Hasbrook also serves as a director of Santa Clara University of Food &
Agribusiness, as well as for various charitable and civic organizations.
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- Michael W. Koehnen
- Steve G. Nettleton
- Richard P. Smith
- Carroll R. Taresh
- Alex A. Vereschagin, Jr.
MICHAEL W. KOEHNEN*
Michael W. Koehnen, age 45, has been a director since 2002. Mr. Koehnen is a
member of our compensation and management succession committee, our audit
committee and our nominating and corporate governance 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.
STEVE G. NETTLETON*
Steve G. Nettleton, age 67, 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 from 1982 to 2003 prior to its merger into Tri Counties Bank. 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 48, 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 and chairman of the
State Government Relations Committee.
CARROLL R. TARESH*
Carroll R. Taresh, age 68, has been a director since 1998. 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 70, has been a director since 1975. Mr.
Vereschagin is our board secretary and a member of our audit committee. He was
chairman of the board from 1984 to 2001. 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 Talbot-Vereschagin Ranch, a farming operation.
* Determined to be independent as described under "Director Independence" on
page 7.
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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 2005 annual meeting we
have:
- 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, and
- affirmatively determined that Mr. Amaral is an audit committee financial
expert under the rules of the Securities and Exchange Commission.
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 is
included as Exhibit A to this proxy statement. The charter for our nominating
and corporate governance committee is not available on our web site but was
included with our 2005 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 nine of our ten 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. 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.
ATTENDANCE AT MEETINGS
The Board of Directors of TriCo met 12 times and the Board of Directors of Tri
Counties Bank met 12 times during 2005. 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. Mr. Casey was our lead director in 2005 and will continue to serve as
lead director in 2006.
Our corporate governance guidelines provide that each director must attend our
annual shareholders meeting. In 2005 all of our directors attended the annual
shareholders meeting.
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.
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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, John Hasbrook, Michael
Koehnen, Steve Nettleton and Alex Vereschagin, Jr. 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 5. 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 six times
during 2005. For more information on the audit committee, please see the report
of the audit committee beginning on page 23.
Compensation and Management Succession Committee. The current members of the
compensation and management succession committee are William Casey (chairman),
Craig Compton, John Hasbrook and Michael Koehnen. 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 2005.
The report of the compensation and management succession committee is found
beginning on page 21.
Nominating and Corporate Governance Committee. The current members of the
nominating and corporate governance committee are William Casey (chairman),
Donald Amaral, Craig Compton, Michael Koehnen and Steve Nettleton. 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 2005.
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 2005, including serving on the compensation committee for any other
entity.
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:
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- 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 21 days
nor more than 60 days prior to any meeting of shareholders called for the
election of directors; provided, however, that if less than 21 days' notice of
the meeting is given to shareholders, such notice of intention to nominate shall
be mailed or delivered to TriCo's president not later than the tenth 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 TriCo stock 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 10,000 votes since we will be electing ten
directors at the meeting. You may cast those votes for a single candidate or
distribute your votes among any or all of the candidates. However, you may not
cumulate votes for a candidate unless that candidate has been properly nominated
prior to the voting and you have given notice of your intention to cumulate your
votes. You must express your intention to cumulate votes at the meeting prior to
the election. If any shareholder gives notice to cumulate his shares, all other
shareholders shall be allowed to cumulate their votes as well. We will provide
an opportunity at the meeting for any shareholder who desires to cumulate votes
to announce his intention to do so. We are soliciting, by your proxy, the
discretionary authority to vote proxies cumulatively. The ten nominees receiving
the highest number of votes will be elected directors.
9
COMPENSATION OF DIRECTORS
COMPENSATION
During 2005 each non-employee director received a $1,500 monthly retainer, the
chairman of the Board received $500 per month and the chairman of the audit
committee received $300 per month. Each director also:
- received nonqualified options for 4,000 shares of our common stock
under our 2001 stock option plan described on page 16, which vest in
May 2006,
- 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,
- has split dollar life insurance described on page 19 with premiums
paid by TriCo,
- has a long-term care agreement with TriCo described beginning on page
15,
- was covered by directors' and officers' liability insurance, and
- was reimbursed for expenses incurred in connection with their
attendance at Board meetings.
The chairman of our board and the chairman of our audit committee received
nonqualified options for an additional 1,000 shares. 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 2005 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 10 years to 15 years and the discount for early retirement has been
changed from 4% per year to 6% per year.
10
OWNERSHIP OF VOTING SECURITIES
This chart shows the common stock ownership for each TriCo director and director
nominee, the executive officers named on page 14, and owners of more than 5
percent of our outstanding common stock as of March 29, 2006. 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, 2006.
COMMON STOCK OWNERSHIP NOT COMMON STOCK OWNERSHIP INCLUDING
INCLUDING STOCK OWNED AS STOCK OWNED AS A TRUSTEE
A TRUSTEE OF THE ESOP OF THE ESOP
-------------------------------- ---------------------------------
NUMBER OF SHARES PERCENTAGE OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY COMMON STOCK BENEFICIALLY COMMON STOCK
BENEFICIAL OWNERS OWNED OUTSTANDING OWNED OUTSTANDING
----------------- ---------------- ------------- ---------------- -------------
5% Holders
TriCo Bancshares 1,238,598 (1) 7.86% 1,238,598 (1) 7.86%
Employee Stock Ownership
Plan and Trust (ESOP)
63 Constitution Drive
Chico, CA 95973
Directors and Executive Officers
Donald J. Amaral 25,000 (2) * 25,000 (2) *
Craig Carney 121,326 (3) * 121,326 (3) *
William J. Casey 641,948 (4) 4.07% 1,880,546 (4)(18) 11.93%
Craig S. Compton 155,160 (5) * 155,160 (5) *
Rick Hagstrom 53,463 (6) * 53,463 (6) *
John S. A. Hasbrook 27,121 (7) * 27,121 (7) *
Michael W. Koehnen 130,116 (8) * 130,116 (8) *
Andrew Mastorakis 184,039 (9) 1.17% 184,039 (9) 1.17%
Donald E. Murphy 192,879 (10) 1.22% 192,879 (10) 1.22%
Steve G. Nettleton 343,545 (11) 2.18% 343,545 (11) 2.18%
Richard O'Sullivan 313,737 (12) 1.99% 313,737 (12) 1.99%
Thomas J. Reddish 175,443 (13) 1.11% 175,443 (13) 1.11%
Richard P. Smith 469,562 (14) 2.98% 1,708,160 (14)(18) 10.84%
Carroll R. Taresh 138,444 (15) * 138,444 (15) *
Alex A. Vereschagin, Jr. 141,424 (16) * 1,380,022 (16) 8.75%
All TriCo directors and executive 3,251,156 20.62% 4,472,171 (17)(18) 28.46%
officers as a group (17 persons)
* Less than 1%.
11
(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 29, 2006, participants in the ESOP could direct the
voting of all 1,238,598 shares held by the ESOP. Of that total, 112,951
shares had been allocated to the accounts of TriCo's executive officers.
(2) Includes stock options for 25,000 shares.
(3) Includes stock options for 84,040 shares and 8,817 shares allocated to Mr.
Carney's account in the ESOP.
(4) Includes stock options for 19,000 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, 1,258 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
20,000 shares.
(6) Includes 11,204 shares held by Mr. Hagstrom's spouse, stock options for
22,000 shares and 8,854 shares allocated to Mr. Hagstrom's account in the
ESOP.
(7) Includes stock options for 24,000 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, 1,400 shares owned by Mr. Koehnen's
minor children, 2,300 shares owned by Mr. Koehnen's wife and stock options
for 24,000 shares.
(9) Includes 700 shares owned by Mr. Mastorakis' minor children, stock options
for 156,300 shares and 5,508 shares allocated to Mr. Mastorakis' account in
the ESOP.
(10) 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, 81,899 shares held by Blavo LLC of which Mr. Murphy is
a manager and stock options for 16,000 shares.
(11) Includes 138,261 shares held jointly with his spouse, 189,284 shares held
in an IRA account for the benefit of Mr. Nettleton and stock options for
16,000 shares.
(12) Includes stock options for 143,000 shares and 28,106 shares allocated to
Mr. O'Sullivan's account in the ESOP.
(13) Includes 2,252 shares held by Mr. Reddish's minor children, stock options
for 157,000 shares and 11,214 shares allocated to Mr. Reddish's account in
the ESOP.
(14) Includes 170 shares held by Mr. Smith's wife, stock options for 430,912
shares and 17,583 shares allocated to Mr. Smith's account in the ESOP.
(15) Includes stock options for 8,000 shares and 8,000 shares held by Mr.
Taresh's wife.
(16) Includes stock options for 8,000 shares.
(17) Includes stock options for 1,258,332 shares.
(18) Includes 1,238,598 shares held by the ESOP of which Messrs. Smith, Casey
and Vereschagin are trustees of which 112,951 shares have been allocated to
the accounts of executive officers under the ESOP.
12
EXECUTIVE OFFICERS AND KEY EMPLOYEES
Biographies
- Richard P. Smith
- Richard O'Sullivan
- Andrew Mastorakis
- W. R. "Rick" Hagstrom
- Thomas J. Reddish
- Craig Carney
- Richard A. Miller
- Raymond Rios
RICHARD P. SMITH
Information about Mr. Smith can be found on page 6.
RICHARD O'SULLIVAN
Richard O'Sullivan, age 49, 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 treasurer of the Boys and
Girls Club of the North Valley.
ANDREW MASTORAKIS
Andrew Mastorakis, age 47, 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 60, 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 46, 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 2005. 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 47, 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 62, has served as senior vice president---human resources 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 49, has served as senior vice president, chief information
officer, since 2003. From 1983 through 1994 Mr. Rios served in a variety of
positions in our information technology department and from 1995 to 2003 he was
manager, information systems, of Tri Counties Bank.
13
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 2005, 2004 and 2003.
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION
-------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) OPTIONS GRANTED COMPENSATION(4)
--------------------------- ---- --------- -------- --------------------- ---------------
Richard Smith 2005 $447,200 $215,000 4,000 $18,982
President and Chief Executive Officer 2004 410,000 237,750 55,520 19,499
2003 371,875 168,750 52,000 17,795
Richard O'Sullivan 2005 226,048 115,000 10,000 37,807
Executive Vice President--Wholesale Banking 2004 205,834 107,000 25,000 28,423
2003 196,096 75,000 20,000 29,372
Andrew Mastorakis 2005 234,598 140,000 15,000 37,324
Executive Vice President--Retail Banking 2004 205,004 141,000 25,000 34,577
2003 195,836 70,000 20,000 30,637
Rick Hagstrom 2005 175,266 62,000 7,500 27,751
Executive Vice President--Risk Management 2004 158,750 64,000 25,000 22,009
2003 144,094 55,000 20,000 18,983
Thomas Reddish 2005 233,688 75,000 10,000 25,864
Executive Vice President and Chief Financial 2004 205,000 77,000 25,000 27,288
Officer 2003 177,402 55,000 20,000 24,089
Craig Carney 2005 181,718 50,000 7,500 25,533
Senior Vice President and Chief Credit Officer 2004 166,668 51,000 20,000 26,826
2003 163,595 45,000 15,000 23,284
(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 15.
(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 20 which generally vest over a seven-year period, interest credits
on deferred compensation under our executive deferred compensation plan
described on page 15 that are considered by the Securities and Exchange
Commission to be at above-market rates, the cost of insurance premiums for
the split dollar life insurance described beginning on page 19 and the cost
of insurance premiums for the long-term care agreements described beginning
on page 15.
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
14
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 2005 Mr. Smith, 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" beginning on
page 21. This plan provides bonus compensation to our chief executive officer,
Richard Smith.
CEO EMPLOYMENT AGREEMENT
In 2004 we entered into an amended employment agreement with Richard Smith, as
further amended in 2005, which provided Mr. Smith with a base annual salary of
$430,000 for 2005 with future increases as determined by the compensation and
management succession 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 21. 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 and Mr. Smith's employment is terminated other
than for "cause" or Mr. Smith terminates his employment after a substantial and
material negative change occurs in his title, compensation or responsibilities,
then 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, Mr. Carney, Mr.
Miller and Mr. Rios 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 and the executive's employment is terminated other than for
"cause" or the executive terminates his employment after a substantial and
material negative change in his title, compensation or responsibilities, then
such 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. 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 2005 we recognized an expense of $136,093 relating to the
long-term care insurance.
15
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, 2005. All of our equity compensation plans have been
approved by shareholders.
NUMBER OF SECURITIES TO BE
ISSUED UPON EXERCISE OF WEIGHTED AVERAGE EXERCISE NUMBER OF SECURITIES REMAINING
OUTSTANDING OPTIONS, WARRANTS PRICE OF OUTSTANDING OPTIONS, AVAILABLE FOR ISSUANCE UNDER
PLAN CATEGORY AND RIGHTS WARRANTS AND RIGHTS EQUITY COMPENSATION PLANS
------------- ----------------------------- ----------------------------- ------------------------------
Equity compensation plans not
approved by stockholders 0 NA 0
Equity compensation plans
approved by stockholders 1,636,762 $11.44 502,436
--------- ------ -------
Total 1,636,762 $11.44 502,436
========= ====== =======
2001 STOCK OPTION PLAN
In 2001 we adopted a stock option plan for key officers, employees, directors
and consultants, as subsequently amended by shareholders, which provides that an
aggregate of 2,124,650 shares of our common stock may be granted under the plan.
On March 29, 2006, there were options for 1,361,082 shares outstanding and
options for 502,436 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, 2006, approximately 685
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 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.
16
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. In addition, 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 or chairman of our audit committee may receive options for
1,000 shares. These shares are exercisable on the first anniversary of the grant
date. The option price for all options granted to directors is the fair market
value on the grant date. The Board determines the terms and conditions of any
other options granted to directors.
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.
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 $1 million deduction limit and therefore
remains fully deductible by TriCo. TriCo intends that the following grants will
qualify as "performance-based compensation" so that these awards will not be
subject to the Section 162(m) deduction limitations:
- performance awards,
- options granted with an exercise price at least equal to 100% of the
fair market value of the underlying shares of common stock at the
grant date, and
- options granted to employees that the committee expects to be named
executive officers at the time a deduction arises.
17
1995 Stock Option Plan. In 1995 we adopted a stock option plan for key
employees. On March 29, 2006, there were options for 194,000 shares outstanding
under this plan and no additional options were available for grant. Vesting
schedules were determined individually for each grant under both plans.
STOCK OPTION GRANTS IN 2005
The following table presents information concerning stock options granted to
each of the named executive officers in 2005 and the potential realizable value
for those stock options based on future appreciation assumptions:
INDIVIDUAL GRANTS
------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME GRANTED # 2005 ($) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- -------- --------
Richard P. Smith 4,000(2) 5.41% $20.58 05-24-15 $ 51,771 $131,197
Richard O'Sullivan 10,000 13.51% 19.35 02-22-15 121,691 308,389
Andrew Mastorakis 15,000 20.27% 19.35 02-22-15 182,537 462,584
Rick Hagstrom 7,500 10.14% 19.35 02-22-15 91,268 231,292
Thomas Reddish 10,000 13.51% 19.35 02-22-15 121,691 308,389
Craig Carney 7,500 10.14% 19.35 02-22-15 91,268 231,292
(1) Potential realizable value is based on an assumption that the market price
of our common stock will appreciate at the stated rates (5% and 10%),
compounded annually from the date of grant until the end of the term. The
values are calculated based on rules of the Securities and Exchange
Commission and do not reflect our estimate or projection of future stock
prices. Actual gains, if any, on stock option exercises will depend on the
future performance of the price of our common stock and the timing of
exercises.
(2) Received as a director of TriCo.
OPTIONS EXERCISED IN 2005 AND 2005 YEAR-END OPTION VALUES
The following table presents information about the number and value of stock
options exercised in 2005 and held at December 31, 2005, 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 IN-THE
NUMBER OF VALUE UNDERLYING UNEXERCISED -MONEY OPTIONS
SHARES RECEIVED OPTIONS AT 12-31-05 AT 12-31-05(1)
ACQUIRED ON UPON --------------------------- ---------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Richard P. Smith 37,500 $605,703 416,608 74,912 $5,842,147 $624,576
Richard O'Sullivan 22,820 327,638 203,180 39,000 2,841,496 293,505
Andrew Mastorakis 0 -- 149,800 43,000 2,043,902 309,665
Rick Hagstrom 0 -- 15,500 29,000 108,950 199,945
Thomas Reddish 0 -- 150,000 39,000 2,051,443 293,505
Craig Carney 24,300 397,046 91,540 30,000 1,226,065 224,640
(1) Based on the closing price per share of TriCo stock as quoted on the Nasdaq
National Market on December 30, 2005 ($23.39 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
18
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.
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. Such amounts have not been reduced for expected social security
benefits and the expected annuity payout from the ESOP, both of which are
currently expected to reduce payments of the 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, 2006, they had accrued the following years of service
in the plan: Mr. Smith--twelve years; Mr. O'Sullivan--twenty-one years; Mr.
Mastorakis--five years; Mr. Hagstrom--twelve years; Mr. Reddish--eleven years
and Mr. Carney--nine years.
SPLIT DOLLAR LIFE INSURANCE
In March 2003 we entered into joint beneficiary agreements with all of our named
executive officers and directors, except for Mr. Nettleton. These agreements
provide that the Company shall own and pay premiums on a split dollar life
insurance policy to provide various death benefits to the beneficiaries named by
each of these directors and executive officers in certain circumstances.
19
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.
20
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE
TO OUR SHAREHOLDERS:
The report of the compensation and management succession committee for 2005
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 14. 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 2005 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 15 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 amended
employment agreement described on page 15. 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 2005 the committee increased
Mr. Smith's salary 4.88% to $430,000 from $410,000 in 2004.
Annual Bonus. The bonus permits annual recognition of individual performance and
is based on the CEO Incentive Plan adopted in 2001. In 2005 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 2005. 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 $215,000 for 2005 which was paid in 2006.
This bonus represented 50% of Mr. Smith's 2005 base salary. 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 16 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 shareholders. All options are granted at exercise prices not
less than the fair market value of the stock
21
on the date of the grant. In 2005 Mr. Smith received stock options for 4,000
shares of common stock for his re-election to the Board of Directors and no
stock options for his employment as chief executive officer. 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 2005 our executives other than
Mr. Smith together received stock options for an aggregate 154,160 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 15,
- contributions through our employee stock ownership plan described on
page 20,
- interest credits on deferred compensation under our executive deferred
compensation plan described on page 15,
- participation in our supplemental executive retirement plan described
on page 19,
- long-term care agreements described beginning on page 15, and
- perquisites referenced on page 14.
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
22
REPORT OF THE AUDIT COMMITTEE
TO OUR SHAREHOLDERS:
The Board has affirmatively determined that all members of TriCo's 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, a copy of which is attached to this proxy statement as Exhibit A.
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 two of its regular meetings in 2005, 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 2005 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 24 may have on the independence of KPMG. These fees amounted to
approximately 12.48% of our total fees paid to KPMG in 2004 and approximately
5.37% of our total fees paid in 2005. The committee approved these services and
determined that those services were compatible with maintaining the independence
of KPMG as TriCo's principal accountant.
23
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,
2005, for filing with the Securities and Exchange Commission.
RESPECTFULLY SUBMITTED:
Donald J. Amaral (Chairman)
William J. Casey
John S. A. Hasbrook
Michael W. Koehnen
Steve G. Nettleton
Alex A. Vereschagin, Jr.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG, LLP has audited our financial statements for the years ending December 31,
2005 and December 31, 2004. The audit committee selected KPMG, LLP as our
independent accountant for 2006. Representatives of KPMG, LLP are expected to
attend the annual meeting and will have the opportunity to make a statement and
answer questions.
AUDIT FEES, AUDIT-RELATED FEES, TAX FEES AND ALL OTHER FEES
The following table shows the fees we paid to KPMG, LLP in 2005 and 2004.
2005 2004
-------- --------
Audit fees(1) $472,986 $226,920
Audit-related fees(2) 27,500 25,000
Tax fees(3) 31,950 35,910
All other fees 0 0
-------- --------
Total $594,936 $287,830
======== ========
(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.
24
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following graph presents the cumulative total yearly shareholder return from
investing $100 on December 31, 2000, in each of TriCo common stock, 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. 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)
TOTAL RETURN PERFORMANCE
PERIOD ENDING
---------------------------------------------------------------
INDEX 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05
----- -------- -------- -------- -------- -------- --------
TriCo Bancshares 100.00 124.21 166.46 219.79 333.20 339.81
Russell 3000 100.00 88.54 69.47 91.04 101.92 108.16
SNL Western Bank Index 100.00 87.45 95.68 129.61 147.29 153.35
25
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, 2005, to all
directors, director nominees and executive officers (including their associates
and members of their immediate family) was approximately $10,146,000,
representing 6.79% 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 2005 were properly made in a timely fashion, except that
Mr. Vereschagin, Jr. was inadvertently late in filing one report. In making
these statements, we have relied on the representations of the persons involved
and on copies of their reports filed with the Commission.
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 2006 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.
26
EXHIBIT A
TRICO BANCSHARES
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
(effective as of February 24, 2004)
A. PURPOSE
The Audit Committee shall assist the Board of Directors of TriCo Bancshares
("Company") in fulfilling its oversight responsibilities. The Audit Committee's
primary responsibilities are to monitor:
- the integrity of the Company's financial statements, including the
financial reporting process and systems of internal controls regarding
finance, accounting, and legal and regulatory compliance;
- the Company's compliance with legal and regulatory requirements;
- the independence, qualifications and performance of the Company's financial
executives, independent auditor and internal auditing department; and
- the communication among the independent auditor, management, the internal
auditing function and the Board of Directors.
The Audit Committee shall discharge its responsibilities, and shall assess the
information provided by the Company's management and the independent auditor, in
accordance with its business judgment. Management is responsible for the
preparation, presentation and integrity of the Company's financial statements
and for the appropriateness of the accounting principles and reporting policies
that are used by the Company. The independent auditor are responsible for
auditing the Company's financial statements and for reviewing the Company's
unaudited interim financial statements. The authority and responsibilities set
forth in this Charter do not reflect or create any duty or obligation of the
Audit Committee to plan or conduct any audit, to determine or certify that the
Company's financial statements are complete, accurate, fairly presented or in
accordance with generally accepted accounting principles or applicable law, or
to guarantee the independent auditor's report.
B. STRUCTURE AND MEETINGS
1. Number. The Audit Committee shall consist of at least three members of the
Board of Directors.
2. Independence. Except as otherwise permitted by the applicable rules of the
Nasdaq National Market System and Section 301 of the Sarbanes-Oxley Act of 2002
(the "Act"), each member of the Audit Committee shall be "independent" as
defined by such rules and Act. In addition, no member of the Audit Committee
shall have participated in the preparation of the financial statements of the
Company or any current subsidiary of the Company at any time during the past
three years.
3. Financial Literacy. Each member of the Audit Committee shall be able to read
and understand fundamental financial statements, including the Company's balance
sheet, income statement, and cash flow statement and shall otherwise be
financially literate, as such qualification is interpreted by the Company's
Board of Directors in its business judgment. At least one member of the Audit
Committee must have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. Unless otherwise determined by the Board of Directors (in
which case disclosure of such determination shall be made in the Company's SEC
periodic reports), at least one member of the Audit Committee shall be an "audit
committee financial expert" as defined by the Act and applicable SEC rules.
4. Chair. Unless the Board of Directors elects a Chair of the Audit Committee,
the Audit Committee shall elect a Chair by majority vote.
A-1
5. Compensation. The compensation of the Audit Committee members shall be as
determined by the Board of Directors. No member of the Audit Committee may
receive any compensation from the Company other than director's fees.
6. Selection and Removal. Members of the Audit Committee shall be appointed by
the Board of Directors. Unless otherwise determined by the Board, no member of
the Audit Committee may serve on the audit committee of more than two other
public companies. The Board of Directors may remove members from the Audit
Committee with or without cause.
7. Meetings. The Audit Committee shall meet at least four times annually or more
frequently as it deems necessary to perform its responsibilities. The Audit
Committee shall meet privately in executive session at least semi-annually with
the Company's Chief Executive Officer, the director of the internal audit
department, and a representative of the independent auditor to discuss any
matters that the Audit Committee or any of these individuals or firms believe
should be discussed. In addition, the Audit Committee or its Chair shall
communicate with management and the independent auditor quarterly to review the
Company's financial statements and significant findings based upon the
independent auditor' limited review procedures. The Audit Committee shall keep
records of its meetings as it deems appropriate.
C. RESPONSIBILITIES AND AUTHORITY
1. General. To fulfill its responsibilities the Audit Committee shall:
- Annually review this Charter and recommend any proposed changes to the
Board of Directors. The Charter will be published at least every three
years in accordance with SEC regulations.
- Review and discuss with management and independent auditor the Company's
annual and quarterly financial statements, including the Company's
disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the matters about which Statement
on Auditing Standards No. 61 requires discussion.
- Oversee the accounting and financial reporting processes of the Company and
the audits of the financial statements of the Company.
- Review and discuss generally with management and the independent auditor
the types of financial information and earnings guidance to be provided to
analysts and rating agencies and to be disclosed in the Company's earnings
press releases (including any use of "pro forma" or "adjusted" non-GAAP
information).
- Consider annually whether it will recommend to the Board of Directors that
the Company's audited financial statements be included in the Company's
Annual Report on Form 10-K.
- The Audit Committee shall prepare for inclusion where necessary in a proxy
or information statement of the Company relating to an annual meeting of
security holders at which directors are to be elected (or special meeting
or written consents in lieu of such meeting), the report described in Item
306 of Regulation S-K.
- The Audit Committee shall direct the independent auditor to use its best
efforts to perform all reviews of interim financial information prior to
disclosure by the Company of such information and to discuss promptly with
the Audit Committee and the Chief Financial Officer any matters identified
in connection with the auditor review of interim financial information
which are required to be discussed by Statement on Auditing Standards Nos.
61, 71 and 90. The Audit Committee shall direct management to advise the
Audit Committee in the event that the Company proposed to disclose interim
financial information prior to completion of the independent auditor's
review of interim financial information.
A-2
Oversight of Independent Auditor
2. Selection. The Audit Committee shall be directly responsible for appointing,
evaluating and, when necessary, terminating the independent auditor. The Audit
Committee may, in its discretion, seek stockholder ratification of the
independent auditor it appoints.
3. Independence. The Audit Committee shall annually assess the independent
auditor's independence. The Audit Committee shall obtain and review a report by
the independent auditor describing all relationships between the independent
auditor and the Company, including the disclosures required by Independence
Standards Board Standard No. 1. The Audit Committee shall engage in an active
dialogue with the independent auditor concerning any disclosed relationships or
services that might impact the objectivity and independence of the auditor.
4. Quality Control Report. The Audit Committee shall annually obtain and review
a report by the independent auditor describing:
- the firm's internal quality control procedures; and
- any material issues raised by the most recent internal quality control
review, or peer review, of the firm, or by an inquiry or investigation by
governmental or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the firm, and any
steps taken to deal with any such issues.
5. Compensation. The Audit Committee shall be directly responsible for setting
the compensation of the independent auditor. The Audit Committee is empowered,
without further action by the Board of Directors, to cause the Company to pay
the compensation of the independent auditor established by the Audit Committee.
6. Preapproval of Services. The Audit Committee shall preapprove all auditing
services, which may include providing comfort letters in connection with
securities underwritings, and non-audit services (other than de minimus
non-audit services as defined by the Act) to be provided to the Company by the
independent auditor. The Audit Committee shall cause the Company to disclose in
its SEC periodic reports the approval by the Audit Committee of any non-audit
services to be performed by the independent auditor.
7. Oversight. The independent auditor shall report directly to the Audit
Committee and the Audit Committee shall be directly responsible for oversight of
the work of the independent auditor, including resolution of disagreements
between Company management and the independent auditor regarding financial
reports. The Audit Committee shall as necessary obtain and review the reports
required to be made by the independent auditor pursuant to paragraph (k) of
Section 10A of the Security Exchange Act of 1934 regarding:
- critical accounting policies and practices;
- alternative treatments of financial information within generally accepted
accounting principles that have been discussed with Company management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditor; and
- other material written communications between the independent auditor and
Company management, such as any management letter or schedule of unadjusted
differences.
8. Review of Financial Principals. The Audit Committee shall as necessary review
with the independent auditor:
- audit problems or difficulties the independent auditor encountered in the
course of the audit work and management's response, including any
restrictions on the scope of the independent auditor's activities or on
access to requested information and any significant disagreements with
management;
- major issues as to the adequacy of the Company's internal controls and any
special audit steps adopted in light of material control deficiencies;
A-3
- analyses prepared by management or the independent auditor setting forth
significant financial reporting issues and judgments made in connection
with the preparation of the financial statements, including analyses of the
effects of alternative GAAP methods on the financial statements; and
- the effect of regulatory and accounting initiatives, as well as off balance
sheet structures, on the financial statements of the Company.
Controls and Procedures
9. Oversight. The Audit Committee shall coordinate the Board of Director's
oversight of the Company's internal accounting controls, the Company's
disclosure controls and procedures and the Company's code of business conduct
and ethics. The Audit Committee shall receive and review the reports of the CEO
and CFO required by Section 302 of the Sarbanes-Oxley Act and Rule 13a-14 of the
Exchange Act (i.e., the Certification of Disclosure in Annual and Quarterly
Results).
10. Internal Audit Function. The Audit Committee shall coordinate the Board of
Director's oversight of the performance of the Company's internal audit
function.
11. Risk Management. The Audit Committee shall discuss the Company's policies
with respect to risk assessment and risk management, including guidelines and
policies to govern the process by which the Company's exposure to risk is
handled.
12. Hiring Policies. The Audit Committee shall establish policies regarding the
hiring of employees or former employees of the Company's independent auditor.
13. Procedures for Complaints. The Audit Committee shall establish procedures
for (i) the receipt, retention and treatment of complaints received by the
Company regarding accounting, internal accounting controls or auditing matters;
and (ii) the confidential, anonymous submission by employees of the Company of
concerns regarding questionable accounting or auditing matters.
14. Additional Powers. The Audit Committee shall have such other duties as may
be delegated from time to time by the Board of Directors.
D. OTHER RESPONSIBILITIES
1. Review Transactions. The Audit Committee shall review and preapprove all
transactions between the Company or Tri Counties Bank and any officer, director
or employee, or affiliate thereof, of the Company or Tri Counties Bank, or any
other transaction required to be disclosed pursuant to Item 404 of SEC
Regulation S-K.
2. Board Update. The Audit Committee shall regularly update the Board of
Directors regarding the Company's compliance with financial policies and
procedures, the performance of the independent auditor and the internal audit
function, and the independence of the independent auditor.
3. Subcommittees. The Audit Committee may form and delegate authority to one or
more subcommittees (including a subcommittee consisting of a single member), as
it deems appropriate from time to time under the circumstances. Any decision of
a subcommittee to preapprove audit or non-audit services shall be presented to
the full Audit Committee at its next scheduled meeting.
4. Written Affirmation to Nasdaq. The Audit Committee shall annually direct the
Company to prepare and provide to Nasdaq such written confirmations regarding
the membership and operation of the Audit Committee as Nasdaq rules require.
5. Independent Advisors. The Audit Committee shall have the authority to engage
independent legal, accounting and other advisors as it deems necessary to carry
out its responsibilities. These independent advisors may be the regular advisors
to the Company. The Audit Committee is empowered, without further action by the
Board of Directors, to cause the Company to pay the compensation of such
advisors as established by the Audit Committee.
A-4
6. Investigations. The Audit Committee shall have the authority to conduct or
authorize investigations into any matters within the scope of its
responsibilities as it shall deem appropriate, including the authority to
request any officer, employee or advisor of the Company to meet with the Audit
Committee or any advisors engaged by the Audit Committee.
7. Annual Self-Evaluation. The Audit Committee shall annually evaluate its own
performance.
A-5
PROXY
TRICO BANCSHARES
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, ON MAY 23, 2006
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 17, 2006, 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 23, 2006, 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.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
ADDRESS CHANGE/COMMENTS (MARK THE CORRESPONDING BOX ON THE REVERSE SIDE)
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DETACH HERE FROM PROXY VOTING CARD.
YOU CAN NOW ACCESS YOUR TRICO BANCSHARES ACCOUNT ONLINE.
Access your TriCo Bancshares shareholder/stockholder account online via Investor
ServiceDirect (R) (ISD).
Mellon Investor Services LLC, Transfer Agent for TriCo Bancshares, now makes it
easy and convenient to get current information on your shareholder account.
o View account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
VISIT US ON THE WEB AT HTTP://WWW.MELLONINVESTOR.COM
FOR TECHNICAL ASSISTANCE CALL 1-877-978-7778 BETWEEN 9AM-7PM
MONDAY-FRIDAY EASTERN TIME
INVESTOR SERVICEDIRECT(R) IS A REGISTERED TRADEMARK OF
MELLON INVESTOR SERVICES LLC
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED,
WILL BE VOTED "FOR" THE PROPOSALS. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS.
Mark Here [ ]
for Address
Change or
Comments
PLEASE SEE REVERSE SIDE
WITHHELD
FOR FOR ALL
1. To elect as directors the following ten nominees: [ ] [ ]
01 William J. Casey 06 Donald E. Murphy
02 Donald J. Amaral 07 Steve G. Nettleton
03 Craig S. Compton 08 Richard P. Smith
04 John S.A. Hasbrook 09 Carroll R. Taresh
05 Michael W. Koehnen 10 Alex A. Vereschagin, Jr.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
FOR AGAINST ABSTAIN
ITEM 2 - TO APPROVE THE PROPOSAL TO RATIFY THE [ ] [ ] [ ]
SELECTION OF KPMG, LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR 2006.
ITEM 3 - In their discretion, the proxy holders are authorized to vote upon such
other business as may properly come before the meeting.
[ ] WE DO [ ] DO NOT EXPECT TO ATTEND THIS MEETING.
Choose MLINK(SM) for fast, easy and secure 24/7 online
access to your future proxy materials, investment plan
statements, tax documents and more. Simply log on to
INVESTOR SERVICEDIRECT(R) at www.melloninvestor.com/isd
where step-by-step instructions will prompt you through
enrollment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" DIRECTOR
NOMINEES NAMED ABOVE IN PROPOSAL 1 AND "FOR" PROPOSAL 2.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS
DIRECTED. IF NO DIRECTION IS MADE, IT WILL BE VOTED "FOR"
THE NOMINEES LISTED AND "FOR" THE SELECTION OF KPMG, LLP AS
THE INDEPENDENT PUBLIC ACCOUNTANTS FOR THE COMPANY FOR
2006. THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD
OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
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.
SIGNATURE ____________________ SIGNATURE ________________________ DATE _________
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.
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DETACH HERE FROM PROXY VOTING CARD
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 11:59 PM EST
THE DAY PRIOR TO ANNUAL MEETING DAY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAIL
HTTP://WWW.PROXYVOTING.COM/TCBK 1-866-540-5760
Mark, sign and date
Use the Internet to vote your proxy. Use any touch-tone telephone to vote your proxy card
Have your proxy card in hand when your proxy. Have your proxy card in and
you access the web site. OR hand when you call. OR return it in the
enclosed postage-paid
envelope.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT ON
THE INTERNET AT: HTTP://WWW.TRICOUNTIESBANK.COM