SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NORTH VALLEY BANCORP
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
NA
(2) Aggregate number of securities to which transaction applies: NA
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined): NA
(4) Proposed maximum aggregate value of transaction: NA
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: NA
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(4) Date Filed: NA
- ---------------
NORTH VALLEY
BANCORP
- ---------------
NORTH VALLEY BANCORP
300 PARK MARINA CIRCLE
REDDING, CALIFORNIA 96001
Dear Shareholders:
The 2002 Annual Meeting of Shareholders of North Valley Bancorp will be
held at 5:00 p.m. on Thursday, May 23, 2002, in the Administrative Offices of
North Valley Bancorp, 300 Park Marina Circle, 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
or by using the Internet as indicated on the Proxy. If you vote by telephone or
electronically through the Internet, you do not need to return the Proxy. Please
refer to the Proxy Statement for a more complete description of the procedures
for telephone and Internet voting.
We appreciate your support and look forward to seeing you at the Annual
Meeting on Thursday, May 23, 2002.
Cordially,
/s/ RUDY V. BALMA
- -----------------------------
Rudy V. Balma
Chairman of the Board
/s/ MICHAEL J. CUSHMAN
- -----------------------------
Michael J. Cushman
President and CEO
- --------------- NORTH VALLEY BANCORP
NORTH VALLEY
BANCORP NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------- THURSDAY, MAY 23, 2002
5:00 P.M.
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of North Valley Bancorp, a
California corporation (the "Corporation"), will be held in the Administrative
Offices of North Valley Bancorp, 300 Park Marina Circle, Redding, California, on
Thursday, May 23, 2002, at 5:00 p.m., for the following purposes:
1. To elect the following three (3) nominees as Directors of the
Corporation, each for a term of three years:
William W. Cox
Thomas J. Ludden
Dolores M. Vellutini
2. 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 12, 2002
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors,
/s/ J.M. WELLS, Jr.
-----------------------------------------
J. M. ("Mike") Wells, Jr.
Secretary
Redding, California
April 26, 2002
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 OR ELECTRONICALLY THROUGH THE INTERNET, AS
DESCRIBED IN THE PROXY STATEMENT ACCOMPANYING THIS NOTICE, YOU DO NOT NEED TO
RETURN THE PROXY.
- --------------- NORTH VALLEY BANCORP
NORTH VALLEY 300 PARK MARINA CIRCLE
BANCORP REDDING, CALIFORNIA 96001
- --------------- (530) 226-2900
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 the Administrative
offices of North Valley Bancorp, 300 Park Marina Circle, Redding, California, at
5:00 p.m., on Thursday, May 23, 2002 and any adjournment or postponement thereof
(the "Meeting"). Only shareholders of record at the close of business on April
12, 2002 (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 4,670,953 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 26, 2002.
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.
Shareholders may vote without attending the Meeting, whether their
shares of Common Stock are held in their names or through a broker, bank or
other nominee. Shareholders of record may vote by submitting a Proxy and the
instructions for voting by mail, by telephone or by using the Internet are set
forth on the Proxy. For shares held through a broker, bank or other nominee,
shareholders may vote by submitting their voting instructions to the broker,
bank or other nominee. Voting instructions may be given by telephone or by using
the Internet, if the broker, bank or other nominee makes those methods available
to the shareholder, in which case the procedures will be enclosed with the Proxy
Statement forwarded by the broker, bank or other nominee.
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 direction to the
Corporation, by a duly executed Proxy bearing a later date, delivered to the
Secretary of the Corporation, or by voting on a later date by telephone or by
using the Internet. 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
1
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.
Any shareholder may also choose to vote shares of Common Stock
electronically by using the Internet, as indicated on the Proxy. Internet voting
procedures are designed to authenticate the identity of a shareholder and to
confirm that instructions have been properly recorded. The Corporation believes
these procedures are consistent with the requirements of applicable law. If a
shareholder votes electronically by using the Internet, there is no need to
return the Proxy.
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 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, internet 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.
Share of Common Stock 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 three nominees for Director recommended by the
Board of Directors, 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, 2001, 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. THE ANNUAL
REPORT INCLUDES A COPY OF THE CORPORATION'S ANNUAL REPORT FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2001, ON FORM 10-K, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. MR. WELLS MAY BE CONTACTED AT NORTH VALLEY BANCORP, 300 PARK MARINA
CIRCLE, REDDING, CALIFORNIA 96001.
2
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).
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). 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. The exact number of
members of the Board of Directors has been set at ten (10). The number of
Directors to be elected at the Meeting and to hold office until their successors
have been elected and qualified is three (3), as described below.
At the Annual Meeting of Shareholders held in 2001, the Class I
Directors listed below were elected for a three-year term. The Class II
Directors are being proposed for election at the 2002 Annual Meeting of
Shareholders and, if elected, will serve for a term of three years. The terms of
the Class III Directors listed below will have their term expire at the 2003
Annual Meeting of Shareholders.
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 Dolores M. Vellutini J. M. Wells, Jr.
Kevin D. Hartwick
Accordingly, three (3) Class II Directors will be elected at the
Meeting, each to serve for a three-year term expiring at the 2005 Annual Meeting
of Shareholders. All Proxies will be voted for the election of the following
three (3) 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.
William W. Cox
Thomas J. Ludden
Dolores M. Vellutini
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 three (3)
candidates receiving the highest number of votes will be elected.
3
The Board of Directors recommends a vote "FOR" each of the three (3)
nominees listed above as Class II Directors: William W. Cox, Thomas J. Ludden,
and Dolores M. Vellutini.
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 (1)
- -------------- ------------------- -------------------- ------------
Common Stock Wellington Management 460,300 9.85%
Company LLP
75 State Street
Boston MA 02109
- -------------------------
(1) Percentage calculated based on 4,670,953 shares outstanding as of the
Record Date.
The following table sets forth certain information regarding ownership
of the Corporation's Common Stock with respect to each Director of the
Corporation, North Valley Bank and Six Rivers Bank, 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
of North Valley Bank and Six Rivers Bank 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 the Record
Date. 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."
4
Name and Address of Amount and Nature of Percent
Beneficial Owner Position Beneficial Ownership(1)(2) of Class(3)
- ------------------------ -------- -------------------------- -----------
Rudy V. Balma Chairman of the Board, 272,615(4)(5) 5.80%
North Valley Bancorp
North Valley Bank
Sharon L. Benson Senior Vice President 28,469 *
and Controller(6)
William W. Cox Director, 30,136(7) *
North Valley Bancorp
North Valley Bank
Michael J. Cushman President and Chief 231,255(4) 4.91%
Executive Officer and Director,
North Valley Bancorp
North Valley Bank
Six Rivers Bank(6)
Bank Processing, Inc.
Edward J. Czajka Executive Vice President 6,104 *
and Chief Financial Officer(6)
Royce L. Friesen Director, 24,410 *
North Valley Bancorp
North Valley Bank
Dan W. Ghidinelli Director, 60,512(8) 1.29%
North Valley Bancorp
North Valley Bank
John Gierek, Jr. Director, *
Six Rivers Bank
H. Russell Harris President and 11,400 *
Director
Six Rivers Bank(6)
Kevin D. Hartwick Director, 24,417(9) *
North Valley Bancorp
Six Rivers Bank
William T. Kay, Jr. Chairman of the Board, 35,472(10) *
Six Rivers Bank
Thomas J. Ludden Director, 50,006 1.06%
North Valley Bancorp
North Valley Bank
Warren L. Murphy Director, 128,219 2.74%
Six Rivers Bank
5
Jack R. Richter Executive Vice President 29,500 *
and Chief Operating Officer(6)
Douglas M. Treadway Director, 29,520 *
North Valley Bancorp
North Valley Bank
Dolores M. Vellutini Director, 57,650 1.23%
North Valley Bancorp
Six Rivers Bank
J.M. ("Mike") Wells, Jr. Director, General Counsel 276,045(4)(11) 5.86%
and Secretary,
North Valley Bancorp
North Valley Bank
Six Rivers Bank
Bank Processing, Inc.
Eric J. Woodstrom Senior Vice President 12,158 *
and Chief Credit Officer(6)
All directors and executive officers as a group
(18 persons) (12) 790,091(13) 15.67%(14)
- ------------------------
(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: 20,640 shares exercisable within 60
days of the Record Date by Mr. Balma; 17,741 shares exercisable within
60 days of the Record Date by Mrs. Benson; 4,624 shares exercisable
within 60 days of the Record Date by Mr. Czajka; 26,640 shares
exercisable within 60 days of the Record Date by Mr. Cox; 43,381 shares
exercisable within 60 days of the Record Date by Mr. Cushman; 14,400
shares exercisable with 60 days of the Record Date by Mr. Friesen;
36,800 shares exercisable within 60 days of the Record Date by Mr.
Ghidinelli; 0 shares exercisable within 60 days of the Record Date by
Mr. Gierek; 4,000 shares exercisable within 60 days of the Record Date
by Mr. Harris; 17,867 shares exercisable within 60 days of the Record
Date by Mr. Hartwick; 14,729 shares exercisable within 60 days of the
Record Date by Mr. Kay; 25,106 shares exercisable within 60 days of the
Record Date by Mr. Ludden; 13,275 shares exercisable within 60 days of
the Record Date by Mr. Murphy; 26,702 shares exercisable within 60 days
of the Record Date by Mr. Richter; 26,800 shares exercisable within 60
days of the Record Date by Mr. Treadway; 25,275 shares exercisable
within 60 days of the Record Date by Ms. Vellutini; 39,780 shares
exercisable within 60 days of the Record Date by Mr. Wells; and 7,658
shares exercisable within 60 days of the Record Date by Mr. Woodstrom.
6
(2) Includes shares allocated under the North Valley Bancorp Employee Stock
Ownership Plan through December 31, 2000, with: 535 shares allocated to
Mr. Cushman; 398 shares allocated to Mr. Richter; and 7,294 shares
allocated to Ms. Benson. Messrs. Woodstrom and Czajka did not have any
shares allocated to them at the end of the year 2000. Final allocations
for the year ending December 31, 2001 were not completed prior to the
Record Date.
(3) Includes stock options exercisable within 60 days of the Record Date.
An "*" indicates less than one percent.
(4) Includes 172,599 shares representing 3.7% of the total shares
outstanding as of the Record Date 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 ESOP
Administrative Committee and have authority to instruct the ESOP
Trustee, Arrowhead Trust, with regard to voting of these shares.
Messrs. Balma, Cushman and Wells, as members of the Administrative
Committee, disclaim beneficial ownership with respect to all those
shares. Mr. Cushman, Mrs. Benson, Mr. Czajka, Mr. Richter and Mr.
Woodstrom are participants in the ESOP.
(5) Includes 73,376 shares held by The Balma Family Trust, of which Mr.
Balma is trustee.
(6) Michael J. Cushman is Chief Administrative Officer of Six Rivers Bank,
Sharon L. Benson is Senior Vice President and Controller of North
Valley Bancorp, North Valley Bank, Six Rivers Bank and Bank Processing,
Inc.; Edward J. Czajka is Executive Vice President and Chief Financial
Officer of North Valley Bancorp, North Valley Bank, Six Rivers Bank and
Bank Processing, Inc.; H. Russell Harris is President of Six Rivers
Bank; Jack R. Richter is Executive Vice President and Chief Operating
Officer of North Valley Bancorp, North Valley Bank, Six Rivers Bank and
Bank Processing, Inc.; Eric J. Woodstrom is Senior Vice President and
Chief Credit Officer of North Valley Bancorp, North Valley Bank and
Bank Processing, Inc., and Senior Vice President and Credit
Administrator of Six Rivers Bank.
(7) Includes 610 shares held by Mr. Cox's spouse and as to which Mr. Cox
disclaims beneficial ownership.
(8) 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.
(9) Includes 280 shares held in custodian accounts for Mr. Hartwick's
children.
(10) Includes 4,851 shares held in a testamentary trust created by Mr. Kay's
deceased father and where Mr. Kay serves as a co-trustee.
(11) Includes 58,298 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. 4,368 shares held
by the Estate of Jean M. Wells of which Mr. Wells is the executor .
7
(12) This group includes all current executive officers and Directors of the
Corporation and its subsidiaries, North Valley Bank and Six Rivers
Bank.
(13) See footnotes 4, 5, 7, 8, 9, 10 and 11. Excludes 172,599 shares
representing 3.7% of total shares outstanding relative to Messrs.
Balma, Cushman and Wells as the Administrative Committee of the ESOP.
Includes 38,638 shares subject to options exercisable within 60 days of
the Record Date by the Directors under the 1989 Director Stock Option
Plan; 228,674 shares subject to options exercisable within 60 days of
the Record Date by the Directors under the 1999 Director Stock Option
Plan; and 104,106 shares subject to options exercisable within 60 days
of the Record Date by Sharon Benson, and Messrs. Cushman, Czajka,
Richter and Woodstrom under the 1998 Employee Stock Incentive Plan.
(14) In calculating the percentage of ownership, all shares which the
identified person has 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.
Certain information with respect to the three nominees for Director of
the Corporation is provided below:
WILLIAM W. COX, CRE, CCIM, (age 54), 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.
THOMAS J. LUDDEN (age 69), 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.
DOLORES M. VELLUTINI (age 64), a Director of the Corporation since
October 2000 and a founding Director of Six Rivers National Bank, now Six Rivers
Bank, since 1989, has been owner and President of Eureka Baking Company in
Eureka, California, since 1988. In addition, she is a developer and the owner of
Vellutini Properties in Eureka, California.
Certain information with respect to the continuing Directors (Class I
and Class III Directors) and the current executive officers of the Corporation
and its subsidiaries is provided below:
RUDY V. BALMA (age 73), the founding Chairman of the Board of Directors
and a Director of the Corporation since 1982, is a retired licensed funeral
director and former President of Redding Memorial Park, doing business as
Redding Cemetery and McDonald's Chapel.
SHARON L. BENSON (age 49) has served as Senior Vice President and
Controller of the Corporation and its subsidiaries since January of 2001. Prior
to that, she served as Senior Vice
8
President and Chief Financial Officer of the Corporation and its subsidiaries
since July 1997, and prior to that as Vice President/Accounting since December
1990.
MICHAEL J. CUSHMAN (age 47), a Director of the Corporation since
February 1999, was promoted and appointed President and Chief Executive Officer
of the Corporation and its then existing 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 and 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, which acquired Country National Bank in November of 1994 where Mr. Cushman
had served as President and Chief Executive Officer since September of 1992.
EDWARD J. CZAJKA (age 37) has served as Executive Vice President and
Chief Financial Officer since July 2001. Prior to that, he served as Senior Vice
President of the Corporation and its subsidiaries since January of 2001. Prior
to joining the Corporation, Mr. Czajka served since 1994 as Vice President and
Controller of Pacific Capital Bancorp in Santa Barbara, California, and as Chief
Financial Officer of its subsidiary bank, First National Bank of Central
California.
ROYCE L. FRIESEN, RPh., (age 63), a Director of the Corporation since
May 1999, 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 54), a Director of the Corporation since 1993,
has been a Certified Public Accountant and partner with Nystrom & Company LLP
since 1974.
JOHN GIEREK, JR. (age 38), a Director of Six Rivers Bank since August
2001, is President of Humboldt Moving and Storage, Inc. in Eureka since 1996,
having previously served as Executive Vice President of Humboldt Moving and
Storage, Inc. from 1990 to 1996. Prior to that, he was Operations Manager and
Personal Banking Manager for Texas Commerce Bank in Barton Creek, Texas, from
1986 to 1990.
H. RUSSELL HARRIS (age 55), President and Director of Six Rivers Bank
since April 2001, has been a banker for over twenty years, originally with
Security Pacific Bank from 1974 to 1987. In 1987, he started the Business
Banking unit for the Bank of Loleta, which was acquired by U.S. Bank. From 1988
to 1992, he was Senior Lending Officer and from 1992 to April 2001, he was Team
Leader/Relationship Manager for Northern California for U.S. Bank.
KEVIN D. HARTWICK (age 40), a Director of the Corporation since October
2000 and a Director of Six Rivers National Bank, now Six Rivers Bank, since
1996, has been a Certified Public Accountant and managing partner with Cholwell
Benz & Hartwick in Crescent City, California, since 1989.
WILLIAM T. KAY, JR. (age 57), founding Chairman of the Board of
Directors of Six Rivers National Bank, now Six Rivers Bank, since 1989, is an
attorney at law and partner with Ferro & Kay, Attorneys at Law, in Arcata,
California.
9
WARREN L. MURPHY (age 49), has served as a Director of Six Rivers
National Bank, now Six Rivers Bank, since its founding in 1989 and is an
independent businessman.
JACK R. RICHTER (age 55) has served as the Corporation's Executive Vice
President and Chief Operating Officer since July 2001 Previously he served as
Senior Vice President and Chief Operating Officer since October 1999. Prior to
that, he served as Senior Vice President and Chief Credit Officer since joining
the Corporation on April 14, 1998. From February 1996 until April 1998, he was
Relationship Manager for Tri-Counties Bank in Redding, California; and from
February 1990 until February 1996, Mr. Richter served as Senior Business Banking
Officer for Bank of California in Redding, California.
DOUGLAS M. TREADWAY (age 60), 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 61), the General Counsel and Secretary
of the Board of Directors of the Corporation and a member of the Board of
Directors of the Corporation since 1982, is an Attorney at Law and "Of Counsel"
with Wells, Small, Selke & Graham, a Law Corporation, located in Redding,
California. Mr. Wells has practiced law with that firm since 1972. See "Certain
Relationships and Related Transactions", below.
ERIC J. WOODSTROM (age 43) has served as Senior Vice President and
Chief Credit Officer since joining the Corporation in October 1999. Prior to
joining the Corporation, 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 that is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended. 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 has established an Audit
Committee. Currently, the members of the Audit Committee are Messrs. Balma,
Ghidinelli (Chairman), Friesen, Hartwick and Vellutini. The Audit Committee met
five times during 2001. 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.
10
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 Messrs. Balma, Cushman,
Ghidinelli (Chairman) and Wells. The Committee did not meet during 2001. See the
Notice of Annual Meeting of Shareholders for nominating procedures.
The Corporation has an Executive Committee, the current members of
which are Messrs. Balma (Chairman), Cox, Cushman, Wells and Mrs. Vellutini. The
functions of the Executive Committee are to review and make decisions on actions
that are required between regular meetings of the Board of Directors. The
Executive Committee did not meet during 2001.
The entire Board of Directors of the Corporation performed the function
of a Compensation Committee during 2001, 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 2001, 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 2001, the Board of Directors held ten regularly scheduled
meetings and three special meetings. In 2001, 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 or she 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 or she 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, 2001, all
Section 16(a) filing requirements applicable to its officers, Directors and 10%
shareholders were complied with on a timely basis, except that Mr. Cushman
failed to file one Form 5 on a timely basis.
11
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation of
the President and Chief Executive Officer of the Corporation 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 and its
subsidiaries during 2001, 2000 and 1999:
12
SUMMARY COMPENSATION TABLE
Long-Term
Compen-
sation
Annual Compensation Awards
--------------------- -------
Secur- All
ities Other
Name and Other Annual Under- Compen-
Principal Compensation lying sation
Position(1) Year Salary (2) Bonus (3) (4) Options (5)(6)
- ----------- ---- ---------- --------- --- ------- -------
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
Michael J. 2001 $200,000 $70,000 $2,050 57,406 $5,321
Cushman
President & 2000 $175,000 $61,250 $2,050 47,500 $2,240
Chief Executive
Officer 1999 $140,000 $25,000 $1,435 47,500 $4,988
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
Sharon L. Benson 2001 $ 90,000 $13,500 $ -0- 23,396 $3,041
Senior Vice
President & 2000 $ 90,000 $22,500 $ -0- 20,000 $1,314
Controller
1999 $ 73,508 $14,000 $ -0- 20,000 $2,575
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
Edward J. Czajka 2001 $110,000 $27,500 N/A 10,000 $ 699
Executive Vice
President & CFO 2000 N/A N/A N/A N/A N/A
1999 N/A N/A N/A N/A N/A
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
H. Russell Harris 2001 $ 90,000 $ -0- N/A 10,000 $ -0-
President & Chief
Executive Officer - Six 2000 N/A N/A N/A N/A N/A
Rivers Bank
1999 N/A N/A N/A N/A N/A
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
Jack R. Richter 2001 $125,000 $31,250 $1,240 34,981 $4,127
Executive Vice
President & Chief 2000 $110,000 $27,500 $ 820 30,000 $1,752
Operating Officer
1999 $ 89,259 $18,000 $ 410 30,000 $3,544
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
Eric J. 2001 $105,000 $15,900 $ -0- 13,018 $2,277
Woodstrom
Senior Vice 2000 $100,000 $25,000 $ -0- 10,000 $ 190
President &
Chief Credit 1999 $ 96,000 $ 5,000 $ -0- 10,000 $ -0-
Officer
- ------------------------ ------ -------------- --------------- ------------- ------------------ ---------------
13
- ------------------------
(1) Russ Harris joined the Corporation and its subsidiaries in April 2001
at a salary of $90,000 per year.
(2) Base salary includes 401(k) Plan and Executive Deferred Compensation
Plan ("EDCP") contributions made by the officers.
(3) Includes bonus amounts in the year paid, rather than in the year
earned.
(4) Represents the cost of a company car for Messrs. Cushman and Richter.
(5) Represents matching contributions made by the Corporation under the
Corporation's 401(k) Plan.
(6) Includes an annual allocation of cash under the ESOP for 2001.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- ------------------------------------------------------------------------------------------------- --------------------------------
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
INDIVIDUAL GRANTS Option Term (3)
- -------------------------------------------------------------------------------------------------- -------------------------------
Number of Percentage of
Securities Total
Underlying Options/SARs
Option/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) (1) Fiscal Year ($Sh) (2) Date 5% 10%
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
Michael J. Cushman 9,906 0.21% $ 13.30 4/26/11 $65,874.90 $131,749.80
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
Sharon L. Benson 3,396 0.07% $ 13.30 4/26/11 $22,583.40 $ 45,166.80
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
Edward J. Czajka 10,000 0.21% $ 13.375 1/25/11 $66,875.00 $133,750.00
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
H. Russell Harris 10,000 0.21% $ 13.30 4/26/11 $66,500.00 $133,000.00
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
Jack R. Richter 4,981 0.11% $ 13.30 4/26/11 $33,123.65 $ 66,247.30
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
Eric J. Woodstrom 3,018 0.06% $ 13.30 4/26/11 $20,069.70 $ 40,139.40
- --------------------------- ------------------- ------------------- --------------- -------------- ------------- -----------------
(1) Options granted under the 1998 Employee Stock Incentive Plan (the "1998
Plan") were either incentive options or nonstatutory options and became
exercisable in accordance with a vesting schedule established at the
time of grant. Vesting cannot extend beyond ten years from the date of
grant. Upon a change in control of North Valley Bancorp, all
outstanding options under the 1998 Plan will become fully vested and
exercisable. Options granted under the 1998 Plan are adjusted to
protect against dilution in the event of certain changes in North
Valley Bancorp's capitalization, including stock splits and stock
dividends. All options granted to the named executive officers are
incentive stock options and have an exercise price equal to the fair
market value of North Valley Bancorp common stock on the date of grant.
14
(2) The exercise price was determined based upon the average of the high
and low prices of North Valley Bancorp common stock as reported on the
Nasdaq National Market on the grant date.
(3) In accordance with Securities and Exchange Commission rules, these
columns show gains that might exist for the respective options,
assuming that the market price of the stock appreciates from the date
of grant over the 10 year option term at the annualized rates of 5% and
10%, respectively.
The following table sets forth the number of shares of North Valley
Bancorp common stock acquired by each of the named executive officers upon the
exercise of stock options during fiscal 2001, if any, the net value realized
upon exercise, the number of shares of common stock represented by outstanding
stock options held by each of the named executive officers as of December 31,
2001, the value of such options based on the average of the high and low prices
of common stock, and certain information concerning unexercised options under
the 1998 Employee Stock Incentive Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
Number of Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs at Options/SARs
on Value Fiscal Year-End (#) at Fiscal Year-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable (1)
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
Michael J. Cushman ------ ------ 41,962 / 15,444 $16,215 / $5,986
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
Sharon L. Benson ------ ------ 17,358 / 6,038 $13,570 / $4,055
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
Edward J. Czajka ------ ------ 4,000 / 6,000 $1,260 / $1,890
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
H. Russell Harris ------ ------ 4,000 / 6,000 $1,560 / $2,340
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
Jack R. Richter ------ ------ 30,701 / 11,826 $7,297 / $2,796
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
Eric J. Woodstrom ------ ------ 7,207 / 5,811 $17,361 / $11,966
- ------------------------------ ---------- ------------- ----------------------------- -----------------------------
(1) The aggregate value has been determined based upon the average of the
high and low prices for North Valley Bancorp common stock as reported
on the Nasdaq National Market at year-end, minus the exercise price.
No stock options were exercised in 2001 by any of the persons named in
the Summary Compensation Table.
15
EMPLOYMENT CONTRACTS
- --------------------
The Corporation entered into Employment Agreements with each of the
following "Executive Officers" during 2001: Mike Cushman, Ed Czajka, Jack
Richter, Eric Woodstrom, Sharon Benson and Russ Harris.
All Employment Agreements were effective January 1, 2001, except the
Employment Agreement for Mr. Harris was effective May 3, 2001.
All Employment Agreements have an initial term of two years, except for
Mr. Cushman, whose Agreement has a term of three years. After the initial term,
all Employment Agreements provide that they will be automatically extended for
additional one-year periods unless either the employee or the employer gives
notice of non-renewal at least sixty (60) days before the end of the term or
extended term.
The Base Salary for each executive officer set forth in the Employment
Agreement is the Base Salary shown in column "Salary" on the Summary
Compensation Table herein.
Under the terms of the Employment Agreements, all Executive Officers
are eligible to participate in the Annual Incentive Compensation program, the
Long Term Incentive Compensation program, the Executive Deferred Compensation
program and the Executive Salary Continuation program in addition to other
benefits available to all other employees of the Corporation. Summary
information regarding each such program is set forth below in this Proxy
Statement.
All Executive Officers are entitled to severance pay upon termination
by the Corporation without cause in an amount equal to six months current base
salary and a pro rata share of the prior year's annual incentive compensation,
except Mr. Cushman who is entitled to twenty-four months current base salary and
pro rata share of the prior year's annual incentive compensation.
CHANGE IN CONTROL ARRANGEMENTS
- ------------------------------
In the event of a sale, dissolution or liquidation of the Corporation
or a merger or a consolidation in which the Corporation is not the surviving or
resulting corporation, a "change in control":
(1) All Executive Officers are, upon a change in control of the
Corporation, entitled under their Employment Agreements to receive the "change
in control" benefits described in their Executive Salary Continuation Agreements
(see below), except Mr. Harris, who would be entitled to receive an amount equal
to twenty four months salary pursuant to his Employment Agreement.
(2) 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.
16
(3) The following agreements with Executive Officers: North Valley Bank
Executive Deferred Compensation Agreement; Six Rivers Bank Executive Deferred
Compensation Agreement; North Valley Bank Executive Salary Continuation
Agreement and Six Rivers Bank Executive Salary Continuation Agreement, all
provide for the acceleration of the payment of benefits thereunder upon a change
in control of the Corporation. Summary information regarding each such agreement
is set forth below in this Proxy Statement.
During the years 2000 and 2001, the Corporation engaged Bank
Compensation Strategies, Inc., now Clarke/Bardes Consulting, to consult with the
Board of Directors and management concerning the various methods of providing
supplemental retirement benefits that would be comparable to those established
by banks and bank holding companies of comparable size. In this regard, the
Corporation replaced the prior Supplemental Executive Retirement Plan with a
Salary Continuation Agreement for each of the Executive Officers of the
Corporation. The Corporation also updated and entered into Executive Deferred
Compensation Agreements with the Executive Officers and individual Director
Deferred Fee Agreements with all of the outside Directors, which were effective
as of January 1, 2001.
SALARY CONTINUATION AGREEMENTS
- ------------------------------
The Salary Continuation Agreements provide for five general classes of
benefits for Executive Officers, which benefits vest over a period of four years
with credit for prior service:
(1) Normal Retirement Benefits. The normal retirement benefit is
calculated to provide a target benefit in the amount equal to seventy percent
(70%) of the executive's compensation at the time of retirement (age 65) less
Corporation provided benefits, including but not limited to, the Corporation's
401(k) matching contribution, the Corporation's Employee Stock Ownership Plan,
and the Corporation's portion of Social Security benefits.
(2) Early Termination Benefit. The early termination benefit is the
vested portion of the target retirement benefit for the plan year immediately
preceding the early termination.
(3) Disability Benefit. The disability benefit is a Disability Lump Sum
Benefit specified in the agreement for the plan year immediately preceding the
disability, payable only upon total disability as defined in the agreement.
(4) Death Benefit. The death benefit is an amount determined by a
formula that takes into account the number of years of service and the
anticipated compensation level at the age of retirement.
(5) Change of Control Benefit. The change of control benefit is an
amount determined by the following formula: Executive's Present Value Vested
Benefit payable at age 65 (as shown on Schedule A of the Agreement) for the
current Plan Year plus two times the Executive's current Plan Year Compensation.
This benefit is payable only in the event of a change in control as defined in
the agreement and is limited by the provisions of Internal Revenue Code section
280(g).
In consulting with Bank Compensation Strategies, Inc., now
Clarke/Bardes Consulting, the Corporation determined that it would be more cost
effective for the Corporation to acquire prepaid
17
policies of insurance to fund these anticipated future obligations than to pay
annual premiums. The Corporation, as a result of acquiring the prepaid policies,
will have cash values in the policies in excess of the amount paid for those
policies. During 2000 and 2001, the Corporation and/or its subsidiaries paid
insurance premiums of $13,896,000 (including $2,318,000 received from cancelled
policies) in order to fund its obligations under the Salary Continuation
Agreements.
The Corporation and its subsidiaries have offered to the Executive
Officers, who have Salary Continuation Agreements, to enter into split dollar
life insurance agreements with those officers in connection with the life
insurance policies obtained by the Corporation and its subsidiaries on their
lives.
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 20 years (whichever is
greater):
ANNUAL RETIREMENT INCOME
Years of Credited Service
Final Average
Compensation 1 2 3 4 or more
- ------------ --------- -------- -------- ----------
$100,000 $17,500 $35,000 $52,500 $70,000
$120,000 21,000 42,000 63,000 84,000
$140,000 24,500 49,000 73,500 98,000
$160,000 28,000 56,000 84,000 112,000
$180,000 31,500 63,000 94,500 126,000
$200,000 35,000 70,000 105,000 140,000
$250,000 43,750 87,500 131,250 175,000
$300,000 52,500 105,000 157,500 210,000
Each of Messrs. Cushman, Czajka, Richter, Woodstrom and Mrs. Benson
began accruing retirement benefits under the Salary Continuation Agreements
effective January 1, 2001.
As of December 31, 2001, the Corporation's accrued obligation under the
Salary Continuation Agreements was $2,363,000 (includes obligation to retirees
under old plans).
EXECUTIVE DEFERRED COMPENSATION PLAN
- ------------------------------------
The Executive Deferred Compensation Plan ("EDCP"), adopted by the
Directors of the Corporation and its subsidiaries effective January 1, 2001, is
a non-qualified executive benefit plan in which the eligible executive
voluntarily elects to defer some or all of his or her current compensation in
exchange for the Corporation's promise to pay a deferred benefit. The deferred
compensation is credited with interest under the plan and the accrued liability
is paid to the executive at retirement. Unlike a 401(k) plan or a pension plan,
an EDCP is a non-qualified plan. Accordingly, this plan is selectively made
available to certain highly compensated employees and executives without regard
to the nondiscrimination requirements of qualified plans. The EDCP is also an
unfunded plan, which means there are no specific assets set aside to fund the
plan. The Corporation has purchased life insurance policies in order to provide
for payment of its obligations
18
under the Executive Deferred Compensation Plan, but the Executive has no rights
under the plan beyond those of a general creditor of the plan sponsor. The
deferred amount is not taxable income to the individual and is not a
tax-deductible expense to the plan sponsor.
The EDCP is embodied in a written agreement between the plan sponsor
and the Executive selected to participate in the plan. The agreement includes
provisions that indicate the benefits to be provided at retirement or in the
event of death, disability, or termination of employment prior to retirement.
The agreement provides for full vesting of deferred amounts since the executive
is setting aside his or her current compensation. If the individual leaves the
plan sponsor, the account balance would be paid according to the terms specified
in the agreement. If the individual were to die prior to or during retirement,
the promised benefits would be paid to the individual's beneficiary or estate.
The Corporation's accrued obligations under the previous Executive
Deferred Compensation Plan for executives was carried over into the new
Executive Deferred Compensation Plan.
As of December 31, 2001, the Corporation's accrued obligation under the
Executive Deferred Compensation Plan was $633,000.
DIRECTOR DEFERRED FEE PLAN
- --------------------------
The Director Deferred Fee Plan ("DDFP"), adopted by the Directors of
the Corporation and its subsidiaries effective January 1, 2001, is a
non-qualified director benefit plan in which the eligible director voluntarily
elects to defer some or all of his or her current fees in exchange for the
Corporation's promise to pay a deferred benefit. The deferred fees are credited
with interest under the plan and the accrued liability is paid to the director
at retirement. Unlike a 401(k) plan or a pension plan, a DDFP is a non-qualified
plan. Accordingly, this plan is only made available to outside directors without
regard to the nondiscrimination requirements of qualified plans. The DDFP is
also an unfunded plan, which means there are no specific assets set aside to
fund the plan. The Corporation has purchased life insurance policies in order to
provide for payment of its obligations under the Director Deferred Fee Plan, but
the director has no rights under the plan beyond those of a general creditor of
the plan sponsor. The deferred amount is not taxable income to the individual
and is not a tax-deductible expense to the plan sponsor.
The Corporation and its subsidiaries have offered to the Directors, who
have DDFP Agreements, to enter into split dollar life insurance agreements with
those Directors in connection with the life insurance policies obtained by the
Corporation and its subsidiaries on their lives.
The DDFP is embodied in a written agreement between the plan sponsor
and the director selected to participate in the plan. The agreement includes
provisions that indicate the benefits to be provided at retirement or in the
event of death, disability, or termination of board membership prior to
retirement. The agreement provides for full vesting of deferred amounts since
the director is setting aside his or her current fees. If the individual leaves
the plan sponsor, the account balance would be paid according to the terms
specified in the agreement. If the individual were to die prior to or during
retirement, the promised benefits would be paid to the individual's beneficiary
or estate.
19
Effective January 1, 2001, the Corporation terminated the Supplemental
Retirement Plan for Directors (except for those benefits under the Plan which
have accrued to former Directors who retired prior to January 1, 2001).
The Corporation's accrued obligation under the previous Supplement
Retirement Plan for Directors has been carried over into the new Director
Deferred Fee Plan.
As of December 31, 2001, the Corporation's accrued obligation under the
Directors Deferred Fee Plan was $1,262,000.
COMPENSATION OF DIRECTORS
- -------------------------
General. During 2001, each Director who was a member of the Board of
Directors of North Valley Bank, Six Rivers Bank or the Corporation received fees
of $500 per Board meeting attended and payments per Committee meeting attended
of $250 (with the exception of Loan Committee, which pays $100 per meeting).
Effective January 2002, fees to be paid to the Directors of the Corporation will
be $1,500 per quarterly meeting for the Board of Directors of the Corporation
and $500 per monthly meeting for the Board of Directors of North Valley Bank and
Six Rivers Bank. Payments per committee meeting will be $250, except the Loan
Committee, which will be $100 per meeting. The Chairman of the Board of
Directors of the Corporation will be paid $2,500 per quarterly meeting and the
Chairmen of the Board of Directors of North Valley Bank and Six Rivers Bank will
be paid $850 per Board of Directors meeting.
Commencing in 1998, each outside Director of the Corporation receives
an award of 600 shares of Common Stock as part of his or her annual retainer as
a Director pursuant to the 1998 Employee Stock Incentive Plan. Each award is
fully vested when granted to the outside Director.
During 2001, cash compensation paid to all Directors totaled $33,750
and payment of additional Director compensation of $135,050 was deferred under
the DDFP. 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.
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. 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 12, 2001, the Corporation had outstanding
options to purchase 39,598 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
20
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.
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 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.
Pursuant to the Stock Incentive Plan, as of December 31, 2001, the
Corporation had outstanding options to purchase 246,304 shares of Corporation
Common Stock, with 615,661 shares remaining available for grant.
The award of 600 shares of Common Stock to outside directors as an
annual retainer under the Plan is fully taxable at the time of the grant. The
Corporation receives a compensation expense deduction in the same 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 the Corporation's Board of
Directors. As of April 12, 2001, the Committee members are Rudy V. Balma,
Michael J. Cushman, William W. Cox, Royce L. Friesen, Dan W. Ghidinelli, Kevin
D. Hartwick, Thomas J. Ludden, Douglas M. Treadway, Dolores M. Vellutini 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
21
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
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 of the Corporation and its
subsidiaries, including employees of the Corporation who are Directors, are
eligible to participate in the 1999 Director Stock Option Plan. As of April 12,
2002, there were thirteen Directors eligible to participate in 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. As of April 12, 2001, there were options
outstanding under the 1999 Director Stock Option Plan for the purchase of
340,056 shares of Common Stock. On the same date, there were 4,670,953 shares of
Common Stock issued and outstanding. Thus, as of
22
April 12, 2001, a total of 192,161 shares of Common Stock were available for the
grant of additional options under the 1999 Director Stock Option Plan.
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,
such fair market value shall be equal to the last transaction price quoted for
such date on the Nasdaq National Market.
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
23
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. 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 executive officers in the banking industry in the Corporation's
market area. In January 2002, the Board approved the following salary increases:
Mr. Cushman's annual salary was increased to $210,000, Mr. Czajka's annual
salary was increased to $130,000, Mr. Richter's annual salary was increased to
$150,000, and Mr. Woodstrom's annual salary was increased to $118,000.
During the year 2000, the Corporation engaged Bank Compensation
Strategies, Inc., now Clarke/Bardes Consulting, to consult with the Board of
Directors and management concerning establishing guidelines for the Board of
Directors and executive officers concerning the awarding of incentive bonuses,
both annual cash bonuses and long term stock options grants. The Board of
Directors studied and evaluated various incentive compensation programs with the
desire to adopt incentive compensation guidelines that will assist the Board of
Directors in determining these bonuses by evaluating the accomplishment of
specific goals and objectives to be achieved by each executive officer in his or
her area of responsibility and the overall goals and results accomplished by
management as a team. The guidelines provide a range of percentages of the
executive officers salary for arriving at both the annual cash bonus award and
long term stock option grants. Although the Board of Directors has approved
these guidelines and uses them to assist in making its determinations, the Board
of Directors awards bonuses to its executive officers at its discretion.
The Board of Directors, at its discretion, awarded bonuses to the
following executive officers during 2001: Messrs. Cushman, Richter, Woodstrom,
and Mrs. Benson.
Submitted by:
The Board of Directors
24
- --------------------------------------------------------------------------------
STOCK PERFORMANCE CHART (1)
- --------------------------------------------------------------------------------
North Valley Bancorp
[GRAPHIC OMITTED]
PERIOD ENDING
--------------------------------------------------------------------
INDEX 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
- -------------------------------------------------------------------------------------------------------
North Valley Bancorp 100.00 152.44 119.81 107.57 133.83 147.93
S&P 500 100.00 133.37 171.44 207.52 188.62 166.22
SNL $250M-$500M Bank Index 100.00 172.95 154.89 144.10 138.74 197.12
(1) Assumes $100 invested on December 31, 1996, in the Corporation's Common
Stock, the S&P 500 corporate composite stock index and SNL Securities
Northern California Proxy Index, with reinvestment of dividends.
25
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through its banking subsidiaries, North Valley Bank and Six Rivers
National 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 2001 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,
Corporate Secretary and Director, is an Attorney at Law and "Of Counsel" of the
law firm of Wells Small Selke & Graham, a Law Corporation, which contracted to
provide professional legal services to the Corporation and its subsidiaries
during 2001. The firm expects to provide professional legal services to the
Corporation and its subsidiaries in the future. Wells Small Selke & Graham, a
Law Corporation, received from the Corporation, North Valley Bank and Six Rivers
Bank in 2001 a total of $134,796 in legal fees and costs reimbursed.
Mr. Wells personally contracted with the Corporation, effective January
2001, to provide certain professional legal services as General Counsel, and to
act as Corporate Secretary for the Corporation and its subsidiaries. It is
contemplated that Mr. Wells will devote substantially all of his activities as
an attorney to providing professional legal services to the Corporation and its
subsidiaries. Mr. Wells was paid $115,000 in 2001.
AUDIT COMMITTEE REPORT
The Audit Committee consists of the following members of the
Corporation's Board of Directors: Dan W. Ghidinelli (Chairman), Rudy V. Balma,
Royce L. Friesen, Kevin D. Hartwick, and Dolores M. Vellutini. All members of
the Committee are independent as defined under the National Association of
Securities Dealers' listing standards. The Committee operates under a written
charter adopted by the Board of Directors which is included in this Proxy
Statement as Appendix A. The Audit Committee, in addition to its other
functions, recommends to the Board of Directors, subject to shareholder
ratification, the selection of the Corporation's independent accountants.
Management is responsible for the Corporation's internal controls and
the financial reporting process. The independent accountants are responsible for
performing an independent audit of the Corporation's consolidated financial
statements in accordance with generally accepted accounting principles and to
issue a report thereon. The Audit Committee's responsibility is to monitor and
oversee these processes.
The Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing, internal control and financial reporting practices
26
of the Corporation. The Committee's primary responsibilities include the
following: (1) serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control system; (2)
review and evaluate the audit efforts of the Corporation's independent
accountants and internal audit department; (3) evaluate the Corporation's
quarterly financial performance as well as its compliance with laws and
regulations; (4) oversee management's establishment and enforcement of financial
policies and business practices; and (5) facilitate communication among the
independent accountants, financial and senior management, counsel, the internal
audit department and the Board of Directors.
It is not the duty or the responsibility of the Committee to conduct
auditing or accounting reviews. Therefore, the Committee has relied, without
further independent verification, on management's representation that the
financial statements have been prepared with integrity and objectivity and in
conformity with accounting principles generally accepted in the United States of
America and on the representations of the independent auditors included in their
report on the Corporation's financial statements. Furthermore, the Committee's
discussions with management and the independent auditors do not provide the
Committee with any other independent basis to determine or assure that the
Corporation's financial statements are presented in accordance with generally
accepted accounting principles, that the audit of our Corporation's financial
statements has been carried out in accordance with generally accepted auditing
standards or that the Corporation's independent accountants are in fact
"independent."
The Committee has reviewed and discussed the audited financial
statements of the Corporation for the fiscal year ended December 31, 2001 with
the Corporation's management. The Committee has discussed with Deloitte & Touche
LLP, the Corporation's independent public accountants, the matters required to
be discussed by Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Committee has also received the written disclosures and the
letter from Deloitte & Touche LLP required by Independence Standards Board
Standard No. 1 (Independence Discussion with Audit Committees) and the Committee
has discussed the independence of Deloitte & Touche LLP with that firm.
The Committee has recommended to the Board of Directors that the
Corporation's audited financial statements be included in the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001 for
filing with the Securities and Exchange Commission.
Submitted by:
Dan W. Ghidinelli (Chairman)
Rudy V. Balma
Royce L. Friesen
Kevin D. Hartwick
Dolores M. Vellutini
27
AUDIT FEES
- ----------
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte") for professional services rendered for the audit of the
Corporation's annual financial statements and for the reviews of the SAS 50
Letter on Pooling of Interests for the fiscal year ended December 31, 2001, were
$200,675.00.
DUE DILIGENCE AND CONSULTATION ON MERGER WITH SIX RIVERS BANK
- -------------------------------------------------------------
The aggregate fees billed by Deloitte for due diligence and
consultation on the merger with Six Rivers Bank for the fiscal year ended
December 31, 2001, were $38,958.00.
ALL OTHER FEES
- --------------
The aggregate fees billed by Deloitte for services rendered to the
Corporation, other than the services described above under "Audit Fees" and "Due
Diligence and Consultation", for the fiscal year ended December 31, 2001, were
$51,837.00 for tax service.
The Audit Committee of the Board of Directors of the Corporation
approved each professional service rendered by Deloitte during the 2001 fiscal
year and considered whether the provision of non-audit services is compatible
with maintaining the principal accountant's independence.
The Audit Committee and the Board of Directors are currently in the
process of reviewing and selecting the Corporation's independent auditor for the
fiscal year 2002.
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 will respond to appropriate questions from shareholders present at
the Meeting.
SHAREHOLDER PROPOSALS
The Corporation's 2002 Annual Meeting of Shareholders will be held on
May 22, 2003. Shareholder proposals must be received by the Corporation no later
than December 26, 2002, to be considered for inclusion in the Proxy Statement
and Proxy for the 2003 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
26, 2001, deadline.
28
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,
/s/ J. M. WELLS, Jr.
-----------------------------------------
J. M. ("Mike") Wells, Jr.,
Secretary
Redding, California
April 26, 2002
29
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30
APPENDIX A
AUDIT COMMITTEE CHARTER
This Audit Committee Charter has been adopted by the Board of Directors of North
Valley Bancorp (the "Company"). The Audit Committee of the Board shall review
and reassess this charter annually and recommend any proposed changes to the
Board for approval.
ROLE AND INDEPENDENCE: ORGANIZATION
The Committee assists the Board in fulfilling its responsibility for oversight
of the quality and integrity of the accounting, auditing, internal control and
financial reporting practices of the Company. It may also have such other duties
as may from time to time be assigned to it by the Board. The membership of the
Committee shall consist of at least three directors, who are each free of any
relationship that, in the opinion of the Board, may interfere with such member's
individual exercise of independent judgment. Each Committee member shall also
meet the independence and financial literacy requirements for serving on audit
committees, and at least one member shall have accounting or related financial
management expertise, all as set forth in the applicable rules of NASDAQ. The
Committee shall maintain free and open communication with the independent
auditors, the internal auditors and Company management. In discharging its
oversight role, the Committee is empowered to investigate any matter relating to
the Company's accounting, auditing, internal control or financial reporting
practices brought to its attention, with full access to all Company books,
records, facilities and personnel. The Committee may retain outside counsel,
auditors or other advisors.
The Board shall appoint one member of the Committee as chair. The chair shall be
responsible for leadership of the Committee, including scheduling and presiding
over meetings, preparing agendas, and making regular reports to the Board. The
chair will also maintain regular liaison with the CEO, CFO, the lead independent
audit partner and the outsource internal audit firm.
The Committee shall meet at least four times a year, or more frequently as the
Committee considers necessary. At least once each year the Committee shall have
separate private meetings with the independent auditors, management and the
internal auditors.
RESPONSIBILITIES
Although the Committee may wish to consider other duties from time to time, the
general recurring activities of the Committee in carrying out its oversight role
are described below. The Committee shall be responsible for:
o Recommending to the Board the independent auditors to be retained
(or nominated for shareholder approval) to audit the financial
statements of the Company. Such auditors are ultimately
accountable to the Board and the Committee, as representatives of
the shareholders.
A-1
o Evaluating, together with the Board and management, the
performance of the independent auditors and, where appropriate,
replacing such auditors.
o Obtaining annually from the independent auditors a formal written
statement describing all relationships between the auditors and
the Company, consistent with Independence Standards Board
Standard Number 1. The Committee shall actively engage in a
dialogue with the independent auditors with respect to any
relationships that may impact the objectivity and independence of
the auditors and shall take, or recommend that the Board take,
appropriate actions to oversee and satisfy itself as to the
auditors' independence.
o Reviewing the audited financial statements and discussing them
with management and the independent auditors. These discussions
shall include the matters required to be discussed under
Statement of Auditing Standards No. 61 and consideration of the
quality of the Company's accounting principles as applied in its
financial reporting, including a review of particularly sensitive
accounting estimates, reserves and accruals, judgmental areas,
audit adjustments (whether or not recorded), and other such
inquiries as the Committee or the independent auditors shall deem
appropriate. Based on such review, the Committee shall make its
recommendation to the Board as to the inclusion of the Company's
audited financial statements in the Company's Annual Report on
Form 10-K (or the Annual Report to Shareholders, if distributed
prior to the filing of the Form 10-K).
o Issuing annually a report to be included in the Company's proxy
statement as required by the rules of the Securities and Exchange
Commission.
o Overseeing the relationship with the independent auditors,
including discussing with the auditors the nature and rigor of
the audit process, receiving and reviewing audit reports, and
providing the auditors full access to the Committee (and the
Board) to report on any and all appropriate matters.
o Discussing with a representative of management and the
independent auditors: (1) the interim financial information
contained in the Company's Quarterly Report on Form 10-Q prior to
its filing, (2) the earnings announcement prior to its release
(if practicable), and (3) the results of the review of such
information by the independent auditors. (These discussions may
be held with the Committee as a whole or with the Committee chair
in person or by telephone.)
o Overseeing internal audit activities, including discussing with
management and the internal auditors the internal audit
function's organization, objectivity, responsibilities, plans,
results, budget and staffing.
o Discussing with management, the internal auditors and the
independent auditors the quality and adequacy of and compliance
with the Company's internal controls.
A-2
o Discussing with management and/or the Company's general counsel
any legal matters (including the status of pending litigation)
that may have a material impact on the Company's financial
statements, and any material reports or inquiries from regulatory
or governmental agencies.
The Committee's job is one of oversight. Management is responsible for the
preparation of the Company's financial statements and the independent auditors
are responsible for auditing those financial statements. The Committee and the
Board recognize that management (including the internal audit staff) and the
independent auditors have more resources and time, and more detailed knowledge
and information regarding the Company's accounting, auditing, internal control
and financial reporting practices than the Committee does; accordingly the
Committee's oversight role does not provide any expert or special assurance as
to the financial statements and other financial information provided by the
Company to its shareholders and others.
A-3
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Please mark
your vote like this [X]
WITHHOLD
FOR FOR ALL
1. To elect as Directors the nominees set forth below: [ ] [ ]
2. In their discretion the proxy holders are authorized to
vote upon such other business as may properly come
before the meeting.
INSTRUCTION: To withhold authority to vote for any
individual nominee strike a line through the nominee's
name in the list below:
01 William W. Cox, 02 Thomas J. Ludden, 03 Dolores M. Vellutini
I PLAN TO ATTEND THE MEETING [ ]
Signature(s) ____________________________________ Dated ________________, 2002
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.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE AND READ THE REVERSE SIDE ^
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 4PM Eastern Time
the business day prior to annual meeting day.
Your telephone or Internet vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and returned
your proxy card.
Internet
http://www.eproxy.com/novb
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
OR
Telephone
1-800-435-6710
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
If you vote your proxy by Internet or by
telephone, you do NOT need to mail back your proxy card.
PROXY PROXY
NORTH VALLEY BANCORP
Proxy Solicited on Behalf of the Board of Directors
of North Valley Bancorp
for the Annual Meeting of Shareholders, May 23, 2002
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 12, 2002, and revoking any proxy heretofore given,
hereby constitutes and appoints Michael J. Cushman and Edward J. Czajka, 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 the Administrative Offices of North Valley Bancorp, 300 Park Marina
Circle, Redding, California, on Thursday, May 23, 2002, at 5:00 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. 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 AND, "FOR" 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)
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^