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. ________ )
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[ ] Preliminary Proxy Statement. [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
TRICO BANCSHARES
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________________
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TRICO BANCSHARES
(TRICO BANCSHARES LOGO)
TriCo Bancshares
63 Constitution Drive
Chico, California 95973
Phone: (530) 898-0300
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
To Our Shareholders:
On Tuesday, May 22, 2007, 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 30, 2007, 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 Moss Adams LLP as our principal independent
auditor for 2007.
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 2006 Annual Report is enclosed. This notice and proxy
statement, a proxy and voting instruction card, and the 2006 Annual Report are
being distributed on or about April 20, 2007.
By Order of the Board of Directors,
/s/ Alex A. Vereschagin, Jr.
----------------------------------------
Secretary
Chico, California
April 20, 2007
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......................................................... 6
CORPORATE GOVERNANCE, BOARD NOMINATION AND BOARD COMMITTEES................ 8
COMPENSATION OF DIRECTORS.................................................. 12
OWNERSHIP OF VOTING SECURITIES............................................. 14
EXECUTIVE OFFICERS......................................................... 16
COMPENSATION DISCUSSION AND ANALYSIS....................................... 17
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE............. 21
COMPENSATION OF NAMED EXECUTIVE OFFICERS................................... 22
REPORT OF THE AUDIT COMMITTEE.............................................. 34
PRINCIPAL INDEPENDENT AUDITOR.............................................. 36
OTHER INFORMATION.......................................................... 37
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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 22, 2007. 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 2006 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 30,
2007, may vote at the meeting. As of the record date, 15,910,291
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 Moss Adams LLP as our principal independent auditor for
2007.
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 director nominees named in this proxy statement and FOR
ratification of Moss Adams LLP as our principal independent auditor
for 2007.
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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 "Corporate Governance, Board Nomination and
Board Committees--Nomination and Election of Directors." 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 proposal to ratify the principal independent auditor.
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 30,
2007, 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 Moss Adams LLP as
our principal independent auditor for 2007. If any other business is
properly presented at the meeting, your proxy gives Richard P. Smith,
our president and chief executive officer, and Richard O'Sullivan,
executive vice president of our subsidiary, Tri Counties Bank,
authority to vote on these matters in their discretion.
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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 2007 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 2008 ANNUAL MEETING DUE?
A: All shareholder proposals to be considered for inclusion in our proxy
statement for the 2008 annual meeting must be received at our
principal office by December 16, 2007. Shareholder nominations for
directors must be received by our president as described at
"Corporate Governance, Board Nomination and Board
Committees--Nomination and Election of Directors."
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 2008. Each nominee is currently serving as a director of TriCo.
The nominees for election are:
William J. Casey
Donald E. Murphy
Donald J. Amaral
Craig S. Compton
John S. A. Hasbrook
Michael W. Koehnen
Steve G. Nettleton
Richard P. Smith
Carroll R. Taresh
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 are found at "Board of
Directors." These biographies include each nominee's 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 "Corporate Governance, Board Nomination and Board Committees--Nomination
and Election of Directors."
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL TEN NOMINEES.
2. RATIFICATION OF SELECTION OF PRINCIPAL INDEPENDENT AUDITOR
Our audit committee has selected the firm of Moss Adams LLP as our
principal independent auditor for 2007. Representatives of Moss Adams will
be present at the meeting and will have the opportunity to make a statement
and to answer appropriate questions.
Neither TriCo's governing documents nor applicable law require shareholder
ratification of the appointment of Moss Adams as our principal independent
auditor. However, the audit committee recommended, and the Board of
Directors determined, to submit the appointment of Moss Adams 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 a different principal independent auditor at any time.
The affirmative vote of a majority of those shareholders present and voting
will ratify the selection of Moss Adams as our principal independent
auditor. If the firm should unexpectedly for any reason decline or be
unable to act as our principal independent auditor, the proxies will be
voted for a substitute nominee to be designated by the audit committee.
The firm of KPMG, LLP served as our principal independent auditor from 2002
until March 15, 2007, when they were dismissed by our audit committee. See
"Principal Independent Auditor." Representatives of KPMG will not be
present at the meeting.
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The following audit services were performed by KPMG for the year ended
December 31, 2006:
- 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 in 2006 can be
found at "Principal Independent Auditor" and "Report of the Audit
Committee."
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF MOSS ADAMS LLP AS OUR
PRINCIPAL INDEPENDENT AUDITOR FOR 2007.
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BOARD OF DIRECTORS
The following persons are currently serving as Board members of both TriCo
Bancshares and Tri Counties Bank. They are each nominated for re-election. These
Board members also serve on committees of the Board of Directors of Tri Counties
Bank, TriCo's wholly owned subsidiary, in addition to the TriCo Board committees
discussed below.
WILLIAM J. CASEY
William J. Casey, age 62, 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 Master's degree in public
administration and has served on the audit committees of other public companies.
DONALD E. MURPHY
Donald E. Murphy, age 71, 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 54, 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, 2006, the Bankruptcy Court confirmed the trustee's plan of reorganization.
Mr. Amaral has a Bachelor's degree in accounting and an MBA degree. He has
served as chief executive officer and chief financial officer of various
companies for over 25 years.
CRAIG S. COMPTON
Craig S. Compton, age 51, 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 47, has been a director since 2002. Mr. Hasbrook is a
member of our compensation and management succession committee and our audit
committee and serves as chairman of the director loan committee of Tri Counties
Bank. 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 for Santa Clara University of Food &
Agribusiness, as well as for various charitable and civic organizations. Mr.
Hasbrook has a BSC degree in finance and an MBA degree in agribusiness from
Santa Clara University.
MICHAEL W. KOEHNEN
Michael W. Koehnen, age 46, has been a director since 2002. Mr. Koehnen is a
member of our compensation and management succession committee and our
nominating and corporate governance committee. He owns and operates
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C.F. Koehnen & Sons, a third-generation family farming and bee-keeping company.
Mr. Koehnen is also president and owner of Riverwest Processing, an almond and
walnut processing company.
STEVE G. NETTLETON
Steve G. Nettleton, age 68, 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 trustee of Enloe Medical Center, and a director of the Chico
Foundation of California State University and the University Advisory Board of
California State University.
RICHARD P. SMITH
Richard P. Smith, age 49, 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 69, 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 71, has been a director since 1975. Mr.
Vereschagin is our Board secretary, chairman of the investment and
asset/liability committee of Tri Counties Bank and a member of our audit
committee. He was chairman of the Board from 1984 to 1999. 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. Mr. Vereschagin has a Bachelor's degree in business.
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CORPORATE 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 our 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. We have adopted a code of ethics
that applies to our principal executive officer, principal financial officer and
persons performing similar functions. You can view our code of business conduct,
our code of ethics for our principal executive officers and senior financial
officers, our audit committee charter, our nominating and corporate governance
committee charter and our compensation and management succession charter on our
website at www.tricountiesbank.com under "investor information--corporate
governance," or receive copies by contacting our corporate secretary in writing
at TriCo Bancshares, 63 Constitution Drive, Chico, California 95973, or by
telephone at (530) 898-0300.
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
of TriCo.
TRANSACTIONS WITH RELATED PERSONS
Our nominating and corporate governance committee is charged with monitoring and
reviewing issues involving potential conflicts of interest and reviewing and
approving all related party transactions. We have a policy adopted by our Board
of Directors for reviewing transactions between TriCo and our directors and
executive officers, their family members and entities with which they have a
position or relationship. Our procedures for transactions with related persons
are intended to determine whether any such related person transaction impairs
the independence of a director or presents a conflict of interest on the part of
a director or executive officer. All transactions between TriCo and related
persons may be consummated only if our nominating and corporate governance
committee approves such transaction in accordance with the procedures set forth
in our policy.
We annually require each of our directors and executive officers to complete a
questionnaire that elicits information about related person transactions. Our
nominating and corporate governance committee and Board of Directors annually
review all transactions and relationships disclosed in the questionnaires, and
the Board makes a formal determination regarding each director's independence
under our corporate governance guidelines.
There have been no transactions or series of similar transactions during 2006,
or any currently proposed transaction, to which TriCo was or is to be a party,
in which the amount involved exceeded or will exceed the lesser of $120,000 or
1% of our average total assets at year-end for the last three completed fiscal
years, and in which any of our directors, director nominees, executive officers
or any shareholder owning 5% or more of our common stock, or any member of the
immediate family or associate of any of the foregoing persons (together, the
"related parties"), had or will have a direct or indirect material interest.
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INDEBTEDNESS OF MANAGEMENT
Some of our directors, executive officers and their immediate family members and
associates are customers of Tri Counties Bank and we expect to have banking
transactions with them in the future. The loan committee of Tri Counties Bank
reviews the adequacy and fairness of any loans made by Tri Counties Bank to our
directors and officers. In its opinion, all such 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 not affiliated with TriCo. 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, 2006, to all directors and executive
officers (including their associates and members of their immediate family) was
approximately $6,537,000, representing 3.86% of shareholders' equity at that
time. As of the date of this proxy statement, all of these loans were performing
loans.
BOARD 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. Following is a description of each of these committees. Our subsidiary,
Tri Counties Bank, also has an audit committee and other Board committees.
AUDIT COMPENSATION AND NOMINATING AND
COMMITTEE MANAGEMENT SUCCESSION CORPORATE GOVERNANCE
MEMBER COMMITTEE MEMBER COMMITTEE MEMBER
----------- --------------------- --------------------
William J. Casey* X X(Chairman) X(Chairman)
Donald E. Murphy*
Donald J. Amaral* X(Chairman) X
Craig S. Compton* X X
John S. A. Hasbrook* X X
Michael W. Koehnen* X X
Steve G. Nettleton* X X
Richard P. Smith
Carroll R. Taresh*
Alex A. Vereschagin, Jr.* X
----------
* Determined to be independent as described at "Director Independence" above.
Audit Committees. We have a standing audit committee of TriCo and a standing
audit committee of Tri Counties Bank. 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 at
"Board of Directors." 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, principal independent auditor and internal auditing
department, and
- the communication among our principal independent auditor, management,
our internal auditing function and the Board.
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The committee also annually retains our principal independent auditor and
approves the terms and scope of work to be performed. Our audit committee met
four times during 2006. For more information on this committee, please see
"Report of the Audit Committee."
Compensation and Management Succession Committee. The compensation and
management succession committee held four meetings in 2006. The committee
considers the recommendations of our management regarding most compensation
matters, including executive compensation. In 2006 the committee hired Mercer
Human Resource Consulting, LLC as an outside consultant to provide an analysis
concerning our executive compensation program compared to other California banks
of similar size. For more information on this committee, please see
"Compensation Discussion and Analysis." This committee:
- establishes TriCo's compensation philosophy,
- evaluates and approves the compensation levels for our chief executive
officer and the other executive officers,
- produces annually a compensation discussion and analysis of executive
compensation,
- administers our stock option plans,
- approves the benefits provided to our executive officers and
directors, and
- establishes and reviews our management succession policies.
Nominating and Corporate Governance Committee. Our nominating and corporate
governance committee met three times in 2006. This committee:
- determines nominees to the Board in the manner described at
"Nomination and Election of Directors,"
- reviews our Board committee structure and members,
- annually evaluates the Board,
- approves any related party transactions as described at "Transactions
with Related Persons,"
- monitors director independence, and
- reviews our corporate governance guidelines and code of business
ethics.
ATTENDANCE AT MEETINGS
The Board of Directors of TriCo met nine times and the Board of Directors of Tri
Counties Bank met nine times during 2006. 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 on which they served. 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 2006 and will continue to serve as lead director in 2007.
Our corporate governance guidelines provide that each director must attend our
annual shareholders meeting. In 2006 all of our directors attended the annual
shareholders meeting.
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
10
complement the existing Board composition. To date the committee has identified
and evaluated nominees for directors based on several factors, including:
- referrals from our management, existing directors and advisors,
- business or banking experience,
- education,
- leadership abilities,
- professional reputation and affiliation, and
- personal interviews.
We do not currently pay any fee to a third party to identify or evaluate
potential director nominees, although we may retain search firms in the future
to assist in finding qualified candidates.
Shareholder Nominations. The committee will consider nominees recommended by
shareholders if those nominations are submitted under Section 15 of our bylaws.
Section 15 provides that nomination for election of directors may be made by the
Board of Directors or by any shareholder of any outstanding class of our capital
stock entitled to vote for the election of directors. Notice of intention to
make any nominations must be made in writing and be delivered or mailed to our
president not less than 21 days or more than 60 days prior to any meeting of
shareholders called for the election of directors. If less than 21 days' notice
of the meeting is given to shareholders, the 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. If notice of the
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. The notification
shall contain the following information to the extent known to the notifying
shareholder:
- the name and address of each proposed nominee,
- the principal occupation of each proposed nominee,
- the number of shares of capital stock of TriCo owned by each proposed
nominee,
- the name and residence address of the notifying shareholder, and
- the number of shares of TriCo stock owned by the notifying
shareholder.
Nominations not made in accordance with Section 15 of the bylaws may, in the
discretion of the chairman of the meeting, be disregarded. 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 may 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.
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 2006, including serving on the compensation committee for any other
entity.
11
COMPENSATION OF DIRECTORS
DIRECTOR COMPENSATION TABLE
The following table summarizes the compensation paid by TriCo to our
non-employee directors in 2006:
CHANGE IN
PENSION
VALUE AND
NONQUALIFIED
DEFERRED
FEES EARNED OR OPTION COMPENSATION ALL OTHER
PAID IN CASH AWARDS EARNINGS COMPENSATION TOTAL
NAME (1) ($)(2) ($)(3) ($)(4) ($)(5) ($)
-------- -------------- --------- ------------ ------------ ------
William J. Casey 24,000 28,395(6) 4,500 11,146 68,041
Donald J. Amaral 21,600 39,868(6) 8,600 10,115 80,183
Craig S. Compton 18,000 22,716(7) 3,900 9,919 54,535
John S. A. Hasbrook 18,000 32,552(7) 2,800 10,247 63,599
Michael W. Koehnen 18,000 32,552(7) 2,500 10,010 63,062
Donald E. Murphy 18,000 22,716(7) 11,600 12,336 64,652
Steve G. Nettleton 18,000 33,812(7) 9,700 9,920 71,432
Carroll R. Taresh 18,000 22,716(7) 16,496(8) 13,538 70,747
Alex A. Vereschagin, Jr. 18,000 22,716(7) 18,793(9) 11,144 70,653
----------
(1) Mr. Smith, our president and chief executive officer, is not included in
this table as he is an employee of TriCo. Mr. Smith receives no additional
cash compensation for his service as a director but does receive stock
options upon his re-election as a director as referenced in note 3 to this
table. Mr. Smith's compensation is shown at "Compensation of Named
Executive Officers."
(2) Includes a $1,500 monthly retainer for each named director, $2,000 per
month for the chairman of the Board and $1,800 per month for the chairman
of the audit committee. We do not pay our directors any additional
compensation to attend Board or committee meetings.
(3) Nonqualified options for 4,000 shares of our common stock under were
granted to all directors upon their re-election on May 23, 2006, under our
2001 stock option plan described beginning on page 24 which vest in May
2007. The chairman of our Board and the chairman of our audit committee
received nonqualified options for an additional 1,000 shares. The dollar
amount shown is recognized for financial statement reporting purposes for
2006 in accordance with the Statement of Financial Accounting Standards
("SFAS") 123(R), and thus includes amounts from awards granted in and prior
to 2006. See note 11 of our consolidated financial statements in our annual
report on Form 10-K for the year ended December 31, 2006, for assumptions
underlying the valuation of equity awards. As of December 31, 2006, each
director had the following number of options outstanding: Mr. Casey,
22,000; Mr. Amaral, 38,000; Mr. Compton, 24,000; Mr. Hasbrook, 36,000; Mr.
Koehnen, 36,000; Mr. Murphy, 20,000; Mr. Nettleton, 28,000; Mr. Taresh,
12,000; and Mr. Vereschagin, 38,800. The number of options currently
exercisable are indicated at "Ownership of Voting Securities."
(4) Reflects the change in value during 2006 of each director's account under
the director supplemental retirement plan described on the next page.
(5) Reflects the taxable value attributable to the split dollar life insurance
benefits described on page 13 and the long-term care insurance described on
page 23.
(6) The full grant date fair value of the options awarded in 2006, computed in
accordance with SFAS 123(R), is $35,069.
(7) The full grant date fair value of the options awarded in 2006, computed in
accordance with SFAS 123(R), is $28,055.
(8) Reflects the change in value during 2006 of Mr. Taresh's accounts under the
director supplemental retirement plan described on the next page and
above-market rates earned under our executive deferred compensation plan
described on page 28. Mr. Taresh was an executive of TriCo from 1989 until
his retirement in 1996.
(9) Also includes above-market rates earned under the director deferred
compensation plans described on the next page.
12
In addition, each director has an indemnity agreement under which TriCo will
indemnify him in his capacity as a director, was covered by directors' and
officers' liability insurance and was reimbursed for expenses incurred in
connection with his attendance at Board meetings.
DEFERRED COMPENSATION PLANS
In 2005 we adopted a deferred compensation plan to permit our directors to defer
payment of their retainer fees until retirement, termination of directorship or
death. A director can defer up to a lifetime maximum of $1.5 million for all
deferrals under this plan and our predecessor plan which permitted director
deferrals from 1992 until 2004. A director who elects to defer his retainer fees
for any year must defer a minimum of $200 per month. In 2006 none of the
directors elected to defer any of their retainer fees. The plan also permits us
to make discretionary contributions to a director's account. To date, we have
not made any discretionary contributions on behalf of any directors. A
director's plan benefit is payable upon his retirement, the termination of his
directorship or death. All distributions under the plan are subject to the rules
of Section 409A of the Internal Revenue Code. The plan is nonqualified,
unsecured and unfunded.
Until December 31, 2008, a director's account under the plan is credited with
interest each month at a rate that is 3% higher than the monthly equivalent of
the annual yield of the Moody's average corporate bond yield index for the
preceding month. Beginning January 1, 2009, the rate for the monthly interest
credit to a director's account is reduced to 1% higher than monthly equivalent
of the annual yield of the Moody's corporate bond yield index for the preceding
month. From the time that his directorship ends until his benefit is paid, a
director's account under the plan is credited with interest each month at the
monthly equivalent of the annual yield of the Moody's average corporate bond
yield index for the preceding month. A director is immediately 100% vested in
his deferrals and any related interest on his deferrals. We determine the
vesting rate for any discretionary contributions credited to a director's
account and any related interest. If a director is removed for cause, our
compensation and management succession committee can decide whether the interest
credited to the director's account with respect to his deferrals and our
discretionary contributions, if any, is forfeited.
Any deferrals made by a director and any discretionary contributions credited to
his account by us prior to January 1, 2005, and any related interest, are
governed by a predecessor deferred compensation plan for directors that we
adopted in 1992. The 1992 plan is similar to the 2005 plan in most respects.
DIRECTOR SUPPLEMENTAL RETIREMENT PLAN
In 2004 we adopted a supplemental retirement plan to provide additional
retirement benefits to directors who retire on or after January 1, 2004. This
plan replaces our supplemental retirement plan for directors originally adopted
in 1987 and any benefit accrued by a director as of December 31, 2003 under this
earlier plan will be paid under the terms of the 2004 plan. Any of our outside
directors who attains "director emeritus" status is eligible to participate in
the 2004 plan. When such a qualified director retires on or after age 55 with at
least 15 years of service, or after a change of control with any number of years
of service, he can receive an annual lifetime benefit equal to the amount of his
base Board fee paid by us during his final year of service. The amount of the
retirement benefit is reduced for each month that the benefit commencement date
precedes the director's 65th birthday. A director's annual benefit payments
under the plan begin the month after his retirement. If a director is
involuntarily removed, he forfeits all benefits under this plan. The plan is
nonqualified, unsecured and unfunded.
SPLIT DOLLAR LIFE INSURANCE
In March 2003 we entered into joint beneficiary agreements with all of our
directors, except for Mr. Nettleton. These agreements provide that TriCo owns
and pays premiums on a split dollar life insurance policy to provide various
death benefits in certain circumstances to the beneficiaries named by each of
these directors.
13
OWNERSHIP OF VOTING SECURITIES
This chart shows the common stock ownership for each TriCo director and director
nominee, the executive officers named on page 22, and owners of more than 5
percent of our outstanding common stock as of March 30, 2007. 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, 2007.
COMMON STOCK OWNERSHIP COMMON STOCK
NOT INCLUDING STOCK OWNERSHIP INCLUDING STOCK
OWNED AS A TRUSTEE OF THE ESOP OWNED AS A TRUSTEE OF THE ESOP
---------------------------------- --------------------------------
PERCENTAGE OF NUMBER OF SHARES PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK BENEFICIALLY COMMON STOCK
BENEFICIAL OWNERS BENEFICIALLY OWNED OUTSTANDING OWNED OUTSTANDING
----------------- ------------------ ------------- ---------------- -------------
5% Holder
TriCo Bancshares 1,179,321(1) 7.40% 1,179,321(1) 7.40%
Employee Stock Ownership
Plan and Trust (ESOP)
63 Constitution Drive
Chico, CA 95973
Directors and Named Executive Officers
Donald J. Amaral 34,000(2) * 34,000(2) *
William J. Casey 646,948(3) 4.06% 1,826,269(3)(17) 11.46%
Craig S. Compton 159,160(4) * 159,160(4) *
W. R. Hagstrom 61,084(5) * 61,084(5) *
John S. A. Hasbrook 35,125(6) * 35,125(6) *
Michael W. Koehnen 138,116(7) * 138,116(7) *
Andrew Mastorakis 94,201(8) * 94,201(8) *
Donald E. Murphy 194,604(9) 1.22% 194,604(9) 1.22%
Steve G. Nettleton 270,959(10) 1.70% 270,959(10) 1.70%
Richard O'Sullivan 274,742(11) 1.72% 274,742(11) 1.72%
Thomas J. Reddish 185,403(12) 1.16% 185,403(12) 1.16%
Richard P. Smith 497,965(13) 3.13% 1,677,286(13)(17) 10.53%
Carroll R. Taresh 142,444(14) * 142,444(14) *
Alex A. Vereschagin, Jr. 111,499(15) * 1,290,820(15)(17) 8.10%
All TriCo directors and executive 3,050,425(16) 19.15% 4,229,746(16)(17) 26.55%
officers as a group (17 persons)
----------
* Less than 1%.
14
(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 participants'
accounts. As of March 30, 2007, participants in the ESOP could direct the
voting of all 1,179,321 shares held by the ESOP. Of that total, 89,080
shares had been allocated to the accounts of TriCo's executive officers.
(2) Includes stock options for 34,000 shares.
(3) Includes stock options for 22,000 shares, 864 shares held in an IRA account
for the benefit of Mr. Casey and 124,000 shares held by a family trust of
which Mr. Casey is manager.
(4) 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
24,000 shares.
(5) Includes 11,367 shares held by Mr. Hagstrom's spouse, stock options for
25,073 shares and 9,480 shares allocated to Mr. Hagstrom's account in the
ESOP.
(6) Includes stock options for 32,000 shares.
(7) 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 32,000 shares.
(8) Includes 700 shares owned by Mr. Mastorakis' minor children and 6,215
shares allocated to Mr. Mastorakis' account in the ESOP.
(9) 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 12,000 shares.
(10) Includes 89,947 shares held jointly with his spouse, 157,011 shares held in
an IRA account for the benefit of Mr. Nettleton and stock options for
24,000 shares.
(11) Includes stock options for 158,000 shares and 29,139 shares allocated to
Mr. O'Sullivan's account in the ESOP. 72,750 shares have been pledged as
security.
(12) Includes 2,306 shares held by Mr. Reddish's minor children, stock options
for 172,000 shares and 12,003 shares allocated to Mr. Reddish's account in
the ESOP.
(13) Includes 173 shares held by Mr. Smith's wife, stock options for 435,216
shares and 18,465 shares allocated to Mr. Smith's account in the ESOP.
(14) Includes stock options for 12,000 shares and 8,000 shares held by Mr.
Taresh's wife.
(15) Includes stock options for 8,000 shares.
(16) Includes stock options for 1,153,629 shares and 89,081 shares allocated to
executive officers' accounts in the ESOP.
(17) Includes 1,179,321 shares held by the ESOP of which Messrs. Smith, Casey
and Vereschagin are trustees of which 89,081 shares have been allocated to
the accounts of executive officers in the ESOP.
15
EXECUTIVE OFFICERS
The following persons are currently serving as executive officers and senior
management of both TriCo and Tri Counties Bank.
RICHARD P. SMITH
Information about Mr. Smith can be found at "Board of Directors."
RICHARD O'SULLIVAN
Richard O'Sullivan, age 50, 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.
W. R. "RICK" HAGSTROM
Rick Hagstrom, age 61, 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 47, 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 2006. 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 48, 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 63, has served as senior vice president and director of 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 50, has served as senior vice president, chief information
officer, since 2005. From 1983 through 1994 Mr. Rios served in a variety of
positions in our information technology department and from 1997 to 2005 he was
manager--information systems of Tri Counties Bank.
16
COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION PHILOSOPHY
TriCo's executive compensation program is designed to maximize shareholder value
by aligning compensation with TriCo's performance and to attract, retain,
motivate and reward a highly qualified executive management team. The
compensation and management succession committee believes that these objectives
can best be met by linking compensation to the achievement of both individual
and corporate performance.
The underlying philosophy behind our compensation program is very
straightforward: we pay competitive salaries and reward executives for
enhancement of shareholder value and sustained individual superior performance.
Consistent with this philosophy is our commitment to offer fair pay based on the
respective roles of our executives, the market value of their jobs and the
opportunity to earn additional cash and non-cash compensation when they provide
superior performance.
ROLE OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE
The committee has the primary authority to determine TriCo's compensation
philosophy and to establish compensation for Richard P. Smith, our chief
executive officer, and our other executive officers. Each component of
compensation for our executives is generally administered under the direction of
our committee and is reviewed on an annual basis to ensure that remuneration
levels and benefits are competitive and reasonable using the guidelines
described below. In determining each level of compensation and the total
compensation package, the committee reviews a variety of sources to determine
and set compensation. Mr. Smith aids the committee by providing annual
recommendations regarding the compensation of all executive officers, other than
himself. The committee can exercise its discretion in modifying any recommended
adjustments or awards to the executives. Each executive also participates in an
annual performance review with Mr. Smith to provide input about his
contributions to TriCo's success for the period being assessed.
While the committee does not set compensation at specific percentage levels
compared to the market, the committee does seek to provide salary, incentive
compensation opportunities and employee benefits that fall within the average
practice of our competitors. The committee annually considers compensation
levels of executives with similar qualifications and experience at banks of
similar size located in California. Accordingly, the committee compares on an
annual basis each element of total compensation against a peer group of bank
holding companies. In 2006 the committee retained Mercer Human Resource
Consulting, LLC, an independent human resources consulting firm, to identify and
maintain a peer group of competitive companies to which we may refer when
establishing executive compensation. The compensation peer group consists of 14
publicly traded and privately held bank holding companies in California which
the committee believes are similar to TriCo in terms of total assets, net
income, market capitalization and shareholder return. These companies are
Capital Corp. of the West, Center Financial Corp, CVB Financial Group, Farmers &
Merchants Bancorp, First Community Bancorp, First Regional Bancorp, ITLA Capital
Corp., Mid-State Bancshares, Nara Bancorp, Inc., Pacific Capital Bancorp, SVB
Financial Group, Vineyard National Bancorp, West America Bancorporation and
Wilshire Bancorp, Inc.
Surveys prepared by management are also used periodically to ensure that TriCo
is maintaining its labor market competitiveness. These surveys compare our
compensation programs to the compensation programs of similarly sized bank
holding companies located in California.
COMPENSATION PROGRAM COMPONENTS
The compensation program for our executives consists of three fundamental
components:
- base salary,
- annual performance-based incentive compensation consisting of a cash
bonus, and
- long-term incentive compensation composed of equity-based awards
intended to reward executives for the enhancement of shareholder value
and promote retention.
17
This program enables us to tie executive compensation to TriCo's performance,
reward individual performance and attract and retain a highly-qualified
executive management team. As a result, the committee believes that this program
best serves the interests of TriCo and our shareholders. The particular elements
of our compensation programs are set forth below. Each executive's current and
prior compensation is considered in setting future compensation.
A percentage of total compensation is allocated to incentives as a result of our
philosophy. We have no pre-established policy or target for the allocation
between either cash and non-cash, or short- and long-term, incentive
compensation. Rather, the committee reviews information provided by Mercer to
determine the appropriate level and mix of incentive compensation. In 2006
approximately 14.0% of the total annual compensation to our named executives was
in the form of non-cash long-term incentive compensation (stock options) and
approximately 26.6% was in the form of annual cash incentive compensation
(bonus).
BASE SALARY
The committee reviews and adjusts base salaries annually to realign them with
market and industry levels after taking into account TriCo's general financial
performance and the executive's responsibilities, experience and future
potential. The committee 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 in California. Mr. Smith's salary is
set by the committee every January and the salaries for the other executives are
usually set in February or March of each year for that year.
The committee reviewed TriCo's general financial performance and utilized the
data provided by Mercer when determining to increase Mr. Smith's 2006 salary
4.0% from $430,000 in 2005 to $447,200 in 2006. This information showed Mr.
Smith's salary to be in the market median for California bank holding companies
similarly sized to TriCo based on the survey prepared by Mercer.
In 2006 the committee increased our other named executives' base salaries by a
range of 4.2% to 4.8% and by 4.4% on average from salaries paid in 2005. Based
upon information presented to us by Mercer regarding market ranges for salaries
of equivalent positions at peer group companies, we believe that we have
established our executives' base salaries within the average practice of our
competitors. As a result, we believe that we compensate our executives equitably
when compared to competitive companies.
ANNUAL INCENTIVE BONUS
It is the committee's objective to have a substantial portion of each
executive's compensation contingent upon TriCo's performance as well as upon his
or her own level of performance and contribution toward TriCo's performance. We
utilize annual cash bonuses to align executive compensation with our business
objectives and TriCo's performance. Placing an emphasis on incentive
compensation is consistent with our philosophy of rewarding executives for
Trico's performance.
CEO Incentive Plan. Under our CEO Incentive Plan approved in January 2006, Mr.
Smith was eligible to receive an annual incentive bonus if certain budgeted
corporate goals were achieved. The potential incentive bonus for Mr. Smith's
performance in 2006 ranged from 0% to 100% of his base salary. If TriCo achieved
less than 90% of its budgeted corporate goals, Mr. Smith would not be entitled
to a bonus. If TriCo achieved substantially all of the following corporate
goals, Mr. Smith would be entitled to a bonus of 50% of his annual salary. If
TriCo achieved 120% of these budgeted corporate goals, Mr. Smith would be
entitled to a bonus of 100% of his annual salary. Mr. Smith's annual incentive
bonus was determined on the basis of TriCo's achievement of the following
budgeted corporate performance goals:
- net income of approximately $26,000,000,
- maintain high asset and liability quality pursuant to regulatory
guidelines, and
- diluted earnings per share of $1.64.
The committee retains discretion regarding the determinations as to whether
TriCo reached these goals. In January 2007, the committee determined that TriCo
achieved substantially all of its budgeted corporate goals for 2006 and thus Mr.
Smith was awarded an incentive bonus of 50% of his salary, or $223,600. For 2007
performance, the
18
committee has determined that Mr. Smith's potential incentive bonus will range
from 0% to 100% of Mr. Smith's base salary depending on TriCo's achievement of
budgeted corporate performance goals.
Other Executives. The committee provides incentive compensation to our other
executives in the form of an annual cash bonus. There is no pre-established
policy or target for the determination of the amount of the incentive bonus
compensation for our other executives. Although the achievement of certain
financial objectives as measured by TriCo's earnings are considered in
determining incentive bonus compensation, other subjective and less quantifiable
criteria are also considered. In this regard, the committee takes into account
specific achievements that are expected to affect our future earnings and
results or that have an identifiable impact on the prior year's results. In
March 2007 our other named executive officers received bonuses ranging from
approximately 35% to 50% of their base salaries for their performance in 2006,
as set forth in the summary compensation table on page 22.
STOCK OPTION GRANTS
The committee provides long-term incentive compensation to our executive
officers through the grant of stock options under our 2001 stock option plan
described on page 24. In accordance with our philosophy, the use of stock
options is intended to provide incentives to our executive officers to work
toward the long-term growth of TriCo by providing them with a benefit that will
increase only to the extent that the value of our common stock increases. Since
the value of an option bears a direct relationship to TriCo's stock price, the
committee believes it is an effective long-term incentive to create value for
shareholders and appropriately align the interests of our executives with the
interest of our shareholders. The grant of stock options also serves as a
long-term retention incentive for our executives with the four-year and
five-year vesting schedules imposed by the committee.
Option awards are made at the regular committee meetings. The effective date for
all grants is the date that the committee approves the grant and all key terms
have been determined. Beginning in 2007, the committee intends to grant stock
options to our executives, including the CEO, on the date of our annual
shareholders' meeting each year. The committee may also grant stock options in
its discretion in connection with the hiring of a new executive officer or other
employee or to address other special circumstances. The exercise price for stock
option grants is determined by reference to the last quoted price per share on
The Nasdaq Global Select Market at the close of business on the date of grant.
Our annual shareholders' meeting typically occurs within four weeks after the
official announcement of our first quarter results so that the stock option
exercise price will reflect a fully informed market price. Each grant allows the
executive to acquire shares of common stock over a specified period of time,
typically four to five years. Accordingly, the option will provide a return to
the executive only if the market price of the shares appreciates over the option
term.
The number of options granted each year by the committee to an executive is not
set, but is based on a subjective evaluation of:
- the perceived incentive that the grant will provide,
- the executive's prior performance and level of responsibility,
- the benefit that the grant may have on long-term shareholder value,
and
- the value of the stock option at the time of grant.
The committee views the grant of options as a retention device and therefore
also reviews the status of vesting and the number of vested versus unvested
options held by an executive at the time of grant and the annual option grants
made to executives at our peer group companies.
In 2006 the committee granted Mr. Smith with stock options to purchase 45,000
shares of our common stock which will vest ratably over a five-year period. In
2006 Mr. Smith also received options for 4,000 shares of our common stock for
his re-election to the Board which will vest on the first anniversary of the
date of grant. The committee did not grant stock options to our other executives
in 2006 but currently intends to grant stock options to them in 2007. We do not
currently maintain any equity or other security ownership guidelines or
requirements for our executives.
OTHER ELEMENTS OF COMPENSATION AND PERQUISITES
In order to attract and retain talented executives who will focus on achieving
TriCo's long-term goals, we provide to our executives, including Mr. Smith, the
following benefits and perquisites:
19
Supplemental Executive Retirement Plan. TriCo maintains a supplemental executive
retirement plan described at "Compensation of Named Executive Officers--Pension
Benefits," which provides our executives with benefits upon their retirement.
Deferred Compensation Plan. TriCo maintains a nonqualified, unsecured and
unfunded executive deferred compensation plan, which is described at
"Compensation of Named Executive Officers--Nonqualified Deferred Compensation."
This plan provides our executives with the opportunity to defer all or part of
their salaries and bonuses until retirement, earlier termination from employment
or death, in addition to any discretionary contribution or reoccurring
contribution that we credit to his account. All amounts are credited with
interest and are paid in the form and at the time elected by the executive,
generally after the executive's cessation of employment.
Change of Control Agreements. The change of control agreements described on page
29 protect income for our executives who would likely be involved in decisions
regarding, and the successful implementation of, merger activity and would be at
risk for a job loss if a change of control occurs. The committee believes it was
important to adopt such agreements in order to provide an incentive for
executives to remain employed with TriCo throughout the turmoil and uncertainty
that an unsolicited tender offer or merger can cause. Such continuity in
leadership benefits both our shareholders and employees. These agreements enable
the executives to make decisions that are in the best interests of our
shareholders without being distracted or influenced in the exercise of his
business judgment by personal concerns. Change of control agreements are
typically offered to executives in the marketplace and thus are necessary to
attract and retain executives as well as protect shareholders' interests. A
change of control will also accelerate the vesting of all outstanding options
and accelerate benefits under some of our benefit plans as described at
"Compensation of Named Executive Officers--Potential Payments Upon Termination
and Change of Control."
ESOP Contributions. TriCo makes yearly contributions to each executive's account
under our employee stock ownership plan described at "Compensation of Named
Executive Officers--ESOP."
Defined Contribution Plan. TriCo offers a 401(k) savings plan to all eligible
employees as described at "Compensation of Named Executive Officers--401(k)."
Long-term Care Insurance. Trico has entered into long-term care agreements with
each executive as described at "Compensation of Named Executive
Officers--Long-Term Care Insurance."
Medical Insurance. TriCo provides to each executive and their family such
health, dental and vision insurance coverage as TriCo may from time to time make
available to its other executives of the same level of employment. TriCo pays a
portion of the premiums for this insurance for all employees.
Life and Disability Insurance. TriCo provides each officer such disability
and/or life insurance as TriCo in its sole discretion determines from time to
time to make available.
Other. TriCo makes available certain other perquisites to executives such as
country club memberships and automobile allowances which are listed in the
perquisites table on page 23.
REVENUE CODE SECTION 162(M)
The committee 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
current levels of compensation, no executive officer is expected to receive
compensation for 2006 services that would be non-deductible under section 162(m)
of the Internal Revenue Code. Accordingly, the compensation committee has not
considered any revisions to its policies and programs in response to this
provision of law.
This limitation does not apply to compensation that is performance based. Our
2001 stock option plan has been structured so that any compensation paid in
connection with the exercise of options granted under the plan with an exercise
price equal to the fair market value of the option shares on the grant date will
qualify as performance-based compensation. Therefore, it will not be subject to
the $1 million deduction limitation.
20
SUMMARY
The committee believes that our philosophy of aligning compensation with TriCo's
performance and individual superior performance was met and that the
compensation for our executive officers has been competitive and comparable to
the compensation received by executive officers of similarly-sized banks located
in the western United States. In addition, TriCo's executive compensation
philosophy and programs support our overall objective to enhance shareholder
value through profitable management of TriCo's operations. The committee is
firmly committed to the ongoing review and evaluation of our executive
compensation program.
REPORT OF THE COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE
TO OUR SHAREHOLDERS:
The compensation and management succession committee has reviewed and discussed
the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with TriCo's management. Based on such review and discussion, the committee
recommended to the Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement.
This report shall not be deemed to be "soliciting material" or to be "filed"
with the Securities and Exchange Commission or subject to Regulation 14A
promulgated by the Commission or Section 18 of the Securities Exchange Act of
1934, as amended.
RESPECTFULLY SUBMITTED:
William J. Casey (Chairman)
Craig S. Compton
John S. A. Hasbrook
Michael Koehnen
21
COMPENSATION OF NAMED EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table presents information concerning all compensation earned by
our principal executive officer, principal financial officer and the three other
most highly compensated executive officers during 2006:
CHANGE IN
PENSION VALUE
AND
NON-EQUITY NONQUALIFIED
INCENTIVE DEFERRED
STOCK OPTION PLAN COMPENSATION ALL OTHER
NAME AND SALARY BONUS AWARDS AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
PRINCIPAL POSITION YEAR ($)(2) ($)(4) ($) ($)(5) ($) ($)(7) ($)(8) ($)
------------------ ---- ------- ------- ------ ------- ------------ ------------- ------------ -------
Richard Smith, 2006 447,200(3) 0 0 138,365 223,600(6) 115,740 43,307 968,212
President and CEO
Thomas Reddish, 2006 232,190 116,844 0 46,238 0 16,900 29,512 441,684
Executive Vice
President and CFO
Andrew Mastorakis, 2006 233,094 105,569 0 50,801 0 66,492 29,927 485,883
Former Executive
Vice
President--Retail
Banking (1)
Richard O'Sullivan, 2006 224,599 79,117 0 46,238 0 12,323 40,922 403,199
Executive Vice
President--Wholesale
Banking
Rich Hagstrom, 2006 174,143 70,106 0 33,124 0 201,103 36,583 515,059
Executive Vice
President--Risk
Management
----------
(1) Mr. Mastorakis resigned effective March 31, 2007.
(2) Reflects actual salary earned in 2006.
(3) Paid pursuant to Mr. Smith's employment agreement described on page 29.
(4) Reflects cash bonuses earned for performance in 2006 but paid in March
2007.
(5) Reflects the dollar amount recognized for financial statement reporting
purposes for 2006 in accordance with SFAS 123(R) of stock options granted
pursuant to our 2001 stock option plan and our 1995 stock option plan and
thus may include amounts from options granted in and prior to 2006.
Assumptions used in the calculation of these amounts are included in
footnote 11 to our audited financial statements for 2006 included in our
annual report on Form 10-K for the year ended December 31, 2006.
(6) Reflects the cash award paid to Mr. Smith under the CEO Incentive Plan
discussed on the next page.
(7) Reflects (i) the actuarial increase in the present value of the executive's
benefits under our supplemental executive retirement plan described on page
27 determined using interest rate and mortality rate assumptions consistent
with those named in our financial statements and includes amounts which the
executive may not be currently entitled to receive because such amounts are
not vested, and (ii) above-market rates earned under our executive deferred
compensation plan discussed on page 28.
(8) Reflects the other compensation indicated on the perquisites table
following on the next page:
22
PERQUISITES TABLE
PERSONAL USE OF LIFE COUNTRY LONG-TERM TOTAL
COMPANY-PROVIDED INSURANCE CLUB TRICO CARE ESOP PERQUISITES AND
AUTOMOBILES BENEFITS DUES CONTRIBUTIONS INSURANCE CONTRIBUTIONS OTHER PERSONAL
NAME YEAR ($)(A) ($)(B) ($) ($)(C) ($)(D) ($)(E) BENEFITS ($)
---- ---- ---------------- --------- ------- ------------- --------- ------------- ---------------
Mr. Smith 2006 15,314 6,843 3,800 0 0 17,350 43,307
Mr. Reddish 2006 0 2,357 0 0 9,805 17,350 29,512
Mr. Mastorakis 2006 0 2,440 0 240 9,897 17,350 29,927
Mr. O'Sullivan 2006 7,745 2,440 3,490 0 9,897 17,350 40,922
Mr. Hagstrom 2006 0 2,356 7,422 3,102 9,969 13,734 36,583
----------
(A) Reflects the value attributable to personal use of automobiles provided by
TriCo as calculated in accordance with IRS guidelines.
(B) Reflects the taxable value attributable to split dollar life insurance
benefits provided by joint beneficiary agreements between TriCo and each
executive. TriCo owns and pays premiums on all insurance policies which
provide various death benefits to the beneficiaries named by each
executive.
(C) Reflects contributions allocated by TriCo to an executive's ESOP account
pursuant to the terms of our nonqualified deferred compensation plan
described on page 28.
(D) Reflects the premiums relating to the long-term care insurance described
below.
(E) Reflects discretionary contributions made by TriCo to an executive's
account in our ESOP described below.
CEO INCENTIVE PLAN
The Board adopted a CEO Incentive Plan which provided bonus compensation to our
chief executive officer, Richard Smith, for his performance during 2006. This
plan generally provided that Mr. Smith could earn a bonus equal to up to 50% of
his 2006 salary if TriCo met certain pre-established performance goals. See
"Compensation Discussion and Analysis--Annual Incentive Bonus" for a more
detailed discussion of this plan. The compensation and management succession
committee retains discretion regarding the determinations as to whether TriCo
reached these goals.
LONG-TERM CARE INSURANCE
In 2003 we entered into long-term care agreements with certain directors and
executives which provide that TriCo will purchase long-term care insurance
policies which are owned by the individual directors and executives. 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 in certain
circumstances, the participant will reimburse a percentage of the premium paid
by TriCo based upon his years of service with TriCo or let the policy lapse.
During 2006 we recognized an expense of $147,687 relating to the long-term care
insurance.
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 six years.
401(K)
We have a 401(k) plan for all employees age 21 and over who complete 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 has not made any matching contributions to the plan to date. Plan assets
are held in trust. A participant can direct the investment of
23
his contribution into one or more of 19 mutual funds. Generally, contributions
are triggered by a participant's retirement, disability, death or other
separation from employment.
2001 STOCK OPTION PLAN
General. 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 31, 2007, there were options for 1,199,381
shares outstanding and options for 435,430 shares were available for future
grant. Vesting schedules are determined individually for each grant. The stock
options that we have issued to our executives were granted at exercise prices
equal to the fair market value of TriCo stock on the date of grant. All stock
options granted to date vest ratably over a five-year period beginning either on
the grant date or the first anniversary of the grant date.
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 or
otherwise terminated remain available for awards under the plan. 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.
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 31, 2007, approximately 700
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.
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 and Change of Control. See "Potential Payments Upon Termination or
Change of 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.
24
Federal Income Tax Consequences. 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.
1995 STOCK OPTION PLAN
In 1995 we adopted a stock option plan for key employees. On March 31, 2007,
there were options for 143,500 shares outstanding under this plan and no
additional options were available for grant. Vesting schedules were determined
individually for each grant under both plans. The material terms of this plan
are similar to our 2001 stock option plan.
GRANTS OF PLAN-BASED AWARDS IN 2006
The following table presents information concerning plan-based awards granted to
each named executive in 2006:
ALL OTHER
OPTION
ESTIMATED POSSIBLE ESTIMATED FUTURE AWARDS:
PAYOUTS UNDER NON-EQUITY PAYOUTS UNDER EQUITY NUMBER OF EXERCISE OR GRANT DATE
INCENTIVE PLAN AWARDS INCENTIVE PLAN AWARDS SECURITIES BASE PRICE FAIR VALUE
---------------------------- -------------------------- UNDERLYING OF OPTION OF OPTION
THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM OPTIONS AWARDS AWARD
NAME GRANT DATE ($) ($) ($) (#) (#) (#) (#) ($/SH) ($)
---- ---------- ---------- ------- ------- --------- ------ ------- ---------- ----------- ----------
Mr. Smith 05-23-06 -- -- -- -- -- -- 4,000(2) 25.91 28,055
08-22-06 -- -- -- -- -- -- 45,000(3) 24.46 444,836
01-24-06(1) -- 223,600 447,200 -- -- -- -- -- --
Mr. Reddish -- -- -- -- -- -- -- -- -- --
Mr. Mastorakis -- -- -- -- -- -- -- -- -- --
Mr. O'Sullivan -- -- -- -- -- -- -- -- -- --
Mr. Hagstrom -- -- -- -- -- -- -- -- -- --
----------
(1) This award was granted pursuant to the CEO Incentive Plan described on page
23. The grant date is the date the Board determined the potential bonus
payment. The target amount represents 50% of Mr. Smith's annual base salary
and the maximum amount represents 100% of Mr. Smith's annual base salary.
See "Compensation Discussion and Analysis" for a discussion of Mr. Smith's
annual incentive bonus under the CEO Incentive Plan.
(2) Reflects stock options granted to Mr. Smith upon his re-election as a
director under our 2001 stock option plan which vest in May 2007.
(3) Reflects stock options granted under our 2001 stock option plan which vest
in five equal installments each year beginning on the first anniversary of
the grant date.
25
OUTSTANDING EQUITY AWARDS AT 2006 FISCAL YEAR-END
The following table presents information for all stock option awards held by the
named executives as of December 31, 2006. There are no stock awards outstanding
for any of the named executives. All stock options vest in five equal
installments each year beginning on the grant date unless indicated otherwise in
the chart below.
OPTION AWARDS
-----------------------------------------------------------------------------
EQUITY INCENTIVE
NUMBER OF NUMBER OF PLAN AWARDS:
SECURITIES SECURITIES NUMBER OF
UNDERLYING UNDERLYING SECURITIES
UNEXERCISED UNEXERCISED UNDERLYING
OPTIONS OPTIONS UNEXERCISED OPTION EXERCISE OPTION
(#) (#) UNEARNED OPTIONS PRICE EXPIRATION
NAME EXERCISABLE UNEXERCISABLE (#) ($)(1) DATE
---- ----------- ------------- ---------------- --------------- ----------
Mr. Smith 30,000 -- -- 9.13 10-14-2007
60,000 -- -- 8.06 02-18-2010
4,000(2) -- -- 8.05 05-08-2011
200,000 -- -- 8.20 06-12-2011
4,000(2) -- -- 12.13 05-14-2012
4,000(2) -- -- 12.60 05-13-2013
80,000 20,000 -- 12.71 07-08-2013
30,912 20,608 -- 17.38 02-17-2014
4,000(2) -- -- 17.40 05-04-2014
4,000(2) -- -- 20.58 05-24-2015
-- 4,000(2) -- 25.91 05-23-2016
-- 45,000(3) -- 24.46 08-22-2016
Mr. Reddish 9,000 -- -- 9.13 10-14-2007
25,000 -- -- 8.06 02-18-2010
80,000 -- -- 8.20 06-12-2011
32,000 8,000 -- 12.71 07-08-2013
15,000 10,000 -- 17.38 02-17-2014
4,000 6,000 -- 19.35 02-22-2015
Mr. Mastorakis 94,100 -- -- 8.20 06-12-2011
32,000 8,000 -- 12.71 07-08-2013
15,000 10,000 -- 17.38 02-17-2014
6,000 9,000 -- 19.35 02-22-2015
Mr. O'Sullivan 100,000 -- -- 8.20 06-12-2011
32,000 8,000 -- 12.71 07-08-2013
15,000 10,000 -- 17.38 02-17-2014
4,000 6,000 -- 19.35 02-22-2015
Mr. Hagstrom 4,000 4,000 -- 12.71 07-08-2013
11,000 10,000 -- 17.38 02-17-2014
3,000 4,500 -- 19.35 02-22-2015
----------
(1) The exercise price equals the market value on the grant date.
(2) Vest on the first anniversary of the grant date.
(3) Vest in five equal installments each year beginning on the first
anniversary of the grant date.
26
OPTION EXERCISES AND STOCK VESTED
The following table presents information on stock options exercised by each of
the named executives in 2006 and the aggregate dollar amount realized on
exercise. There were no stock awards made or outstanding for the named
executives in 2006.
OPTION AWARDS
----------------------------
NUMBER OF
SHARES
ACQUIRED VALUE REALIZED
ON EXERCISE ON EXERCISE
NAME (#)(1) ($)(2)
---- ----------- --------------
Mr. Smith 30,000 628,050
Mr. Reddish -- --
Mr. Mastorakis 18,700 368,492
Mr. O'Sullivan 67,180 1,232,285
Mr. Hagstrom 7,427 94,473
----------
(1) Of the shares exercised, the following amounts were due to options expiring
in 2006: Mr. Smith, 30,000 shares.
(2) The aggregate dollar value realized upon the exercise of an option
represents the difference between the market price of the underlying shares
on the date of exercise and the exercise price of the option.
PENSION BENEFITS
Effective January 1, 2004, we adopted a supplemental executive retirement plan
to provide supplemental retirement benefits to our key employees. This plan
replaces the supplemental retirement plan for executives that we originally
adopted in 1987. Any benefit accrued by an executive as of December 31, 2003
under the earlier plan will be paid under terms of the 2004 plan. We select the
key employees who will participate in this plan. The plan is nonqualified,
unsecured and unfunded.
Under normal circumstances, a participant is entitled to a supplemental
retirement benefit if he:
- retires after age 62,
- terminates due to his disability at any age,
- retires after age 55,
- voluntarily terminates with a minimum number of years of service, or
- is terminated without cause with a minimum number of years of service.
The plan provides a monthly lifetime benefit determined by a formula based on
the participant's highest average compensation, including salary and bonus, for
36 of the last 60 months of his employment and his years of service when he
ceases employment. A participant's benefit is reduced by his ESOP and social
security benefits. If he retires after age 55 but before age 62, a participant
must have a minimum of 10 years of service to be entitled to a supplemental
retirement benefit. A participant generally forfeits all benefits under the plan
if he is terminated with cause, he voluntarily terminates prior to age 55 with
less than 15 years of service or is terminated without cause with less than 5
years of service. In general, a participant's monthly benefit payments begin on
the later of the first day of the month after his 62nd birthday or the first day
of the month after his retirement. A participant can elect to receive his
monthly benefit payments earlier if he is at least 55, but the amount of his
benefit is reduced for early payment. Other termination provisions are described
at "Potential Payments Upon Termination or Change of Control--Supplemental
Executive Retirement Plans."
The following table presents certain information concerning the benefits of the
named executives under our supplemental executive retirement plan:
27
NUMBER OF PRESENT VALUE
YEARS CREDITED OF ACCUMULATED PAYMENTS
SERVICE BENEFIT DURING 2006
NAME PLAN NAME (#) ($) (1) ($)
---- ---------------------- ------------- -------------- -----------
Mr. Smith Supplemental Executive 14 946,200 --
Retirement Plan
Mr. Reddish Supplemental Executive 13 142,200 --
Retirement Plan
Mr. Mastorakis Supplemental Executive 07 286,200 --
Retirement Plan
Mr. O'Sullivan Supplemental Executive 22 0 --
Retirement Plan
Mr. Hagstrom Supplemental Executive 13 1,182,300 --
Retirement Plan
----------
(1) The value as of December 31, 2006, is determined using assumptions
consistent with those used in note 14 of our audited financial statements
included in our annual report on Form 10-K for the year ended December 31,
2006.
NONQUALIFIED DEFERRED COMPENSATION
Our 2005 deferred compensation plan provides our executives with the opportunity
to defer all or part of their salaries and bonuses until retirement, termination
from employment or death. An executive can defer up to a lifetime maximum of
$1.5 million for all deferrals under this plan and our predecessor plan which
permitted deferrals from 1987 until 2004. An executive who elects to defer his
compensation for any year must defer a minimum of $200 per month. The plan
permits us to make discretionary contributions to an executive's account. Each
year since the plan's inception we have credited to each executive's account a
contribution based on our contributions made for him under our ESOP for that
year. This plan is nonqualified, unsecured and unfunded.
Until December 31, 2008, an executive's account under the plan is credited with
interest each month at a rate that is 3% higher than the monthly equivalent of
the annual yield of the Moody's average corporate bond yield index for the
preceding month. Beginning January 1, 2009, the rate for the monthly interest
credit to an executive's account is reduced to 1% higher than the monthly
equivalent of the annual yield of the Moody's corporate bond yield index for the
preceding month. From the time that his employment with us ends until his
benefit is paid, an executive's account under the plan is credited with interest
each month at the monthly equivalent of the annual yield of the Moody's average
corporate bond yield index for the preceding month.
Executives are immediately 100% vested in their own contributions and in our
reoccurring contributions credited to their account. We determine the vesting
rate for any discretionary contributions credited to an executive's account as
well as for the interest related to these contributions. If an executive is
terminated for cause, our compensation and management succession committee can
decide whether the interest credited to the executive's account with respect to
his deferrals, our discretionary contributions and our reoccurring contributions
is forfeited. The distribution of an executive's plan benefit in the event of a
change of control or other termination is described at "Potential Payments Upon
Termination or Change of Control."
Any deferrals made by an executive, our discretionary contributions and our
reoccurring contributions credited to his account prior to January 1, 2005, and
the related interest, are governed by a predecessor deferred compensation plan
for executives that we adopted in 1987. The 1987 plan is similar to the 2005
plan in most respects.
In 2006 Mr. Smith and Mr. Mastorakis each elected to defer some of their
compensation. The following table presents information concerning nonqualified
deferred compensation for each of the named executives:
28
EXECUTIVE TRICO AGGREGATE AGGREGATE AGGREGATE
CONTRIBUTIONS CONTRIBUTIONS EARNINGS IN WITHDRAWALS/ BALANCE
IN 2006 IN 2006 2006 DISTRIBUTIONS AT 12-31-06
NAME ($)(1) ($)(2) ($)(3) ($) ($)
---- ------------- ------------- ----------- ------------- -----------
Mr. Smith 24,000 0 10,786 0 137,770
Mr. Reddish 0 0 0 0 0
Mr. Mastorakis 25,000 240 38,319 0 448,878
Mr. O'Sullivan 0 0 34,997 0 406,073
Mr. Hagstrom 0 3,102 22,894 0 265,649
----------
(1) These amounts were included as salary paid to such officer in the summary
compensation table on page 22.
(2) These amounts were paid into the executive's account as an ESOP make-up
contribution.
(3) The following amounts were included in the summary compensation table on
page 22 as above-market rates earned under our executive nonqualified
deferred compensation plan: Mr. Smith, $3,940; Mr. Mastorakis, $13,592; Mr.
O'Sullivan, $12,323; and Mr. Hagstrom, $8,103.
CEO EMPLOYMENT AGREEMENT
We entered into an employment agreement with Richard Smith, our president and
chief executive officer, which provided Mr. Smith with a base annual salary of
$465,088 for 2007 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 employment agreement also provides that Mr. Smith
shall receive 20 paid vacation days annually and a car allowance of $1,000 per
month or use of an automobile owned or leased by TriCo, and reimbursement of
other reasonable out-of-pocket expenses incurred in the performance of his
duties. Mr. Smith is also eligible to participate in our 401(k) savings plan,
our employee stock ownership plan, our executive deferred compensation plan and
our supplemental executive retirement plan. Finally, Mr. Smith and his
dependents receive disability, health, dental or other insurance plans available
to all of our employees.
If Mr. Smith is terminated without cause not in connection with a change of
control, then TriCo shall pay to Mr. Smith all amounts earned or accrued as
salary and a pro rated amount of Mr. Smith's minimum guaranteed annual bonus
through the date of termination. In addition, TriCo shall pay through the then
remaining term of the agreement the amount of salary that would be payable to
Mr. Smith if his employment had not been terminated. The current term of Mr.
Smith's employment under the agreement is through March 20, 2008. The agreement
is automatically extended for an additional year unless one party notifies the
other party to the contrary 90 days prior to the renewal date. If Mr. Smith's
employment is terminated in various circumstances as described under "Potential
Payments Upon Termination or Change of Control," then Mr. Smith is entitled to
receive the potential benefits described in that section.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Change of Control Agreements. Each named executive has entered into an agreement
with TriCo that provides him 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 within one year after such change of control, then such
executive is entitled to receive a severance payment equal to twice the combined
amount of his annual salary in effect at the time plus his most recent annual
bonus, paid in 24 equal monthly installments; provided that the present value of
those payments shall not be more than 299% of executive's compensation as
defined by section 280G of the Internal Revenue Code ("Section 280G"). The
effect of this provision is that deductions for payments made under these
agreements will not be disallowed due to Section 280G. All of our executives'
change of control agreements are currently scheduled to expire in August 2007,
except for Mr. Smith's agreement which will expire on March 20, 2008. However,
each agreement will automatically renew for an additional one-year period unless
terminated by either party 90 days prior to such anniversary date. In exchange
for receiving the benefits under the agreement, each executive has agreed to
keep confidential all of TriCo's trade secrets.
29
A "change of control" as defined in our executives' change of control agreements
and Mr. Smith's employment agreement generally occurs in connection with:
- a person becoming the beneficial owner of 40% or more of our
outstanding common stock,
- the purchase of our common stock pursuant to a tender or exchange
offer,
- our shareholders' approval of the merger of TriCo where TriCo is not
the surviving corporation, the sale of all of our assets or TriCo's
dissolution, or
- a replacement of at least a majority of our directors.
For "cause" as defined in these agreements means:
- an employee's dishonesty, disloyalty, willful misconduct, dereliction
of duty or conviction of a felony or other crime the subject matter of
which is related to his duties for TriCo,
- an employee's commission of an act of fraud or bad faith upon TriCo,
- an employee's willful misappropriation of any funds or property of
TriCo, or
- an employee's willful continued and unreasonable failure to perform
his duties or obligations.
2001 Stock Option Plan. Under our 2001 stock option plan, upon a change of
control all outstanding options shall vest, become immediately exercisable and
have all restrictions lifted. A "change of control" as defined under this plan
generally means:
- the acquisition of 50% or more of our outstanding voting securities,
- a replacement of at least two-thirds of our directors, or
- our shareholders' approval of a merger, dissolution or sale of
substantially all of our assets.
Upon termination of an executive's employment or service, a participant will
generally have 90 days following termination of employment or service to
exercise any vested options. All options which are not exercised prior to 90
days after the date the executive ceases to serve as an employee of TriCo shall
be forfeited. If an executive is terminated for cause, all right to exercise his
vested options terminates on the date of the executive's termination.
Nonqualified Deferred Compensation Plans. An executive's plan benefit is
generally payable upon his retirement, separation from employment or death.
However, if an executive is terminated for cause, our compensation and
management succession committee can determine in its discretion whether the
interest credited to the executive's account with respect to his deferrals and
any contributions made by TriCo are forfeited. For "cause" as defined in this
plan is generally the same as an "involuntary termination" under our
supplemental executive retirement plan described below. An executive can also
elect in advance to receive a distribution of his plan benefit in the event of a
change of control. A "change of control" as defined under our 2005 deferred
compensation plan generally means:
- the acquisition of more than 50% of our outstanding stock,
- the acquisition in 12 months or less of at least 35% of our stock,
- the replacement in 12 months or less of a majority of our directors,
or
- the acquisition in 12 months or less of at least 40% of our assets.
In addition to any advance election to receive his benefit in the event of a
change of control, the executive can make an advance election as to the time and
form for his benefit distribution after his separation from employment. In all
cases, other than a distribution to satisfy his severe financial hardship, the
executive may elect to receive his benefit payments in a lump sum or in monthly
installments over 5, 10 or 15 years. An executive's distribution election can be
changed in advance of his retirement or other separation in accordance with
Section 409A of the Internal Revenue Code. All distributions under the plan are
subject to Section 409A of the Internal Revenue Code including, for example, the
rule that an employee who is a "specified employee" may not receive a
distribution of his benefit until at least 6 months following his separation.
Supplemental Executive Retirement Plans. Under our 2004 supplemental executive
retirement plan, if, following a change of control, a participant retires after
age 55, is terminated without cause or voluntarily terminates within 24 months,
he is entitled to a supplemental retirement benefit. The monthly lifetime
benefit is determined by a formula based on the executive's highest average
compensation, including salary and bonus, for 36 of the last 60 months of his
employment and his years of service when he ceases employment. The executive is
entitled to a supplemental
30
retirement benefit under the plan without regard to the minimum number of years
of service that would be required if his retirement or termination had occurred
before the change of control. An executive's benefit is reduced by the sum of
his ESOP and social security benefits. In general, his monthly benefit payments
begin on the first day of the month after his retirement or other termination
from employment following a change of control without any reduction for payment
of this benefit prior to age 62, as would be the case if he had retired or
terminated before a change of control. See "Pension Benefits" for a description
of benefits payable not in connection with a change of control. A "change of
control" as defined under this plan is generally the same as under our executive
change of control agreements. An involuntary termination with cause as defined
in this plan generally means a termination due to:
- gross negligence or gross neglect,
- commission of a felony, misdemeanor or any other act involving moral
turpitude, fraud or dishonesty which has a material adverse impact on
TriCo,
- willful and intentional disclosure, without authority, of any secret
or confidential information that has a material adverse impact on
TriCo, or
- willful and intentional violation of the rules of any regulatory
agency that has a material adverse impact on TriCo.
Joint Beneficiary Agreements. In 2003 we entered into joint beneficiary
agreements with each of our executives. These agreements provide that Tri
Counties Bank shall purchase a life insurance policy for the executive and the
executive may designate beneficiaries to receive his share of the death
proceeds. The value of the benefits received by the executive's beneficiaries
depends on the executive's age at the time of death and whether the executive
was eligible for benefits under our supplemental executive retirement plan.
The amounts listed in the following table are estimated maximum amounts that
would have been payable to our executives upon termination of employment in
certain circumstances if payment had occurred on December 31, 2006. The actual
amounts payable can only be determined when an executive is terminated from
TriCo and can be more or less than the amounts shown below, depending on the
facts and circumstances actually prevailing at the time of the executive's
termination of employment. Our compensation and management succession committee
may in its discretion revise, amend or add to the benefits if it deems
advisable. Thus, the actual amounts payable in certain circumstances could be
significantly greater or less than the estimated amounts shown in the table
below.
31
AFTER
CHANGE IN
CONTROL,
INVOLUNTARY RETIREMENT INVOLUNTARY
INVOLUNTARY TERMINATION OR OR GOOD
TERMINATION NOT FOR VOLUNTARY REASON
FOR CAUSE CAUSE RESIGNATION DEATH DISABILITY TERMINATION
NAME BENEFIT ($) ($) ($) ($) ($) ($)
---- ----------------------- ----------- ----------- ----------- --------- ---------- -----------
Mr. Smith Severance pay(1) 0 361,200 0 0 0 1,324,400
Option vesting
acceleration(2) 0 0 0 0 0 621,730
Supplemental executive
retirement plans(3) 0 879,966 0 0 946,200 946,200
Deferred compensation
plan(4) 108,000(5) 137,770 137,770 137,770 137,770 137,770
Joint beneficiary
agreement(6) 0 0 0 5,291,750 0 0
------- --------- ------- --------- --------- ---------
Total 108,000 1,378,926 137,700 5,429,520 1,083,970 3,030,100
======= ========= ======= ========= ========= =========
Mr. Reddish Severance pay(1) 0 0 0 0 0 617,376
Option vesting
acceleration(2) 0 0 0 0 0 261,550
Supplemental executive
retirement plans(3) 0 123,714 0 0 142,200 142,200
Deferred compensation
plan(4) 0 0 0 0 0 0
Joint beneficiary
agreement(6) 0 0 0 2,055,400 0 0
------- --------- ------- --------- --------- ---------
Total 0 123,714 0 2,055,400 142,200 1,021,126
======= ========= ======= ========= ========= =========
Mr. Mastorakis Severance pay(1) 0 0 0 0 0 749,196
Option vesting
acceleration(2) 0 0 0 0 0 285,130
Supplemental executive
retirement plans(3) 0 134,514 0 0 286,200 286,200
Deferred compensation
plan(4) 336,436(5) 448,878 448,878 448,878 448,878 448,878
Joint beneficiary
agreement(6) 0 0 0 2,948,870 0 0
------- --------- ------- --------- --------- ---------
Total 336,436 583,392 448,878 3,397,748 735,078 1,769,404
======= ========= ======= ========= ========= =========
Mr. O'Sullivan Severance pay(1) 0 0 0 0 0 682,096
Option vesting
acceleration(2) 0 0 0 0 0 261,550
Supplemental executive
retirement plans(3) 0 0 0 0 0 0
Deferred compensation
plan(4) 247,879(5) 406,073 406,073 406,073 406,073 406,073
Joint beneficiary
agreement(6) 0 0 0 1,738,750 0 0
------- --------- ------- --------- --------- ---------
Total 247,879 406,073 406,073 2,144,823 406,073 1,349,719
======= ========= ======= ========= ========= =========
32
Mr. Hagstrom Severance pay(1) 0 0 0 0 0 474,532
Option vesting
acceleration(2) 0 0 0 0 0 191,740
Supplemental
executive retirement
plans(3) 0 1,028,601 0 0 1,182,300 1,182,300
Deferred compensation
plan(4) 200,634(5) 265,649 265,649 265,649 265,649 265,649
Joint beneficiary
agreement(6) 0 0 0 889,050 0 0
------- --------- ------- --------- --------- ---------
Total 200,634 1,294,250 265,649 1,154,699 1,447,949 2,114,221
======= ========= ======= ========= ========= =========
----------
(1) Payment based on salary as of December 31, 2006, and bonus paid in March
2006.
(2) The value of accelerated stock option amounts represents the number of
shares issuable upon the exercise of stock options for which vesting is
accelerated multiplied by the difference between the market value on
December 31, 2006, and the option exercise price. The closing price of our
common stock on December 29, 2006, was $27.21 per share. Stock option
vesting is accelerated following a change of control regardless of an
executive's termination of employment.
(3) Represents an estimate of the present value of the accumulated benefit
obligation under our supplemental executive retirement plans as of December
31, 2006, as adjusted to reflect the effect of vesting considerations in
the termination situations indicated.
(4) The value of the benefits under our deferred compensation plans assumed
that the executive received a lump sum payment.
(5) We assumed that our compensation and management succession committee
determined that the executive forfeited interest on his deferrals and any
contributions made by TriCo.
(6) Represents the lesser of the difference between death benefit and the cash
value of the executive's life insurance policies and the amount specified
in the joint beneficiary agreement.
Regardless of the manner of which an executive's employment terminates, he is
also generally entitled to receive amounts earned during his term of employment.
Such amounts include:
- salary earned,
- annual incentive bonus compensation earned,
- gain on exercise of vested stock options granted pursuant to our stock
option plan,
- amounts contributed under our 401(k) savings plan and our ESOP,
- unused vacation pay, and
- benefits under the long-term care insurance.
162(M) DISCLOSURE
Based on current levels of compensation, no executive is expected to receive
compensation for 2006 services that would be non-deductible under Section 162(m)
of the Internal Revenue Code. Accordingly, the compensation and management
succession committee has not considered any revisions to its policies and
programs in response to this provision of law.
33
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 at "Corporate Governance, Board
Nomination and Board Committees--Board Committees" and are set forth in its
charter, a copy of which was attached to the proxy statement relating to the
2006 annual meeting of shareholders and can be found on our website.
Management is responsible for internal controls and the financial reporting
process, including the system of internal controls. KPMG, LLP, our principal
independent auditor in 2006, was 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, as amended (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 2006, 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 our principal
independent auditor 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, must 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 2006 were pre-approved by the committee.
The committee received from KPMG the written disclosures and the letter 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" at "Principal Independent
Auditor" may have on the independence of KPMG. These fees amounted to
approximately 6.0% of our total fees paid to KPMG in 2005 and approximately 9.3%
of our total fees paid in 2006. The committee approved these services and
determined that those services were compatible with maintaining the independence
of KPMG as TriCo's principal auditor in 2006.
34
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,
2006, for filing with the Securities and Exchange Commission.
RESPECTFULLY SUBMITTED:
Donald J. Amaral (Chairman)
William J. Casey
John S. A. Hasbrook
Steve G. Nettleton
Alex A. Vereschagin, Jr.
35
PRINCIPAL INDEPENDENT AUDITOR
CHANGE IN AUDITOR
On March 15, 2007, our audit committee dismissed our principal independent
auditor, KPMG, LLP, and engaged the services of Moss Adams LLP as our new
principal independent auditor on March 15, 2007, for the year ended December 31,
2007. During the years ended December 31, 2005 and 2006, and the following
interim period through March 15, 2007, we did not consult with Moss Adams
regarding any of the matters or events set forth in Item 304(a)(2)(i) and (ii)
of Regulation S-K.
During the years ended December 31, 2005 and 2006, and the following interim
period through March 15, 2007, there were no disagreements between TriCo and
KPMG on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to KPMG's satisfaction, would have caused KPMG to make reference to the subject
matter of the disagreement in connection with its reports on our financial
statements for such periods. Also, none of the reportable events described under
Item 304(a)(1)(v) of Regulation S-K occurred within the two most recent years
ended December 31, 2005 and 2006 or within the following interim period through
March 15, 2007.
The audit reports of KPMG on our consolidated financial statements as of and for
the years ended December 31, 2005 and 2006 did not contain any adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. We requested KPMG to furnish us with a
letter addressed to the Securities and Exchange Commission stating whether they
agreed with the above statements. A copy of that letter was filed with the
Commission on a Form 8-K filed on March 21, 2007.
AUDIT FEES, AUDIT-RELATED FEES, TAX FEES AND ALL OTHER FEES
KPMG audited our financial statements for the years ending December 31, 2006 and
December 31, 2005. The following table shows the fees we paid to KPMG, LLP in
2006 and 2005.
2006 2005
-------- --------
Audit fees(1) $319,950 $472,986
Audit-related fees(2) 30,200 27,500
Tax fees(3) 36,050 31,950
All other fees 0 0
-------- --------
Total $386,200 $532,436
======== ========
----------
(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.
36
OTHER INFORMATION
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 2006 were properly made in a timely fashion, except that
Mr. Nettleton 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 2007 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.
37
PROXY
TRICO BANCSHARES
SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS ON MAY 22, 2007
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 20, 2007, 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 22, 2007, 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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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.
- View account status
- View certificate history
- View book-entry information
- View payment history for dividends
- Make address changes
- Obtain a duplicate 1099 tax form
- 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
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THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, Mark Here
WILL BE VOTED "FOR" THE PROPOSALS. for Address [ ]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Change or
Comments
PLEASE SEE REVERSE SIDE
WITHHELD
FOR FOR ALL FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
1. To elect as directors the following ten nominees: ITEM 2-TO APPROVE THE PROPOSAL TO RATIFY
THE SELECTION OF MOSS ADAMS, LLP
AS THE PRINCIPAL INDEPENDENT
01 William J. Casey 06 Donald E. Murphy AUDITOR OF THE COMPANY FOR 2007.
02 Donald J. Amaral 07 Steve G. Nettleton
03 Craig S. Compton 08 Richard P. Smith ITEM 3-In their discretion, the proxy holders
04 John S. A. Hasbrook 09 Carroll R. Taresh are authorized to vote upon such other
05 Michael W. Koehnen 10 Alex A. Vereschagin, Jr. business as may properly come before the
meeting.
(INSTRUCTION: To withhold authority to vote for any [ ] WE DO [ ] DO NOT EXPECT TO ATTEND THIS MEETING.
individual nominee, write that nominee's name in the
space provided below.)
----------------------------------------------------
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
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 MOSS ADAMS, LLP AS THE PRINCIPAL
INDEPENDENT AUDITOR FOR THE COMPANY FOR 2007. 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(S) X DATED: , 2007
------------------------------------- --------------------
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
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------------------------------------------------------------------------------------------------------------
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BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
INTERNET AND TELEPHONE VOTING ARE AVAILABLE THROUGH 11:59 PM EASTERN TIME
THE DAY PRIOR TO THE ANNUAL MEETING DATE.
INTERNET OR TELEPHONE VOTE AUTHORIZES THE NAMED PROXIES TO VOTE IN THE SAME MANNER
AS IF MARKED, SIGNED AND RETURNED ON THE PROXY CARD.
INTERNET TELEPHONE
HTTP://WWW.PROXYVOTING.COM/TCBK 1-866-540-5760
Use the Internet to vote the proxy. OR Use any touch-tone telephone to vote
Have the proxy card in hand the proxy. Have the proxy
when accessing the web site. card in hand when calling.
If voting by Internet or by telephone, you do NOT need to mail back the proxy card.
To vote by mail, mark, sign and date the proxy card and return it in the enclosed postage-paid envelope.
Choose MLINK(SM) for fast, easy and secure 24/7 online access to future proxy
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YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT
ON THE INTERNET AT: HTTP://WWW.TRICOUNTIESBANK.COM