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NORTH VALLEY BANCORP
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880 East Cypress Avenue
Redding, California 96002
Dear Shareholders:
The 2000 Annual Meeting of Shareholders of North Valley Bancorp will be
held at 4:30 p.m. on Tuesday, May 30, 2000, in Administration, North Valley
Bank, 880 East Cypress Avenue, Redding, California. In connection with the
Annual Meeting, we are enclosing the following:
1. Notice of Annual Meeting of Shareholders.
2. Proxy Statement.
3. Proxy.
4. Annual Report to Shareholders.
We encourage you to read all of the enclosed materials carefully and
invite you to attend the Annual Meeting. Whether or not you plan to attend the
Annual Meeting in person, please return the Proxy, properly completed and
executed, as promptly as possible so that your shares may be represented at the
Annual Meeting.
As an added convenience, a shareholder can choose to vote by telephone by
calling the toll-free number indicated on the Proxy. If you vote by telephone,
you do not need to return the Proxy. Please refer to the Proxy Statement for a
more complete description of the voting by telephone procedures.
We appreciate your support and look forward to seeing you at the Annual
Meeting on Tuesday, May 30, 2000.
Cordially,
Rudy V. Balma
Chairman of the Board
Michael J. Cushman
President
NORTH VALLEY BANCORP
Notice of Annual Meeting of Shareholders
Tuesday, May 30, 2000
4:30 P.M.
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of North Valley Bancorp, a California
corporation (the "Corporation"), will be held in Administration, North Valley
Bank, 880 East Cypress Avenue, Redding, California, on Tuesday, May 30, 2000, at
4:30 p.m., for the following purposes:
1. To elect the following eight (8) nominees as Directors
of the Corporation:
Rudy V. Balma Dan W. Ghidinelli
William W. Cox Thomas J. Ludden
Michael J. Cushman Douglas M. Treadway
Royce L. Friesen J. M. ("Mike") Wells, Jr.
2. To ratify the appointment of Deloitte & Touche LLP as
independent public accountants for the Corporation for
2000.
3. To consider such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
Section 15 of the By-laws of the Corporation provides for the nomination
of Directors, as follows:
Nomination for election of members of the Board of Directors may be made
by the Board of Directors or by any shareholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Notice of intention to make any nominations shall be made in writing and shall
be delivered or mailed to the President of the corporation not less than 21 days
nor more than 60 days prior to any meeting of shareholders called for election
of directors; provided however, that if less than 21 days notice of the meeting
is given to shareholders, such notice of intention to nominate shall be mailed
or delivered to the President of the corporation not later than the close of
business on the tenth day following the day on which the notice of meeting was
mailed; provided further, that if notice of such meeting is sent by third-class
mail as permitted by Section 6 of these By-laws, no notice of intention to make
nominations shall be required. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the number of shares of capital stock of the corporation owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the corporation
owned by the notifying shareholder. Nominations not made in accordance herewith
may, in the discretion of the Chairman of the meeting, be disregarded and upon
the Chairman's instructions, the inspectors of election can disregard all votes
cast for each such nominee.
Only shareholders of record at the close of business on April 14, 2000 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors,
J. M. ("Mike") Wells, Jr.
Secretary
Redding, California
April 28, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE-PAID ENVELOPE. IF YOU VOTE BY TELEPHONE, AS DESCRIBED IN THE PROXY
STATEMENT ACCOMPANYING THIS NOTICE, YOU DO NOT NEED TO RETURN THE PROXY.
NORTH VALLEY BANCORP
880 EAST CYPRESS AVENUE
REDDING, CALIFORNIA 96002
(530) 221-8400
PROXY STATEMENT
The enclosed proxy (the "Proxy") is solicited on behalf of the Board of
Directors of North Valley Bancorp, a California corporation (the "Corporation"),
for use at the Annual Meeting of Shareholders to be held in Administration,
North Valley Bank, 880 East Cypress Avenue, Redding, California, at 4:30 p.m.,
on Tuesday, May 30, 2000 and any adjournment or postponement thereof (the
"Meeting"). Only shareholders of record at the close of business on April 14,
2000 (the "Record Date"), will be entitled to notice of and to vote at the
Meeting. At the close of business on the Record Date, the Corporation had
outstanding 3,715,818 shares of its common stock, no par value (the "Common
Stock"). This Proxy Statement and the accompanying proxy card are first being
mailed to shareholders on or about April 28, 2000.
On each matter submitted to a shareholder vote, each holder of Common
Stock will be entitled to one vote, in person or by proxy, for each share of
Common Stock outstanding in the holder's name on the books of the Corporation as
of the Record Date. At the 1998 Annual Meeting of Shareholders, the
Corporation's Articles of Incorporation were amended to provide that no holder
of any class of stock of the Corporation shall be entitled to cumulate votes in
connection with any election of Directors of the Corporation. Therefore, in the
election of Directors, each outstanding share of Common Stock is entitled to
cast one vote for as many separate nominees as there are Directors to be
elected. The nominees who receive the most votes for the number of positions to
be filled are elected Directors. With regard to Proposal 2 herein, the
affirmative vote of a majority of the votes cast is required for approval of
such proposal.
Shareholders of record may vote their proxies by telephone or mail. A
toll-free telephone number is included on the Proxy. Any person submitting a
Proxy in the form accompanying this Proxy Statement has the power to revoke or
suspend such Proxy prior to its exercise. A Proxy is revocable prior to the
Meeting by a written directive to the Corporation, or by a duly executed Proxy
bearing a later date, delivered to the Secretary of the Corporation. A Proxy may
also be revoked if the shareholder is present and elects to vote in person at
the Meeting.
Any shareholder may choose to vote shares of Common Stock by telephone, by
calling the toll-free number (at no cost to the shareholder) indicated on the
Proxy. Telephone voting is available 24 hours per day. Easy to follow voice
prompts allow a shareholder to vote shares and to confirm that instructions have
been properly recorded. The Corporation's telephone voting procedures are
designed to authenticate the identity of shareholders by utilizing individual
control numbers. If a shareholder votes by telephone, there is no need to return
the Proxy.
1
The Corporation will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. The Corporation will reimburse brokerage houses, fiduciaries,
custodians and others holding stock in their names or names of nominees or
otherwise for reasonable out-of-pocket expenses incurred in sending proxies and
proxy materials to the beneficial owners of such stock. In addition to the
solicitation of Proxies by use of the mail, some of the officers, directors and
employees of the Corporation may (without additional compensation) solicit
Proxies by telephone or personal interview, the costs of which the Corporation
will bear. The Corporation may, at its discretion, engage the services of a
proxy solicitation firm to assist in the solicitation of proxies. The total
expense of this solicitation will be borne by the Corporation and will include
reimbursement paid to brokerage firms and others for their expenses in
forwarding soliciting material and such expenses as may be paid to any proxy
solicitation firm engaged by the Corporation.
Each Proxy will be voted as directed by the shareholder submitting the
Proxy, and, if no instructions are given on the Proxy, it will be voted "FOR"
the election of the eight nominees for Director recommended by the Board of
Directors, "FOR" ratification of the appointment of Deloitte & Touche LLP as
independent public accountants for the Corporation for the 2000 fiscal year, all
as described in the Proxy Statement; and, at the proxy holders' discretion, on
such other matters, if any, which may properly come before the Meeting
(including any proposal to adjourn the Meeting). A majority of the shares
entitled to vote, represented either in person or by a properly executed Proxy,
will constitute a quorum at the Meeting. Abstentions and broker non-votes are
each included in the determination of the number of shares present and voting
for purposes of determining the presence of a quorum. Abstentions will be
included in tabulations of the votes cast on proposals presented to the
shareholders and therefore will have the effect of a negative vote. Broker
non-votes will not be counted for purposes of determining the number of votes
cast for a proposal.
A copy of the Annual Report of the Corporation for the fiscal year ended
December 31, 1999, including audited financial statements (the "Annual Report"),
is enclosed. Additional copies of the Annual Report are available upon request
to J. M. ("Mike") Wells, Jr., Secretary of the Corporation. A COPY OF THE
CORPORATION'S 1999 ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY ALSO BE OBTAINED WITHOUT CHARGE BY WRITING TO MR. WELLS,
C/O NORTH VALLEY BANCORP, 880 EAST CYPRESS AVENUE, REDDING, CALIFORNIA 96002.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-laws of the Corporation provide a procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full on the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Nominations not made in accordance therewith may, in the discretion
of the Chairman of the Meeting, be disregarded, and, upon his instruction, the
inspectors of election shall disregard all votes cast for such nominee(s).
2
The By-laws of the Corporation provide that the authorized number of
Directors shall be not less than six (6) nor more than eleven (11). The exact
number of members of the Board of Directors has been set at eight (8) and,
therefore, the number of Directors to be elected at the Meeting and to hold
office until their successors have been elected and qualified is eight (8).
At the Special Meeting of Shareholders of the Corporation held on March
28, 2000, the shareholders approved certain amendments to the Articles of
Incorporation and By-laws of the Corporation concerning the classification of
the Board of Directors. Such amendments provide that, in the event that the
authorized number of Directors shall be fixed at nine (9) or more, the Board of
Directors shall be divided into three classes: Class I, Class II and Class III,
each consisting of a number of directors equal as nearly as practicable to
one-third the total number of directors. Directors in Class I shall initially
serve for a term expiring at the 2001 annual meeting of shareholders, directors
in Class II shall initially serve for a term expiring at the 2002 annual meeting
of shareholders, and directors in Class III shall initially serve for a term
expiring at the 2003 annual meeting of shareholders. Thereafter, each director
shall serve for a term ending at the third annual shareholders meeting following
the annual meeting at which such director was elected.
Such amendments to the Articles of Incorporation and By-laws were
proposed, and adopted, in contemplation of the merger transactions contained in
the Agreement and Plan of Reorganization and Merger, as amended, between the
Corporation and Six Rivers National Bank. Pursuant to such Agreement, upon
consummation of such merger transactions, the authorized number of the
Corporations' Directors would be set at ten (10) and two of the incumbent
directors of Six Rivers National Bank would be appointed to the resulting
vacancies on the Board. One such director would become a Class II Director of
the Corporation and the other such director would become a Class III Director of
the Corporation. Delores M. Vellutini has been tentatively selected for
appointment as the Class II Director and Kevin D. Hartwick has been tentatively
selected for appointment as the Class III Director. The consummation of such
merger transactions is not expected to occur prior to the date of the Meeting
(May 30, 2000).
The amendments to the Articles of Incorporation and By-laws approved by
the shareholders at the March 28, 2000 special meeting of shareholders provide
that, in the event that the authorized number of directors shall be fixed with
at least six (6) but less than nine (9) members, the board of directors shall be
divided into two classes, designated Class I and Class II, each consisting of
one-half of the directors or as close an approximation as possible. In
accordance with the circumstances described in the foregoing paragraph,
therefore, for purposes of this Meeting, the Board of Directors has been divided
into two classes, designated Class I and Class II. All nominees for election as
Class I Directors will serve for a term of one (1) year and all nominees for
election as Class II Directors will serve for a term of two (2) years (subject
to expansion of the Board, as discussed below).
3
All Proxies will be voted for the election of the following eight (8)
nominees recommended by the Board of Directors, unless authority to vote for the
election of any or all Directors is withheld. All of the nominees are incumbent
Directors.
Class I Directors Class II Directors
----------------- ------------------
Rudy V. Balma William W. Cox
Royce L. Friesen Michael J. Cushman
Thomas J. Ludden Dan W. Ghidinelli
Douglas M. Treadway J. M. ("Mike") Wells, Jr.
If any of the nominees should unexpectedly decline or be unable to act as a
Director, the Proxies may be voted for a substitute nominee to be designated by
the Board of Directors. The Board of Directors has no reason to believe that any
nominee will become unavailable and has no present intention to nominate persons
in addition to or in lieu of those named above. The eight candidates receiving
the highest number of votes will be elected.
Upon consummation of the merger transactions with Six Rivers National
Bank, which is presently expected to occur on or before July 31, 2000, unless
such date is extended by mutual agreement of the Corporation and Six Rivers
National Bank, the Board of Directors will be increased to ten (10) members and
the Board of Directors will be divided into three classes: Class I, Class II and
Class III. As provided in the amended Articles of Incorporation and By-laws of
the Corporation, the directors in Class I shall initially serve for a term of
one (1) year; the directors in Class II shall initially serve for a term of two
(2) years; and the directors in Class III shall serve for a term of three (3)
years. Each director elected at an annual meeting thereafter, beginning with the
annual meeting of shareholders to be held in 2001, shall serve for a term of
three years. Set forth below is the anticipated composition of directors
following consummation of the merger transactions with Six Rivers National Bank:
Class I Directors Class II Directors Class III Directors
----------------- ------------------ -------------------
Rudy V. Balma William W. Cox Michael J. Cushman
Royce L. Friesen Thomas J. Ludden Dan W. Ghidinelli
Douglas M. Treadway Delores M. Vellutini* J. M. Wells, Jr.
Kevin D. Hartwick*
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*Currently a Director of Six Rivers National Bank
Accordingly, a vote for the eight (8) nominees listed above for two-year
staggered terms (Class I and Class II) also constitutes a vote for the same
eight (8) nominees with three-year staggered terms (Class I, Class II and Class
III), subject to consummation of the merger transactions with Six Rivers
National Bank and the appointment of two directors of Six Rivers National Bank
to the Corporation's Board of Directors. If the merger transactions with Six
Rivers National Bank are not consummated, or if the authorized number of
Directors is not increased to at least nine (9) members, then the Board of
Directors shall continue with Class I and Class II directors (with two-year
4
staggered terms), as set forth above, in accordance with the provisions of the
Corporation's amended Articles of Incorporation and Bylaws.
In summary: RUDY V. BALMA, ROYCE L. FRIESEN and DOUGLAS M. TREADWAY are
each nominated to serve a term of one year; THOMAS J. LUDDEN is nominated to
serve a term of one year or two years; WILLIAM W. COX is nominated to serve a
term of two years; and MICHAEL J. CUSHMAN, DAN W. GHIDINELLI and J. M. ("MIKE")
WELLS, JR. are each nominated to serve a term of two years or three years.
The Board of Directors recommends a vote "FOR" each of the eight (8)
nominees listed above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the knowledge of the Corporation, as of the Record Date, no person or
entity was the beneficial owner of more than five percent (5%) of the
outstanding shares of the Corporation's Common Stock, except as described below
and in the following tables. For the purpose of this disclosure and the
disclosure of ownership of shares by management, shares are considered to be
"beneficially" owned if the person has or shares the power to vote or direct the
voting of the shares, the power to dispose of or direct the disposition of the
shares, or the right to acquire beneficial ownership (as so defined) within 60
days of the Record Date.
Amount and
Name and Address Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Common Stock Banc Fund 206,576 5.6%
c/o The Banc Funds Company LLC
208 South LaSalle Street
Chicago, IL 60604
The following table sets forth certain information regarding ownership of
the Corporation's Common Stock with respect to each Director, each person
nominated for election as a Director and each executive officer named in the
Summary Compensation Table elsewhere herein, as well as for all other executive
officers and for all current Directors and executive officers as a group. All of
the shares of Common Stock of the Corporation shown in the following table are
owned both of record and beneficially, except as indicated in the notes to the
table, as of April 14, 2000. The table should be read with the understanding
that more than one person may be the beneficial owner or possess certain
attributes of beneficial ownership with respect to the same securities.
Therefore, careful attention should be given to the footnote references set
forth in the column "Amount and Nature of Beneficial Ownership."
5
Name and Address of Amount and Nature of Percent
Beneficial Owner Position Beneficial Ownership(1) of Class(2)
- ---------------- -------- ----------------------- -----------
Rudy V. Balma Chairman of the Board 252,205(3)(4) 6.8
Sharon L. Benson Senior Vice President 11,434 *
and Chief Financial
Officer
William W. Cox Director 15,696 *
Michael J. Cushman President and Chief 196,619(3) 5.3
Executive Officer, Director
Royce L. Friesen Director 8,810 *
Dan W. Ghidinelli Director 45,712(5) 1.2
Thomas J. Ludden Director 34,908 *
Jack R. Richter Senior Vice President 14,400 *
and Chief Operating Officer
Douglas M. Treadway Director 15,120 *
J.M. ("Mike") Wells, Jr. Director, General Counsel 251,227(3)(6) 6.8
and Secretary
Eric J. Woodstrom Senior Vice President 4,000 *
and Chief Credit Officer
All directors and executive officers as a group
(11 persons) (7) 516,073(8) 13.9(9)
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(1) Includes shares beneficially owned, directly and indirectly, together with
associates. Subject to applicable community property laws and shared
voting and investment power with a spouse, sole investment and voting
power is held by the beneficial owner of all shares unless noted
otherwise. Includes stock options granted pursuant to the North Valley
Bancorp 1989 Director Stock Option Plan, the North Valley Bancorp 1998
Employee Stock Incentive Plan and the North Valley Bancorp 1999 Director
Stock Option Plan with: 13,400 shares exercisable within 60 days of the
6
Record Date by Mr. Balma; 8,000 shares exercisable within 60 days of the
Record Date by Mrs. Benson; 13,400 shares exercisable within 60 days of
the Record Date by Mr. Cox; 19,000 shares exercisable within 60 days of
the Record Date by Mr. Cushman; 23,200 shares exercisable within 60 days
of the Record Date by Mr. Ghidinelli; 13,398 shares exercisable within 60
days of the Record Date by Mr. Ludden; 12,000 shares exercisable within 60
days of the Record Date by Mr. Richter; 13,600 shares exercisable within
60 days of the Record Date by Mr. Treadway; 30,096 shares exercisable
within 60 days of the Record Date by Mr. Wells; and 2,000 shares
exercisable within 60 days of the Record Date by Mr. Woodstrom.
(2) Includes stock options exercisable within 60 days of the Record Date. An
"*" indicates less than one percent.
(3) Includes 167,029 shares for each of Messrs. Balma, Cushman and Wells
relative to the North Valley Bancorp Employee Stock Ownership Plan.
Messrs. Balma, Cushman and Wells constitute the Administrative Committee
(ESOP) and have authority to instruct the ESOP Trustee with regard to
voting of these shares. Messrs. Balma, Cushman and Wells, as members of
the Administrative Committee (ESOP), disclaim beneficial ownership with
respect to all those shares. Mr. Cushman, Mrs. Benson, Mr. Richter and Mr.
Woodstrom are participants in the ESOP.
(4) Includes 71,776 shares held by The Balma Family Trust, of which Mr. Balma
is trustee.
(5) Includes 18,312 shares held by The Balma Grandchildren Trust, of which Mr.
Ghidinelli is a trustee and as to which Mr. Ghidinelli disclaims
beneficial ownership.
(6) Includes 53,102 shares held by The Wells Family Trust, of which Mr. Wells
is trustee. Includes 1,000 shares held by Mr. Wells' spouse and as to
which Mr. Wells disclaims beneficial ownership.
(7) This group includes all current executive officers and Directors.
(8) See footnotes 3 through 6. Excludes 167,029 shares relative to Messrs.
Balma, Cushman and Wells. Includes 35,094 shares subject to options
exercisable within 60 days of the Record Date by the Directors under the
1989 Director Stock Option Plan; 72,000 shares subject to options
exercisable within 60 days of the Record Date by the Directors under the
1999 Director Stock Option Plan; and 41,000 shares subject to options
exercisable within 60 days of the Record Date by Sharon Benson and Messrs.
Cushman, Richter and Woodward under the 1998 Employee Stock Incentive
Plan.
(9) In calculating the percentage of ownership, all shares which the
identified person or persons have the right to acquire by exercise of
options are deemed to be outstanding for the purpose of computing the
percentage of class owned by such person, but are not deemed to be
outstanding for the purpose of computing the percentage of the class owned
by any other person.
7
Certain information with respect to the Directors, nominees for Director
and the current executive officers of the Corporation and its banking
subsidiary, North Valley Bank (the "Bank"), is provided below:
Rudy V. Balma (age 71), the Chairman of the Board of Directors and a
Director of the Corporation since 1982, is a retired licensed funeral director
and President of Redding Memorial Park, doing business as Redding Cemetery and
McDonald's Chapel.
Sharon L. Benson (age 47) has been Senior Vice President & Chief Financial
Officer of the Corporation and its subsidiaries since July 1997. Prior to that,
she was Vice President, Accounting, of the Bank since December 1990.
William W. Cox, CRE, CCIM (age 52), a Director of the Corporation since
February 1997, has been owner and President of Cox Real Estate Consultants,
Inc., since April 1996. From October 1987 to August 1996, he was President and
50% owner of Haedrich & Cox, Inc., a real estate brokerage company.
Michael J. Cushman (age 45) was promoted and appointed President & Chief
Executive Officer of the Corporation and its subsidiaries on February 10, 1999.
Prior to that and from the time he joined North Valley Bank on March 23, 1998,
he served as Senior Vice President & Chief Business Banking Officer. From March
1995 through March 1998, he was a self-employed investor, and from November of
1994 through March of 1995 served as Vice President of Tri-Counties Bank, who
acquired Country National Bank in November of 1994 where Mr. Cushman served as
President & Chief Executive Officer since September of 1992.
Royce L. Friesen, RPh., (age 61) is Chairman of the Board of Owens
Healthcare in Redding, California, having previously served as President, Chief
Executive Officer and owner since 1968. Owens Healthcare, a management company,
was formed to provide support and coordination among ten retail and home care
pharmacies located throughout Northern California.
Dan W. Ghidinelli (age 52), a Director of the Corporation since 1993, has
been a Certified Public Accountant and partner with Nystrom & Company LLP since
1974.
Thomas J. Ludden (age 67), a Director of the Corporation since 1991, is a
retired educator in the Weaverville School District in Trinity County,
California, owner of the Tri-L Ranch, a tree farm, since 1956, and retired owner
and President of Ludden & Co., Inc., a dry goods and clothing business located
in Weaverville, California. He has also served as Trustee for the
Shasta-Tehama-Trinity JCCD since 1967, and as Trustee for the Lions Eye
Foundation CA/NEV since July 1988.
Jack R. Richter (age 53) has served as the Bank's Senior Vice President &
Chief Operating Officer since October 1999. Prior to that he served as Senior
Vice President & Chief Credit Officer since joining the Bank on April 14, 1998.
From February 1996 until April 1998 he was Relationship Manager for Tri-Counties
Bank in Redding; and from February 1990 until February 1996, Mr. Richter served
as Senior Business Banking Officer for Bank of California in Redding,
California.
8
Douglas M. Treadway (age 57), a Director of the Corporation since February
1997, is President of Shasta College and has served in that capacity since 1994.
From 1991 to 1994, he was Chancellor for the North Dakota University System.
J. M. ("Mike") Wells, Jr. (age 59), the General Counsel and
Secretary of the Board of Directors of the Corporation and a
member of the Board of Directors since 1982, is an attorney with
Wells, Small, Selke & Graham, a Law Corporation, located in
Redding, California. Mr. Wells has practiced law with that firm
since 1972.
Eric J. Woodstrom (age 41) has served as Senior Vice President & Chief
Credit Officer since joining the bank in October 1999. Prior to joining the
Bank, Mr. Woodstrom served in executive management roles in Southern California
community banks and was a manager in the Los Angeles office of the Secura Group,
a leading bank consulting company, where he provided risk management consulting
services to financial services companies throughout the United States. He began
his banking career with the Office of the Comptroller of the Currency with
almost eight years experience as a National Bank Examiner.
None of the Corporation's Directors is a director of any other reporting
company. There are no family relationships between any of the Directors and
executive officers of the Corporation.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Corporation and of the Bank have established
an Audit Committee. As of April 14, 2000, the members of the Audit Committee are
Messrs. Balma, Cushman (ex-officio), Ghidinelli (Chairman), Friesen, and Ludden.
The Audit Committee met four times during 1999. The functions of the Audit
Committee are to recommend the appointment of and to oversee a firm of
independent public accountants whose duty is to audit the books and records of
the Corporation for the fiscal year for which it is appointed, to review and
analyze the reports of the Corporation's independent public accountants, to
analyze the results of internal and regulatory examinations, to monitor the
effectiveness of the Corporation's accounting system and financial reporting and
to interface with the Corporation's independent public accountants concerning
additional specific engagements requested by the Corporation.
The Corporation has a Director Replacement Committee, or nominating
committee, which recommends and nominates qualified individuals to serve on the
Corporation's Board of Directors. Committee members are Balma, Cushman,
Ghidinelli (Chairman) and Wells. The Committee met one time during 1999. See the
Notice of Annual Meeting of Shareholders for procedures for submitting
nominations.
The Corporation has an Executive Committee, the current members of which
are Messrs. Balma, Cox, Cushman (Chairman), Friesen, Ghidinelli, Ludden,
Treadway and Wells. The functions of the Executive Committee are to review and
9
make decisions on actions that are required between regular Board Meetings. The
Executive Committee met thirteen times during 1999.
The entire Board of Directors of the Corporation performed the function of
a compensation committee during 1999, which was to determine annual compensation
for executive officers of the Corporation and its subsidiaries.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year 1999, Mr. Cushman participated in deliberations of
the Corporation's Board of Directors concerning executive officer compensation
for all executive officers excluding himself.
MEETINGS OF THE BOARD OF DIRECTORS
During 1999, the Board of Directors held twelve regularly scheduled
meetings and two special meetings. In 1999, each Director attended at least 75%
of the aggregate of the total number of meetings of the Board of Directors (held
during the period for which he was a Director) and the total number of meetings
of Committees of the Board of Directors on which such Director served (during
the periods that he served).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's Directors and executive officers and
persons who own more than 10% of a registered class of the Corporation's equity
securities to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Corporation. Officers, Directors and greater
than 10% shareholders are required by the SEC to furnish the Corporation with
copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of such reports
furnished to the Corporation and written representations that no other reports
were required, during the fiscal year ended December 31, 1999, all Section 16(a)
filing requirements applicable to its officers, Directors and 10% shareholders
were complied with on a timely basis.
10
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation of
the President and Chief Executive Officer of the Corporation and the Bank and
the other most highly compensated executive officers (whose total annual salary
and bonus exceeds $100,000) for services in all capacities to the Corporation,
the Bank and other subsidiaries during 1999, 1998 and 1997:
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
------------------------------ ----------
Secur- All
ities Other
Name and Other Annual Under- Compen-
Principal Salary Bonus Compensation Lying sation
Position(1) Year (2) (3) (4) Options (5)(6)
- ----------- ---- ------- ------- ------------ ------- -------
Michael J. 1999 $140,000 $25,000 $ 1,435 22,500 $ 4,988
Cushman
President & 1998 $ 96,000 $ -0- $ 547 25,000 $ -0-
Chief
Executive 1997 N/A
Officer
Martin R. 1999 $175,000 $ -0- $ -0- -0- $ -0-
Sorensen
(Former) 1998 $175,000 $40,000 $ 2,619 50,000 $ 2,000
President &
Chief 1997 N/A
Executive
Officer
Jack R. 1999 $ 89,258 $25,000 $ 410 10,000 $ 3,544
Richter
Senior Vice 1998 $ 85,008 $ -0- $ -0- 20,000 $ -0-
President &
Chief 1997 N/A
Operating
Officer
- -------------------
(1) Mr. Sorensen served as President & Chief Executive Officer of the Bank and
the Corporation from February 1998 until his resignation effective on
December 18, 1998, and continued to be compensated in 1999 as disclosed
elsewhere herein. Mr. Cushman, hired in March 1998 as Senior Vice
President & Chief Business Banking Officer of the Bank, was promoted by
the Board of Directors in February 1999 to President & Chief Executive
Officer of the Corporation and the Bank at a salary of $140,000 per year.
Mr. Richter joined the Corporation and the Bank during 1998. Eric J.
Woodstrom, not shown on the above compensation table, joined the
Corporation and the Bank in October of 1999 at a salary of $96,000 per
year and was paid a bonus of $5,000 in January 2000.
11
(2) Base salary includes 401(k) Plan and Executive Deferred Compensation Plan
("EDCP") contributions made by the officers.
(3) Includes bonus amounts in the year paid, rather than in the year earned.
(4) Represents the cost of a company car for Messrs. Cushman and
Richter.
(5) Represents matching contributions made by the Corporation under the
Corporation's 401(k) Plan, and make-up contributions made by the
Corporation under the EDCP.
(6) Includes an annual allocation of Common Stock under the ESOP
for 1999.
The following table describes stock options granted pursuant to the North
Valley Bancorp 1998 Employee Stock Incentive Plan to the persons named in the
Summary Compensation Table during the fiscal year ended December 31, 1999:
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term(2)
- ----------------------------------------------------------------------------------- ------------------------------
Number of Percent of
Securities Total Options Market
Underlying Granted to Exercise or Price on
Options Employees In Base Price Date of Expiration
Name Granted Fiscal Year ($/Sh) Grant Date 0% 5% 10%
- ---- ---------- -------------- ----------- -------- ---------- ------- -------- --------
Michael J. 22,500(1) 14.2% $12.875 $12.875 February 16, 2009 $ -0- $159,713 $393,380
Cushman
Jack R. 10,000(1) 6.3% $12.875 $12.875 February 16, 2009 $ -0- $ 70,984 $174,836
Richter
- ---------------------
(1) Options were granted to Messrs. Cushman and Richter under the North Valley
Bancorp 1998 Employee Stock Incentive Plan at 100% of the fair market
value of the Corporation's Common Stock on the date of grant. See the
discussion of the 1998 Employee Stock Incentive Plan below.
(2) The 0%, 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and are not an estimate or
projection of future prices for the Corporation's Common Stock.
12
The following table sets forth the stock options exercised in 1999 and the
December 31, 1999 unexercised value of both vested and unvested stock options
for each of the persons named in the Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
Shares Number of Securities Underlying Value of Unexercised In-The-Money
Acquired Value Unexercised Options at Fiscal Year End Options at Fiscal Year End (1)
Acquired Value -------------------------------------- ---------------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
Michael J. Cushman -0- $ -0- 10,000 15,000 $ -0- $ -0-
-0- $ -0- 4,500 18,000 $ -0- $ -0-
Jack R. Richter -0- $ -0- 8,000 12,000 $ -0- $ -0-
-0- $ -0- 2,000 8,000 $ -0- $ -0-
- --------------------
(1) Based on the fair market value of the Corporation's Common Stock of
$10.625 per share at December 31, 1999.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
No employment agreement exists with any current officer of the Corporation
or its subsidiaries.
Martin R. Sorensen was appointed by the Board of Directors as the new
President & Chief Executive Officer of the Corporation and its subsidiaries, and
entered into an employment agreement effective February 1, 1998. Mr. Sorensen
resigned from all positions with the Corporation and the Bank effective December
18, 1998, and his employment agreement was terminated pursuant to a severance
agreement with the Corporation. In accordance with such agreement, Mr. Sorensen
continued to receive compensation during 1999 in an amount equal to his salary
for 1998.
In the event of a sale, dissolution or liquidation of the Corporation or a
merger or consolidation in which the Corporation is not the surviving or
resulting corporation, all options outstanding under the 1989 Director Stock
Option Plan, the 1998 Employee Stock Incentive Plan and the 1999 Director Stock
Option Plan which at the time are not fully vested may, nonetheless, under the
terms of the relevant agreement of merger or consolidation or plan of sale,
liquidation or dissolution, be entitled to be exercised as if they were fully
(100 percent) vested. Summary information regarding each Corporation stock
option plan is set forth below in this Proxy Statement.
13
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Supplemental Executive
Retirement Plan (the "Executive Retirement Plan") was established by the
Corporation effective October 1, 1988, for the purpose of providing supplemental
retirement benefits to key employees of the Corporation and its subsidiaries
designated by the Board of Directors. The Executive Retirement Plan is
administered by a committee of three persons appointed by the Chairman of the
Board, and is an unfunded and unsecured plan as defined in sections 201, 301 and
401 of ERISA (Employee Retirement Income Security Act of 1974).
The Executive Retirement Plan provides for two general classes of
benefits:
(1) Retirement benefits commencing at age 65 or upon termination within
two years after a change in control of the Corporation, payable monthly
for not less than ten years in an amount, depending upon length of
service, equal to up to 45% of the executive's highest average monthly
compensation for any 36 consecutive months during his last 60 months of
service. "Compensation" includes base salary and bonuses. An early
retirement benefit is also available if the executive retires early
between the ages of 55 and 65 after not less than ten years of service. If
commencement of payment of the early retirement benefit is deferred until
the executive attains age 65, it is equal to the normal retirement
benefit; if payment commences prior to age 65, the monthly benefit is
reduced according to a formula set forth in the Executive Retirement Plan.
Optional benefit forms, such as joint/survivor annuities, are also
available.
(2) Survivor benefits payable after death occurring either while employed
or after employment but before commencement of normal retirement benefits.
The survivor benefit is generally equal to the greater of the normal
retirement benefit which would have been payable to the executive or 36
times his highest average monthly compensation and is payable in ten equal
annual installments.
Vesting of benefits under the Executive Retirement Plan is 100% if
termination occurs within 24 months after change in control of the Corporation
or as a result of disability, retirement on or after the age of 65 or death. For
any other reason, vesting occurs at the rate of 25% for each year of credited
service. Benefits are reduced by an amount equal to 50% of the amount of any
monthly primary Social Security benefit (determined at age 65) or, in the case
of commencement of payment of early retirement benefits prior to age 65, by 50%
of the monthly primary Social Security benefit that would become payable at age
65, determined under the terms of the Social Security Act in effect at the time
early retirement benefits commence.
As in the case of the Directors' Retirement Plan (as defined below), the
Corporation (or the subsidiary responsible for payment of benefits) may purchase
insurance policies or annuity contracts to provide for payment of benefits under
the Executive Retirement Plan, but persons entitled to benefits have no right to
14
such policies or contracts or other specific assets or properties of the
Corporation or subsidiary unless express trusts of any such assets or properties
have been established for the purpose of payment of benefits.
For the year ended December 31, 1999, the Bank paid insurance premiums
aggregating $51,000 in order to fund obligations under the Executive Retirement
Plan, with a cash residual value of $1,124,000.
The following table illustrates the approximate retirement income that may
become payable to a key employee credited with the number of years of service
shown, assuming that benefits commence at age 65 and are payable in the form of
an annuity for the employee's life or for 10 years (whichever is greater):
ANNUAL RETIREMENT INCOME
Years of Credited Service
Final Average 10
Compensation 2 4 6 8 or more
- ------------- --------- --------- --------- --------- ----------
$ 60,000 5,400 10,800 16,200 21,600 27,000
80,000 7,200 14,400 21,600 28,800 36,000
100,000 9,000 18,000 27,000 36,000 45,000
120,000 10,800 21,600 32,400 43,200 54,000
140,000 12,600 25,200 37,800 50,400 63,000
160,000 14,400 28,800 43,200 57,600 72,000
180,000 16,200 32,400 48,600 64,800 81,000
200,000 18,000 36,000 54,000 72,000 90,000
Messrs. Cushman and Richter are eligible for retirement benefits under
this Plan.
EXECUTIVE DEFERRED COMPENSATION PLAN. The EDCP was established by the
Corporation effective January 1, 1989, in order to provide current tax planning
opportunities and supplemental retirement or death benefits to Directors and
selected key employees or their designated beneficiaries or surviving spouses,
children or estates. It is administered by a committee of not less than three
persons appointed by the Chairman of the Board of Directors. Although the EDCP
is intended to be an unfunded and unsecured plan as defined in sections 201, 301
and 401 of ERISA, the employer (the Corporation or a subsidiary thereof)
responsible for payment of benefits may establish trusts, which may be
irrevocable but which are subject to the claims of the Corporation's creditors,
to provide for payment thereof.
Participants may elect to defer to their account under the EDCP not less
than $2,400 in amount, up to 100%, of their annual compensation. The employer is
required to make matching contributions in the amount of 25% of the amount
deferred up to a maximum of 5% of compensation before deferrals, and may also
make discretionary contributions in any amount.
15
EDCP benefits are payable from participants' individual accounts upon
termination within 24 months of a change of control of the Corporation or as the
result of normal or early retirement, disability or death, or under other
limited circumstances. Benefits are payable usually over a period of five years
in the case of directors and 10 years in the case of executives, in equal
monthly installments commencing on a date chosen by the participant not later
than 60 days after the end of the month in which termination of service occurs.
Other payment alternatives which may be elected at the discretion of the
administrative committee of the EDCP include payment in a single sum or over a
period of 15 years, and early withdrawals in limited amounts and hardship
distributions are permitted. All amounts deferred are immediately vested at
100%; discretionary contributions are vested as set forth by agreement with the
participant at the time of the related deferral, and matching contributions are
vested according to the schedule set forth for matching contributions under the
Corporation's Deferred Salary Profit-Sharing Thrift Plan. For the year ending
December 31, 1999, the Bank paid insurance premiums of $765,000 in order to fund
obligations under the EDCP, with a cash residual value of $2,695,000.
As of December 31, 1999, the Corporation's accrued pension obligation
under the Directors' Retirement Plan, the Executive Retirement Plan and the EDCP
was $2,108,000.
COMPENSATION OF DIRECTORS
GENERAL. During 1999, each Director received fees of $850 per Board
Meeting attended (except that if the Director was a member of the Board of
Directors of both the Corporation and the Bank, and both Boards met on the same
day, the Director only received a single $850 fee for attending both meetings)
and payments per Committee meeting attended of $200 (with the exception of Loan
Committee, which effective in May 1998 pays $100 per meeting). As executive
officers, Messrs. Cushman and Richter did not receive Director's fees. During
1999, cash compensation paid to all Directors totaled $40,100, and payment of
additional Director compensation of $74,356 was deferred under the EDCP.
Directors electing coverage under the group health insurance plan available to
employees of the Corporation have been required to pay 100% of their premiums
since January 1989.
At a meeting of the Board of Directors on December 4, 1997, after Chairman
Rudy Balma had excused himself from said meeting, the Board unanimously passed a
resolution to pay Chairman Balma a sum equal to seventy-five percent (75%) of
the currently established regular Board Meeting fee in addition to the regular
monthly Board Meeting and committee fees, due to the amount of extra work the
Chairman must necessarily perform on behalf of the Bank and the Corporation, and
such additional fee remained effective throughout 1999. The total of these
special fees paid through 1999 was $7,656.
Commencing in 1998, each outside Director of the Corporation receives an
award of 600 shares of Common Stock (as adjusted for the 2-for-1 stock split in
October 1998) as part of his annual retainer as a Director pursuant to the 1998
Employee Stock Incentive Plan. Each award is fully vested when granted to the
outside Director.
16
SUPPLEMENTAL RETIREMENT PLAN FOR DIRECTORS. The Supplemental Retirement
Plan for Directors (the "Directors' Retirement Plan") was established by the
Corporation as of October 1, 1988 as an unfunded and unsecured plan to provide
deferred compensation to Directors of the Corporation who are not also employees
of the Corporation or any affiliate ("Outside Directors"). Its general purpose
is to aid in retaining the services of such Outside Directors. Outside Directors
with 10 years of service to the Corporation or any of its subsidiaries are
eligible to receive benefits under the Directors' Retirement Plan, which
benefits consist of the payment (commencing upon the earlier of death or the
72nd birthday of the Director) of $5,000 per year for 10 years to the Director,
his designated beneficiaries or (in the absence of such a designation) his
surviving spouse, children or estate (in that order).
The obligation to pay benefits under the Directors' Retirement Plan is the
responsibility of the Bank. The Bank is authorized to purchase life insurance
policies and/or annuity contracts in order to provide for payment of its
obligations under the Directors' Retirement Plan, but such obligations have only
the legal status of unfunded, unsecured promises to pay money in the future, and
no one entitled to receive benefits under the Directors' Retirement Plan has, as
a result, any rights to such policies or contracts or other specific property or
assets of the Bank unless an express trust is established for such purpose. For
the year ending December 31, 1999, the Bank paid insurance premiums of $61,000
in order to fund obligations under the Directors' Retirement Plan, with a cash
residual value of $831,000.
NORTH VALLEY BANCORP 1989 DIRECTOR STOCK OPTION PLAN
Under the North Valley Bancorp 1989 Director Stock Option Plan, as amended
(the "1989 Director Plan"), which was adopted by the Board of Directors in
December 1989 and by the shareholders of the Corporation at the 1990 Annual
Meeting, each member of the Board of Directors, including employees who are
Directors, automatically received every January a nonstatutory stock option to
purchase 1,000 shares of the Corporation's Common Stock. In January 1999, each
Director was granted an option to purchase 1,000 shares at an exercise price of
$10.20. Effective upon adoption of the North Valley Bancorp 1999 Director Stock
Option Plan, no further grants of options have been made or will be made under
the 1989 Director Plan. Pursuant to the 1989 Director Plan, as of April 14,
2000, the Corporation had outstanding options to purchase 45,094 shares of
Common Stock.
Options granted under the 1989 Director Plan vest immediately as to 20%,
with an additional 20% vesting on each of the first four anniversary dates
following the date of grant. Such options are exercisable for a period of 10
years from the date of grant at a price which shall be 85% of the fair market
value of the Corporation's Common Stock on the date of grant. The exercise price
can be paid by cash, certified check, official bank check or the equivalent
thereof acceptable to the Corporation. Options granted pursuant to the 1989
Director Plan automatically expire three months after termination of service as
a Director for any reason other than cause, death or disability. In the case of
termination of service due to death or disability, such options terminate one
year from the date of such termination of service. In the event that service as
a Director is terminated for cause, the options granted pursuant to the Director
Plan expire 30 days after such termination.
17
The 1989 Director Plan is presently administered by the Board of
Directors, which has the authority to delegate some or all of its duties to a
committee of the Board of Directors appointed for this purpose, which committee
must be composed of not less than three members of the Board of Directors. This
committee is generally authorized to administer the 1989 Director Plan in all
respects, subject to the express terms of the 1989 Director Plan.
The 1989 Director Plan provides for adjustment of and changes in the
shares of Common Stock reserved for issuance in the event certain changes occur
or in the event of the sale, dissolution or liquidation of the Corporation or
any reorganization, merger or consolidation of the Corporation.
NORTH VALLEY BANCORP 1998 EMPLOYEE STOCK INCENTIVE PLAN
The North Valley Bancorp 1998 Employee Stock Incentive Plan (the "Stock
Incentive Plan") was adopted by the Board of Directors in February 1998 and
approved by the shareholders of the Corporation at the 1998 Annual Meeting. The
Stock Incentive Plan provides for awards in the form of options (which may
constitute incentive stock options or non-statutory stock options to key
employees) and also provides for the award of shares of Common Stock to outside
directors. The shares of Common Stock authorized to be granted as options under
the Stock Incentive Plan consist of 600,000 shares (as adjusted for the 2-for-1
stock split in October 1998), increased in an amount equal to 2% of shares
outstanding each year, commencing January 1, 1999. The Stock Incentive Plan
defines "key employee" as a common-law employee of the Corporation, its parent
or any subsidiary of the Corporation, an "outside director", or a consultant or
advisor who provides services to the Corporation, its parent or any subsidiary
of the Corporation. For purposes of the Stock Incentive Plan, an "outside
director" is defined as a member of the Board who is not a common-law employee
of the Corporation, its parent or any subsidiary of the Corporation.
On February 16, 1999, the Board approved the grant of options totaling
149,000 shares to 57 key employees of the Bank, including options for 22,500
shares to Mr. Cushman and 10,000 shares to Mr. Richter, at an exercise price of
$12.875 (the market price on such date). Pursuant to the Stock Incentive Plan,
as of April 14, 2000, the Corporation had outstanding options to purchase
199,500 shares of Corporation Common Stock, with 503,392 shares remaining
available for grant.
Under the Stock Incentive Plan, each outside director is eligible to
receive a stock award of 600 shares (as adjusted for the 2-for-1 stock split in
October 1998) of Common Stock of the Corporation as part of his or her annual
retainer payment from the Corporation. Such stock award is fully vested when
granted to the outside director.
18
The award of Common Stock to outside directors is fully taxable at the
time of the grant. The Corporation receives a deduction for this amount. If the
outside director disposes of the Common Stock prior to 12 months after the date
of grant, any gain (or loss) will be a short-term capital gain. If the shares
are held for longer than 12 months, any gain (or loss) will be taxed at
long-term capital gain rates.
The Stock Incentive Plan is administered by a Committee appointed by the
Board of Directors. As of April 14, 2000, the Committee members are Rudy V.
Balma, Michael J. Cushman, William W. Cox, Royce L. Friesen, Dan W. Ghidinelli,
Thomas J. Ludden, Douglas M. Treadway, and J. M. Wells, Jr. The Committee must
have a membership composition which enables the Stock Incentive Plan to qualify
under SEC Rule 16b-3 with regard to the grant of Options or other rights under
the Stock Incentive Plan to persons who are subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to the
requirements of applicable law, the Committee may designate persons other than
members of the Committee to carry out its responsibilities and may prescribe
such conditions and limitations as it may deem appropriate, except that the
Committee may not delegate its authority with regard to the selection for
participation of or the granting of Options or determining awards or other
rights under the Stock Incentive Plan to persons subject to Section 16 of the
Exchange Act.
In the event that the Corporation is a party to a merger or other
reorganization, outstanding Options and stock awards shall be subject to the
agreement of merger or reorganization. Such agreement may provide, without
limitation, for the assumption of outstanding awards by the surviving
corporation or its parent, for their continuation by the Corporation (if the
Corporation is a surviving corporation), for accelerated vesting and accelerated
expiration, or for settlement in cash.
NORTH VALLEY BANCORP 1999 DIRECTOR STOCK OPTION PLAN
On April 1, 1999, the Board of Directors adopted the North Valley Bancorp
1999 Director Stock Option Plan (the "1999 Director Stock Option Plan"),
pursuant to which all members of the Board of Directors are eligible for the
grant of nonstatutory stock options to purchase shares of the Corporation's
Common Stock. Nonstatutory stock options are options not intended to qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
The 1999 Director Stock Option Plan replaced the existing North Valley
Bancorp 1989 Director Stock Option Plan, as amended (the "1989 Director Plan")
and was approved by the shareholders at the 1999 Annual Meeting.
The 1999 Director Stock Option Plan is administered by the Board of
Directors. All grants of options are at the discretion of the Board of
Directors. The Board of Directors has the authority to delegate some or all of
its duties in administering the 1999 Director Stock Option Plan to a committee
19
of the Board of Directors appointed for this purpose, composed of not less than
two members of the Board of Directors who qualify as non-employee directors. The
body administering the 1999 Director Stock Option Plan is generally authorized
to administer such Plan in all respects, subject to the express terms of such
Plan, including the full power to make all determinations necessary or advisable
for its administration.
All members of the Board of Directors, including employees of the
Corporation who are Directors, are eligible to participate in the 1999 Director
Stock Option Plan. As of April 14, 2000, there were eight Directors eligible to
participate in the 1999 Director Stock Option Plan.
Directors Balma, Cox, Ghidinelli, Ludden, Treadway and Wells were each
granted an option to purchase 30,000 shares in April 1999 at an exercise price
per share of $10.31; and Director Friesen was granted an option to purchase
30,000 shares in July 1999 at an exercise price per share of $9.88. As of April
14, 2000, the Corporation had outstanding options to purchase 234,000 shares of
Common Stock, and 129,955 shares remained available for grants under the 1999
Director Stock Option Plan.
Shares covered by options granted pursuant to the 1999 Director Stock
Option Plan are authorized but unissued shares of the Corporation's Common
Stock. The maximum aggregate number of shares of Common Stock which may be
optioned and sold under the 1999 Director Stock Option Plan is equal to 10
percent of the total shares of the Corporation's Common Stock issued and
outstanding from time to time.
The 1999 Director Stock Option Plan includes provisions for adjustment of
and changes in the shares reserved for issuance in the event that the shares of
Common Stock of the Corporation are changed into or exchanged for a different
number of kind of shares of stock or other securities of the Corporation or
other corporation, whether by reason or reorganization, merger, consolidation,
recapitalization, reclassification, stock dividend, stock split or other
changes.
The 1999 Director Stock Option Plan also includes provisions regarding the
sale, dissolution or liquidation of the Corporation and any reorganization,
merger or consolidation in which the Corporation is not the surviving or
resulting corporation. If the Corporation is not the surviving or resulting
corporation, the Board of Directors shall have the power to terminate all
options under the 1999 Director Stock Option Plan, provided that each optionee
shall have the right prior to the effective date of such sale, dissolution,
liquidation, reorganization, merger or consolidation to exercise any outstanding
option in full, without regard to the option's vesting schedule.
Options granted under the 1999 Director Stock Option Plan may only be
nonstatutory stock options. Each option will be 20 percent exercisable or
"vested" immediately upon the date of grant and will become further vested at
the rate of 20 percent on each of the first four anniversary dates thereafter.
Options are exercisable for a period of ten years after the date of grant. The
exercise price for the options will be 85 percent of the fair market value of
the shares on the date of grant, as determined by the Board of Directors. So
long as the Corporation's Common Stock is traded on the NASDAQ National Market
System, such fair market value shall be equal to the last transaction price
quoted for such date by the NASDAQ National Market System.
20
Each option granted under the 1999 Director Stock Option Plan has a
termination date of ten years after the date of grant. In addition, each option
automatically expires three months after termination of service as a Director
other than for cause, except that in the case of termination of service due to
mandatory retirement, death or disability, an option will remain in effect
unchanged. If a Director is removed from the Board of Directors for cause, the
option will expire 30 days after such termination of service.
The Board of Directors may amend, suspend or terminate the 1999 Director
Stock Option Plan at any time and for any reason. Any amendment is subject to
the approval of the shareholders of the Corporation only to the extent required
by applicable laws or regulations. No amendment or termination may adversely
affect the rights of an optionee under a previously granted option, without the
optionee's consent.
No taxable income is recognized by an optionee upon the grant of a
nonstatutory stock option under the 1999 Director Stock Option Plan. The
exercise of a nonstatutory stock option granted under the 1999 Director Stock
Option Plan results in the realization of ordinary income to the optionee in an
amount equal to the difference between the exercise price and the fair market
value of the shares on the date of exercise. For federal income tax purposes,
the Corporation will be entitled to a compensation expense deduction in the same
amount. The 1999 Director Stock Option Plan allows an optionee to satisfy any
withholding tax requirement in connection with the exercise of an option by the
withholding of shares from the total number of shares issuable upon exercise of
the option or by the delivery to the Corporation of shares of Corporation Common
Stock that have been held by the optionee for at least six months. Any such
arrangement must be acceptable to the Corporation.
REPORT OF THE COMPENSATION COMMITTEE
The entire Board of Directors acts as the Corporation's compensation
committee and reviews salaries recommended by the Chief Executive Officer for
executive officers other than the Chief Executive Officer, and can, at its
discretion, grant stock options to key officers of the Corporation and its
affiliates who are primarily responsible for the management and growth of the
Corporation's business (such options, as disclosed elsewhere herein, were
granted to Messrs. Cushman and Richter during 1999). In conducting its review of
salaries, the Board of Directors takes into consideration the overall
performance of the Corporation and the Chief Executive Officer's evaluation of
individual executive officer performance, with final decisions on base salary
adjustments made in conjunction with the Chief Executive Officer.
The Board of Directors determines the base salary for the Chief Executive
Officer by: (1) examining the Corporation's performance against its preset
goals, (2) examining the Corporation's performance within the banking industry,
(3) evaluating the overall performance of the Chief Executive Officer, and (4)
comparing the base salary of the Chief Executive Officer to that of other chief
21
executive officers in the banking industry in the Corporation's market area. Mr.
Cushman, who was hired by the Bank in March of 1998, was promoted by the Board
of Directors in February 1999 to President & Chief Executive Officer of the Bank
and the Corporation with a salary of $140,000 per annum. In January 2000, the
Board approved an increase in Mr. Cushman's annual salary to $175,000 and Mr.
Richter's annual salary was increased to $110,000.
The Corporation does not have a formal bonus plan. However, at its
discretion, the Board of Directors can, and has since 1990, set aside a portion
of the after-tax profits of the Bank which is then apportioned among the most
highly compensated executive officers, including Messrs. Cushman and Richter.
This is not a formal bonus plan and there is no guarantee that such bonuses will
be paid in the future.
During 1999, the entire Board of Directors acted as the Corporation's
Compensation Committee.
NORTH VALLEY BANCORP
TOTAL RETURN PERFORMANCE
[GRAPHIC CHART OMITTED]
PERIOD ENDING
----------------------------------------------------------
INDEX 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------------------------------------------------
North Valley Bancorp 100.00 141.40 165.15 251.76 197.87 177.66
S&P 500 100.00 137.58 169.03 225.44 289.79 350.78
Northern California Proxy 100.00 151.62 164.20 326.20 313.44 374.15
SNL $250M-$500M Bank Index 100.00 134.95 175.23 303.07 271.41 252.50
- -------------------
(1) Assumes $100 invested on December 31, 1994 in the Corporation's Common
Stock, the S&P 500 composite stock index, SNL Securities' Northern California
Proxy index, and SNL Securities' Index, with reinvestment of dividends.
(2) Source: SNL Securities
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through its banking subsidiary, North Valley Bank, the Corporation has had
and expects in the future to have banking transactions, including loans and
other extensions of credit, in the ordinary course of its business with many of
the Corporation's Directors, executive officers, holders of five percent or more
of the Corporation's Common Stock and members of the immediate family of any of
the foregoing persons, including transactions with corporations or organizations
of which such persons are directors, officers or controlling shareholders, on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with others. Management
believes that in 1999 such loan transactions did not involve more than the
normal risk of collectibility or present other unfavorable features.
J. M. "Mike" Wells, Jr., the General Counsel of the Corporation, Secretary
of the Board of Directors and Director, is an attorney in the law firm of Wells,
Small, Selke & Graham, a Law Corporation, which contracted to provide
professional legal services to the Corporation and the Bank during 1999 and
expects to provide professional legal services to them in the future. Wells,
Small, Selke & Graham, a Law Corporation, received from the Bank in 1999 a total
of $133,000 in legal fees and costs reimbursed.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP, which served the Corporation as
independent public accountants for the 1999 fiscal year, has been selected by
the Audit Committee of the Board of Directors of the Corporation as the
Corporation's independent public accountants for the 2000 fiscal year. Deloitte
22
& Touche LLP has no interest, financial or otherwise, in the Corporation. All
Proxies will be voted for the ratification of the appointment of Deloitte &
Touche LLP, unless authority to vote for the ratification of such selection is
withheld or an abstention is noted. If Deloitte & Touche LLP should for any
reason decline or be unable to act as independent public accountants, the
Proxies will be voted for a substitute independent public accounting firm to be
designated by the Audit Committee.
REQUIRED APPROVAL
The approval of the ratification of the appointment of Deloitte & Touche
LLP as the Corporation's independent public accountants for the 2000 fiscal year
requires the affirmative vote of the holders of a majority of the shares present
or represented by Proxy and voting at the Meeting.
RECOMMENDATION OF MANAGEMENT
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Deloitte & Touche LLP.
A representative of Deloitte & Touche LLP is expected to attend the
Meeting and will have the opportunity to make a statement if he or she desires
to do so and respond to appropriate questions from shareholders present at the
Meeting.
SHAREHOLDER PROPOSALS
The Corporation's 2001 Annual Meeting of Shareholders will be held on May
21, 2001. Shareholder proposals must be received by the Corporation no later
than December 18, 2000, to be considered for inclusion in the Proxy Statement
and Proxy for the 2001 Annual Meeting of Shareholders. Management of the
Corporation will have discretionary authority to vote proxies obtained by it in
connection with any shareholder proposal not submitted on or before the December
18, 2000, deadline.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Meeting, but if such matters are properly presented to the Meeting,
Proxies solicited hereby will be voted in accordance with the judgment of the
persons holding such Proxies. All shares represented by duly executed Proxies
will be voted at the Meeting.
By Order of the Board of Directors,
J. M. ("Mike") Wells, Jr.,
Redding, California Secretary
April 28, 2000
23
PROXY NORTH VALLEY BANCORP PROXY
Proxy Solicited on Behalf of the Board of Directors
of North Valley Bancorp
for the Annual Meeting of Shareholders, May 30, 2000
The undersigned holder of Common Stock acknowledges receipt of the
Notice of Annual Meeting of Shareholders of North Valley Bancorp and the
accompanying Proxy Statement dated April 28, 2000, and revoking any proxy
heretofore given, hereby constitutes and appoints Michael J. Cushman and Sharon
L. Benson, and each of them, each with full power of substitution, as attorneys
and proxies to represent and vote, as designated on the reverse side, all shares
of Common Stock of North Valley Bancorp (the "Corporation"), which the
undersigned would be entitled to vote at the Annual Meeting of Shareholders of
the Corporation to be held in Administration, North Valley Bank, 880 East
Cypress Avenue, Redding, California, on Tuesday, May 30, 2000, at 4:30 P.M., or
at any postponement or adjournment thereof, upon the matters set forth in the
Notice of Annual Meeting and Proxy Statement and upon such other business as may
properly come before the meeting or any postponement or adjournment thereof. All
properly executed proxies will be voted as indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSAL 2. WHEN THE PROXY IS
PROPERLY EXECUTED, SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS DIRECTED. IF
NO DIRECTION IS GIVEN IN THE PROXY, SHARES REPRESENTED BY THE PROXY WILL BE
VOTED "FOR" THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, "FOR"
PROPOSAL 2 AND, IN THE DISCRETION OF THE PROXY HOLDERS, ON ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT
THEREOF.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF DIRECTORS OF
THE CORPORATION AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
(Continued, and to be signed on the other side)
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^ FOLD AND DETACH HERE ^
Withhold
For For All FOR AGAINST ABSTAIN
1. To elect as Directors the nominees set forth below: [ ] [ ] 2.To ratify the appointment of Deloitte [ ] [ ] [ ]
& Touche LLP as independent public
INSTRUCTION: To withhold authority to vote for any accountants for 2000.
individual nominee strike a line through the nominee's
name in the list below:
01 Rudy V. Balma, 02 William W. Cox, 03 Michael J. 3.In their discretion the proxy holders are authorized to
Cushman, 04 Royce L. Friesen, 05 Dan W. Ghidinelli, vote upon such other business as may properly come before
06 Thomas J. Ludden, 07 Douglas M. Treadway, 08 J.M the meeting.
("Mike") Wells, Jr.
I PLAN TO ATTEND THE MEETING [ ]
Signature(s)__________________________________________________________ Dated _________________________________ , 2000
Please mark, date and sign exactly as your name(s) appear(s) above. When signing as attorney, executor, administrator, trustee or
guardian, please give full title, if one or more than one Trustee, all should sign. WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE SIGN AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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^ FOLD AND DETACH HERE ^
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours a day - 7 days a week
There is NO CHARGE to you for this call.- Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the lower right hand corner of this form
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OPTION 1: To vote as the Board of Directors recommends on ALL proposal press 1
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When asked, please confirm by Pressing 1.
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OPTION 2: If you choose to vote on each Proposal separately, press 0, you will hear these instructions:
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Proposal 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the instructions.
Proposal 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm by Pressing 1.
The instructions are the same for all remaining proposals.
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.