ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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The following sets forth information for each
person currently serving as a member of the board of directors of both TriCo and Tri Counties Bank, TriCos wholly owned subsidiary. These directors also serve on committees of the board of directors of Tri Counties Bank in addition to the
TriCo board of directors committees discussed below. The following biographies show the age and principal occupations during the past five years of each of the directors. Ages are shown as of April 29, 2014.
BOARD OF DIRECTORS
William J.
Casey
William J. Casey, age 69, has been a director since 1989. He is the chairman of TriCos board of directors, chairman of TriCos
compensation and management succession committee, chairman of TriCos nominating and corporate governance committee and a member of TriCos audit committee. Mr. Casey has been a self-employed healthcare consultant since 1983.
Mr. Casey has an MPA degree from the University of Southern California. He has served on the audit committees of other public companies. Mr. Casey is Mr. Gieses father-in-law.
Mr. Casey was selected as a director because TriCo believes that his leadership qualities, knowledge and experience on the boards of other public
companies are important to the board of directors effectiveness and in his role as Chairman. In addition, his knowledge of corporate governance, finance and accounting matters make him well-suited to serve on TriCos nominating and
corporate governance committee and TriCos audit committee.
Donald J. Amaral
Donald J. Amaral, age 61, has been a director since 2003. Mr. Amaral is chairman of TriCos audit committee and a member of TriCos compensation
and management succession committee and TriCos nominating and corporate governance committee. He was chairman and chief executive officer of Coram Healthcare Corporation, a home infusion therapy company, from 1995 to 1999. Mr. Amaral has
a Bachelors degree in accounting and an MBA degree. Retired since 1999, he served as chief executive officer and chief financial officer of various companies for over 25 years.
Mr. Amaral was selected as a director because his education, knowledge and experience allow him to provide the board of directors with insight regarding
financial and accounting matters and to serve on TriCos audit committee as an audit committee financial expert. In addition TriCo believes that his professional experience and leadership qualities contribute to the effectiveness of the board
of directors and the committees on which he serves.
L. Gage Chrysler III
L. Gage Chrysler III, age 60, has been a director since 2008. Mr. Chrysler has been with Modern Building, Inc., a construction company, since 1978 and
currently serves as its president and chief executive officer. He also serves as a director of the Salvation Army Advisory Board, Mid Valley Title and CSU Chico Alumni Association, Chico Chapter. Mr. Chrysler has a Bachelors degree in
business specializing in finance.
Mr. Chrysler was selected as a director because of his leadership experience and community involvement. In
addition, his experience in construction allows him to provide valuable insights to the board of directors concerning construction lending and the state of the construction industry and real estate markets generally.
Craig S. Compton
Craig S. Compton, age 58, has
been a director since 1989. Mr. Compton is a member of TriCos compensation and management succession committee and TriCos nominating and corporate governance committee. He has served as the president, chief executive officer and
chief financial officer of AVAG, Inc., an aerial application business, for over 20 years and has been a principal in his family rice farming partnership for over 23 years. Mr. Compton is also the owner of A&P Helicopters, a commercial
helicopter business. He is a director of Environmental Alternatives Foster Care Agency. He holds a B.S. in Business Administration from California State University, Chico.
4
Mr. Compton was selected as a director based on his leadership experience and community involvement. His
business background as a chief executive officer, chief financial officer and business owner contribute to his effective service as a board member and as a member of TriCos compensation and management succession committee and TriCos
nominating and corporate governance committee.
Cory W. Giese
Cory W. Giese, age 35, has been a director since February, 2013. Mr. Giese is a member of TriCos audit committee. Mr. Giese is a certified
public accountant and owns and operates an accounting firm in Truckee, California. He also served as controller for Squaw Valley Academy, Inc., a boarding school, and for several privately held real estate investment entities. He holds a B.S. in
Business Administration from California State University, Chico and a Master of Accounting from Washington State University. Mr. Giese is Mr. Caseys son-in-law. Mr. Giese was selected as a director based on his business
background and his ties to and familiarity with several of the communities in which TriCo operates. In particular, Mr. Gieses education and experience in accounting as a certified public accountant qualify him to serve on TriCos
audit committee.
John S. A. Hasbrook
John S.
A. Hasbrook, age 54, has been a director since 2002. Mr. Hasbrook is a member of TriCos compensation and management succession committee and TriCos audit committee and serves as chairman of the director loan committee of Tri
Counties Bank. He is active in several agricultural and investment enterprises. He is president of SunWest Wild Rice Co., Inc.; president of Hasbrook-Fetter Farms, Inc.; vice president, marketing of SunWest Foods, Inc., a food marketing company; and
serves as an officer for other agricultural-related entities. Mr. Hasbrook also serves as a director of Santa Clara Universitys Food & Agribusiness Institute, as well as for various charitable and civic organizations.
Mr. Hasbrook has a BSC degree in finance and an MBA degree in agribusiness from Santa Clara University. He is a Board Member of Sutter Medical Foundation, a former comptroller of the California Wine Commission and former corporate account
officer at Bank of America where he worked for three years.
Mr. Hasbrook was selected as a director because of his experience in the areas of
finance, marketing, banking and agri-business. His broad business experience and community involvement provides the board of directors with valuable insights concerning the primary communities in which the bank operates and the agricultural industry
in particular.
Michael W. Koehnen
Michael W.
Koehnen, age 53, has been a director since 2002. He is the Vice-Chairman of TriCos board of directors. Mr. Koehnen is also a member of TriCos compensation and management succession committee and TriCos nominating and corporate
governance committee. He is the owner and president of C.F. Koehnen & Sons, a third-generation family farming and beekeeping company. Mr. Koehnen is also president and owner of Riverwest Processing, an almond processing company.
Mr. Koehnen was selected as a director because of his leadership experience and knowledge of corporate governance and compensation-related matters. In
addition, his involvement in businesses related to agricultural industry allows him to provide valuable insights to the board of directors.
Richard
P. Smith
Richard P. Smith, age 56, has been a director since 1999. He has served as the president and chief executive officer of TriCo and
the bank since 1999. Mr. Smith joined the bank in 1994 as vice president and chief information officer. He was senior vice president-customer/employee support and control from 1997 until 1998, when he was promoted to executive vice
president in the same capacity. Mr. Smith was named president of the bank and executive vice president of TriCo in 1998. Mr. Smith served as chairman of the California Bankers Association during 2011 and is currently a member of
its board of directors.
Mr. Smith was selected as a director because TriCo believes that including the president and chief executive officer on the
board of directors is important and assists the board of directors in keeping abreast of the TriCos operations and managements progress on corporate initiatives. Further, Mr. Smith has 20 years of banking experience, including
13 as the banks chief executive officer. This experience allows him to provide valuable insights to the board of directors concerning the banking industry and the bank in particular.
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W. Virginia Walker
W. Virginia Walker, age 69, has been a director since 2009. Ms. Walker is a member of the nominating and corporate governance committee and the audit
committee. Ms. Walker is the General Manager of the Jamison Group LLC, a consulting group specializing in finance, marketing and strategy for high tech companies. Her professional experience includes having worked in companies ranging from
start-ups to those with a billion dollars in annual revenue. From 2001 to 2007 she held various executive management positions with Enea AB, a software and services company, where she was most recently Senior Vice President, Corporate Strategy and
Marketing.
Ms. Walker was selected as a director primarily based on her marketing, finance and public affairs experience, her over 25 years as chief
financial officer, in addition to her management experience gained in large, complex organizations, and her long-standing ties to the community in which the bank is headquartered.
EXECUTIVE OFFICERS
The
following persons currently serve as executive officers and senior management of both TriCo and Tri Counties Bank.
Richard P. Smith
Information about Mr. Smith can be found at Board of Directors.
Daniel K. Bailey
Daniel Bailey,
age 45, has been executive vice presidentretail banking & bank operations of Tri Counties Bank since May 2007. Prior to joining Tri Counties Bank, Mr. Bailey spent more than fifteen years at Wells Fargo Bank where he served in
numerous senior management positions. His most recent position with Wells Fargo was senior vice president, Northern California Region Initiatives Manager.
Craig Carney
Craig Carney, age
55, has served as executive vice president and chief credit officer of Tri Counties Bank since 2007. From 1997 until 2007 he was senior vice president and chief credit officer of Tri Counties Bank. From 1985 to 1996 Mr. Carney was employed by
Wells Fargo Bank in various lending capacities. His most recent position with Wells Fargo was as vice president, senior lender in commercial banking from 1991 to 1996. Mr. Carney served as a consultant to Tri Counties Bank from 1996 until his
employment in 1997.
Glenn Hunter
Glenn Hunter, age 63, has served as senior vice president and director of human resources of Tri Counties Bank since 2013. Previously, he was
senior vice president, global human resources for Obopay, Inc., a mobile payments technology company, from 2008-2013.
Richard OSullivan
Richard OSullivan, age 57, has served as executive vice presidentwholesale banking of Tri Counties Bank since 1997. He
was TriCos senior vice presidentcustomer sales and service from 1995 to 1997. He served as vice president and manager of TriCos Park Plaza branch from 1992 until 1995. Mr. OSullivan is also a partner in a family farm.
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Thomas J. Reddish
Tom Reddish, age 54, has served as executive vice president and financial officer of TriCo and Tri Counties Bank since 2006 after serving as
senior vice president and chief financial officer since 2003 and, prior to that, as vice president and chief financial officer since 1999. Previously, he was vice president and controller of TriCo and vice president of Tri Counties Bank from 1998
until 1998. He served as controller of Tri Counties Bank from 1994 until 1998.
Raymond Rios
Ray Rios, age 57, has served as senior vice president, and chief technology officer, since 2005. From 1983 through 1994 Mr. Rios served in
a variety of positions in TriCos information technology department and from 1997 to 2005 he was managerinformation systems of Tri Counties Bank.
Carol Ward
Carol Ward, age 59, is
the executive vice president and chief risk officer of Tri Counties Bank. She was appointed to this position in June, 2012 following more than 28 years of banking experience including executive risk management positions at several southern
California banks. From 2010 to 2012, she served as senior vice president of enterprise risk management for Elevations Credit Union in Boulder, Colorado. From 2006 to 2010, she worked as an independent consultant and, supported Kinecta Federal Credit
Union as an internal consultant from 2008 to 2010.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors, executive officers and some other shareholders are required to report their ownership of TriCos common stock and any changes in that
ownership to the Securities and Exchange Commission and NASDAQ. To the best of TriCos knowledge, all required filings in 2013 were timely made. In making these statements, TriCo has relied on the representations of the persons involved and on
copies of their reports filed with the Securities and Exchange Commission.
CORPORATE GOVERNANCE
Corporate Governance
TriCo has long believed that good
corporate governance is important to ensure that TriCo is managed for the long-term benefit of its shareholders. TriCo continues to review its corporate governance policies and practices along with provisions of the Sarbanes-Oxley Act of 2002, the
Dodd-Frank Act, the rules of the Securities and Exchange Commission and the listing standards of NASDAQ. TriCo has adopted a code of ethics that applies to its principal executive officer, principal financial officer and persons performing similar
functions. You can view TriCos code of business conduct, TriCos code of ethics for its principal executive officers and senior financial officers, TriCos audit committee charter, TriCos nominating and corporate governance
committee charter and TriCos compensation and management succession committee charter on its website at www.tricountiesbank.com under About Tri Counties BankInvestor RelationsCorporate Governance, or receive copies by
contacting TriCos corporate secretary in writing at TriCo Bancshares, 63 Constitution Drive, Chico, California 95973, or by telephone at (530) 898-0300.
No Change in Shareholder Nomination Procedures
There
were no material changes to the procedures by which TriCo shareholders may recommend nominees to TriCos board of directors since TriCo last provided disclosure regarding shareholder nomination procedures in its 2013 proxy statement.
7
Audit Committees
TriCo has a standing audit committee of TriCo and a standing audit committee of Tri Counties Bank. The board of directors has determined that Mr. Amaral
is an audit committee financial expert under the rules of the Securities and Exchange Commission and that each member of the committee is financially literate as defined by NASDAQ listing standards and is independent under special standards
established by the Securities and Exchange Commission and NASDAQ for audit committee members. Their qualifications and business expertise are described at Board of Directors. TriCos audit committee monitors:
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the integrity of TriCos financial statements, including the financial reporting process and systems of internal controls regarding finance, accounting and legal and regulatory compliance,
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our compliance with legal and regulatory requirements,
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the independence, qualifications and performance of TriCos financial executives, principal independent auditor and internal auditing department, and
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the communication among TriCos principal independent auditor, management, TriCos internal auditing function and the board of directors.
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The committee also annually retains our principal independent auditor and approves the terms and scope of work to be performed. For more
information on this committee, please see Report of the Audit Committee.
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ITEM 11.
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EXECUTIVE COMPENSATION
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COMPENSATION OF NAMED EXECUTIVE OFFICERS
Summary Compensation Table
The following
table presents information concerning all compensation earned in 2013, 2012 and 2011 by TriCos principal executive officer, principal financial officer and the three other most highly compensated executive officers during 2013:
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Name and
principal position
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Year
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Salary
($)(1)
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Bonus
($)(2)
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Stock
awards
($)
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Option
awards
($)(3)
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Non-
equity
incentive
plan
compensation
($)
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Change in
pension
value and
nonqualified
deferred
compensation
earnings
($)(4)
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All other
compensation
($)(5)
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Total
($)
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Richard Smith,
President and CEO
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2013
2012
2011
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505,675
493,365
483,691
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0
0
0
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0
0
0
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395,840
270,400
316,500
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160,000
149,461
145,107
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9,135
822,407
442,904
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49,984
57,549
45,758
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1,120,634
1,793,182
1,433,960
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Thomas Reddish,
Executive Vice
President and CFO
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2013
2012
2011
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309,272
301,744
290,801
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60,000
60,940
73,597
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0
0
0
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99,990
135,200
189,900
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0
0
0
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0
389,411
321,634
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25,341
28,025
24,238
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494,603
915,320
900,170
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Richard OSullivan,
Executive Vice
PresidentWholesale
Banking
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2013
2012
2011
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252,004
246,656
243,411
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75,974
49,656
12,171
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0
0
0
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95,920
101,400
63,300
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0
0
0
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31,805
237,480
273,668
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24,992
36,187
35,558
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480,695
671,379
628,107
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Craig Carney,
Executive Vice
PresidentChief
Credit Officer
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2013
2012
2011
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262,338
242,311
210,172
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79,279
50,885
42,761
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0
0
0
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99,110
135,200
189,900
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0
0
0
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9,158
500,896
203,232
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30,961
28,933
26,861
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480,846
958,225
672,926
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Dan Bailey,
Executive Vice
PresidentRetail
Banking
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2013
2012
2011
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257,299
249,194
240,157
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77,756
50,327
48,862
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0
0
0
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100,760
135,200
189,900
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0
0
0
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0
87,743
54,436
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29,383
27,715
27,269
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465,198
550,179
560,624
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(1)
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Reflects actual salary earned in the year indicated.
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(2)
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Reflects cash bonuses earned for performance in the year indicated but paid in the following year.
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9
(3)
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Reflects the fair value of the option awards on the grant date determined in accordance with FASB ASC Topic 718, using the valuation assumptions described in the Notes to the Consolidated Financial
Statements section of TriCos Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC.
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(4)
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Reflects only the above-market rates earned under TriCos executive deferred compensation plan. The actuarial change in the present value of the executives benefits under TriCos supplemental executive
retirement plan was negative. In accordance with SEC rules, such negative amounts are not reflected in the sum in this column. The table below shows the actuarial change in the present value for each executive:
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Name of Executive
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Change in Pension Value
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Mr. Smith
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($302,232
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Mr. Reddish
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($138,010
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Mr. OSullivan
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($346,435
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Mr. Carney
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($71,640
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Mr. Bailey
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($2,013
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The actuarial change in the present value is determined using interest rate and mortality rate assumptions consistent with those named in TriCos financial statements and includes amounts which the executive may
not be currently entitled to receive because such amounts are not vested. The actuarial change in present value for the executives was negative in 2013 primarily as a result of an increase in the market value of TriCo common stock which, in turn,
increased the values of the executives ESOP accounts. Other than for Mr. Bailey, the present value of an executives benefit under his supplemental executive retirement plan is reduced by the value of his ESOP account on the date of
retirement.
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(5)
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Reflects the incremental cost to TriCo of other compensation indicated on the perquisites and personal benefits table below.
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Perquisites and Personal Benefits
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Name
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Year
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Automobile
use or
allowance
($) (A)
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Life
insurance
benefits
($) (B)
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Personal
use of
club
member-
ships
($)
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TriCo
contributions
($) (C)
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ESOP
contributions
($)(D)
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Total
perquisites
and other
personal
benefits ($) (E)
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Mr. Smith
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2013
2012
2011
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5,886
5,904
7,338
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26,333
35,585
23,890
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4,506
4,070
3,700
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0
0
0
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12,750
11,710
10,698
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49,984
57,549
45,758
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Mr. Reddish
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2013
2012
2011
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0
0
0
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8,477
11,505
9,100
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4,114
4,810
4,440
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0
0
0
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12,750
11,710
10,698
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25,341
28,025
24,238
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Mr. OSullivan
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2013
2012
2011
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12,000
12,000
12,000
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8,061
8,194
8,489
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4,506
4,440
4,440
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0
0
0
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291
11,553
10,628
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24,992
36,187
35,558
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Mr. Carney
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2013
2012
2011
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6,000
6,000
6,000
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6,763
6,991
7,116
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4,959
4,544
4,440
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227
183
184
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12,750
11,123
8,994
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30,961
28,933
26,861
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Mr. Bailey
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2013
2012
2011
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12,000
12,000
12,000
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563
713
713
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4,070
3,330
4,070
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0
0
0
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12,750
11,672
10,486
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29,383
27,715
27,269
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10
(A)
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Reflects the value attributable to personal use of automobiles provided by TriCo as calculated in accordance with IRS guidelines.
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(B)
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In 2013, TriCo provided all full time employees, including the named executive officers, with life insurance benefits paying greater three times the employees annual salary or $500,000 to the employees
beneficiaries. For 2013, reflects the incremental cost of this insurance. For 2012 and 2011, reflects the taxable value attributable to split dollar life insurance benefits provided by joint beneficiary agreements between TriCo and each executive;
TriCo owned and paid premiums on these insurance policies which provided various death benefits to the beneficiaries named by each executive.
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(C)
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Reflects contributions allocated by TriCo to an executives ESOP account pursuant to the terms of TriCos nonqualified deferred compensation plan.
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(D)
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Reflects discretionary contributions made by TriCo to an executives account in TriCos ESOP described below.
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(E)
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Includes security system expenses for Mr. OSullivan and expenses related to spouses when spouses are invited to accompany executives on management retreats and conventions.
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CEO Incentive Plan
Each year the board
of directors adopts a CEO Incentive Plan providing for potential bonus compensation to TriCos chief executive officer, Richard Smith, for his performance during that year. In 2013, the CEO Incentive Plan generally provided that Mr. Smith
could earn a bonus equal to up to 100% of his 2013 salary if TriCo met certain pre-established performance goals. See Compensation Discussion and AnalysisAnnual Incentive Bonus for a more detailed discussion of this plan. The
compensation and management succession committee retains discretion regarding the determinations as to whether TriCo reached these goals.
ESOP
TriCo has an employee stock ownership plan and trust for all employees completing at least 1,000 hours of service with TriCo or Tri
Counties Bank. Annual contributions are made by TriCo in cash at the discretion of the board of directors. Contributions to the plan are held in trust and invested primarily in TriCos common stock. Contributions are allocated to participants
on the basis of salary in the year of allocation. In general, benefits become vested after six years.
401(k)
TriCo has a 401(k) plan for all employees age 21 and over who complete at least 90 days of service with TriCo or Tri Counties Bank.
Participants may contribute a portion of their compensation subject to certain limits based on federal tax laws. Participants may select between making regular pre-tax deferrals or Roth deferrals (effective January 1, 2008). TriCo has not made
any matching contributions to the plan to date. Plan assets are held in trust. Participants can direct their investment contributions into one or more of 29 mutual funds. Generally, contributions are triggered by a participants retirement,
disability, death or other separation from employment.
2009 Equity Incentive Plan
General.
In 2009 TriCo adopted and its shareholders approved TriCos 2009 equity incentive plan. In 2013, TriCos shareholders
approved an amendment to the 2009 plan increasing the number of authorized shares from 650,000 to 1,000,000. The plan may be administered by the board of directors or an authorized committee of the board of directors. It is the current policy of the
board of directors that all equity incentive awards be approved by the compensation and management succession committee. The 2009 plan expires in 2019.
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Employees, officers, directors and consultants of TriCo or its subsidiaries are eligible for
awards under the 2009 plan. The board of directors or an authorized committee determines which individuals will receive awards, as well as the number of shares underlying and composition of each award.
Grants to non-employee directors.
The 2009 plan provides that TriCo may grant to each outside (i.e., non-employee) director a
stock option for 20,000 shares of common stock when first elected to the board of directors and an additional stock option for 4,000 shares each year when re-elected to the board of directors. In addition, each outside director who is appointed as
Chairman of the Board or as Chairman of the Audit Committee may receive an additional stock option for 1,000 shares. The exercise price for these options will be the fair market value on the date of grant and the options will vest as determined by
the board of directors. Outside directors are eligible to receive other awards, but no such awards have been granted to them.
Awards.
The 2009 plan permits TriCo to grant stock options, restricted stock, stock awards, and stock appreciation rights. The
board of directors or an authorized committee determines the types, sizes and terms of awards based on various factors, including a participants duties and responsibilities, the value of the participants past services, the
participants potential contributions to TriCos success and other factors. No participant may receive awards for more than 300,000 shares of common stock during any year, including grants of stock options and stock appreciation rights.
The 2009 plan provides for the following types of awards:
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Stock Options
. TriCo may grant stock options under the 2009 plan, including options which are qualified as incentive stock options as defined under Section 422 of the Internal Revenue Code and nonqualified
stock options. Options will not be exercisable at a price that is less than 100% of the fair market value of TriCos common stock on the date of grant or, if the optionee holds at least 10% of the voting power of all classes of TriCos
stock, 110% of fair market value with respect to incentive stock options. The term of options will generally be ten years, except that incentive stock options granted to any 10% shareholders will have a term of no more than five years. Options will
vest and become exercisable as determined by the board of directors at the time of grant.
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Restricted Stock
. A restricted stock award is the grant of shares of TriCos common stock, exercisable currently at a price determined by the board of directors (including zero), that is subject to
forfeiture until specific conditions or goals are met. Conditions may be based on continuing employment or achieving performance goals specified by the board of directors. During the period of restriction, participants holding restricted stock may,
if permitted by the board of directors, have full voting and dividend rights. The restrictions lapse in accordance with a schedule or other conditions determined by the board of directors.
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Stock Grants
. A stock grant is an award of shares of common stock without restriction. Stock grants may be made in certain circumstances to reward special performance or for other reasons.
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Stock Appreciation Rights.
Under the 2009 plan, TriCo may grant stock appreciation rights or SARs that are settled in common stock or cash and which must be granted with an exercise price not
less than 100% of fair market value on the date of grant. Upon exercise of a SAR, a participant is entitled to receive cash or a number of shares of common stock equivalent in value to the difference between the fair market value on the exercise
date and the exercise price of the SAR. For example, if a participant is granted 100 SARs with an exercise price of $10 and the SARs are later exercised when the fair market value of the underlying shares is $20 per share, the participant would be
entitled to receive 50 Shares [(($20$10) x 100) / $20], or $1,000 in cash (($20$10) x 100). Because of adverse accounting consequences of an SAR settled in cash, TriCo expects that most SARs will provide for settlement in shares of
common stock.
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Performance-based awards
. Grants of performance-based awards under the 2009 plan are intended to
qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code and preserve the deductibility of these awards for federal income tax purposes. Section 162(m) of the Internal Revenue Code denies a
tax deduction to public companies for compensation paid to certain covered employees in a taxable year to the extent the compensation paid to a covered employee exceeds $1,000,000 unless the plan contains certain features that qualify
the compensation as performance-based compensation. Because Section 162(m) of the Internal Revenue Code only applies to those employees who are covered employees as defined in Section 162(m), covered employees and
those who may become covered employees are most likely to receive performance-based awards. Covered employees means TriCos chief executive officer, its chief financial officer and any of its other three highest compensated
officers.
12
Shares reserved for issuance
. Subject to certain adjustments, the maximum aggregate number
of shares of TriCos common stock which may be issued pursuant to or subject to awards under the 2009 plan is 1,650,000. As of December 31, 2013 there were 937,500 shares available for grant of awards under the 2009 plan. The number of shares
available for issuance under the 2009 plan is reduced by: (i) one share for each share of common stock issued pursuant to a stock option or a Stock Appreciation Right and (ii) two shares for each share of common stock issued pursuant to a
Performance Award, a Restricted Stock Award or a Restricted Stock Unit Award. When awards made under the 2009 plan expire or are forfeited or cancelled, the underlying shares will become available for future awards under the 2009 plan. To the extent
that a share of common stock pursuant to an award that counted as two shares again becomes available for issuance under the 2009 plan, the number of shares of common stock available for issuance under the 2009 plan will increase by two shares.
Shares awarded and delivered under the 2009 plan may be authorized but unissued, or reacquired shares.
Acceleration of vesting
.
The board of directors has the authority to accelerate the vesting and exercisability of awards. In addition, an award held by a participant whose service has not terminated prior to a change in control may be subject to additional acceleration of
vesting and exercisability upon or after such event as may be provided in the agreement for such award or as may be provided in any other written agreement between TriCo or any affiliate and the participant. In the absence of such an acceleration
provision, however, no acceleration will occur. See Compensation of Named Executive OfficersPotential Payments Upon Termination or Change of Control.
Federal Income Tax Consequences.
Tax consequences to TriCo and to participants receiving awards will vary with the type of award.
The plan is not intended to be a qualified plan under Section 401(a) of the Internal Revenue Code.
Following is a
summary of the principal federal tax consequences to U.S. citizens and residents of awards under the plan. It is based on the provisions of the Internal Revenue Code and applicable Internal Revenue Service (IRS) regulations and rulings.
The Internal Revenue Code is subject to amendment and continuing interpretation by the IRS. This summary describes only the principal tax consequences in the circumstances described and does not take into account special rules that might apply in
limited cases.
IRS regulations provide that, for the purpose of avoiding certain penalties under the Internal Revenue Code, taxpayers may
rely only on opinions of counsel that meet specific requirements set forth in the regulations, including a requirement that such opinions contain extensive factual and legal discussion and analysis. Any tax advice that may be contained in this
document does not constitute an opinion that meets the requirements of the regulations. Any such tax advice therefore cannot be used, and was not intended or written to be used, for the purpose of avoiding any federal tax penalties that the IRS may
attempt to impose. Because any such tax advice could be viewed as a marketed opinion under the IRS regulations, those regulations require this document to state that any such tax advice was written to support the promotion or
marketing of the matters set forth in this document.
For purposes of this summary, TriCo assumed that no award will be considered
deferred compensation as that term is defined for purposes of Section 409A of the Internal Revenue Code and the federal tax rules governing nonqualified deferred compensation arrangements.
You should consult your own independent tax advisor and seek advice based on your particular circumstances as to the specific consequences
under federal tax law, and under other tax laws, such as foreign, state or local tax laws, which are not addressed here.
13
Nonstatutory Options.
Grant
. Participants will not have to report any taxable income upon receipt of a nonstatutory option.
Exercise with Cash
. Participants will have to report taxable income upon exercise of a nonstatutory option with cash. The amount a
participant must report is the difference between the value of the shares on the date that the option is exercised and the amount paid for the shares. This income will be taxable to the participant just as any other income the participant received
as compensation for services. This income, together with the amount paid for the shares, will then be the participants basis in the shares for purposes of determining the participants taxable gain or loss on any later sale of the shares.
Exercise with Stock
. If a participant exercises a nonstatutory option by delivering shares that are already owned, the
exercise will be treated, in part, as a nontaxable exchange of shares. This means
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The participant will not have to report compensation income on the number of shares received whose value equals the value of the shares delivered. The participants basis in those shares, for determining any
taxable gain or loss when the participant sells those shares, will be the basis of the shares delivered. Also, the shares received will have a holding period (for determining whether the participant qualifies for long-term capital gains tax rates)
which includes the length of time the participant held the shares delivered.
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The participant will have to report compensation income on any additional shares received in an amount equal to the difference between the value of those additional shares and the amount of cash, if any, paid for the
shares. This income, together with the amount paid for the shares, will then be the participants basis in the shares for purposes of determining the participants taxable gain or loss on any later sale of the shares.
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If the shares used to exercise a nonstatutory option were acquired by exercising an incentive stock option or under an employee stock purchase
plan, the participants use of those shares may constitute a disqualifying disposition of those shares, as explained below under Incentive Stock Options.
Sale of Shares
. A participant may also have to report taxable gain or loss when selling a share received on exercise of a
nonstatutory option. The amount of gain or loss that the participant must report will be measured by the difference between the amount that the participant receives from selling that share and the participants basis in the share. Any such gain
or loss will be a capital gain or loss. Capital gains qualify to be taxed at long-term capital gains tax rates rather than the rates which apply to compensation income if the participant has held the share more than one year.
Incentive Stock Options.
Grant.
Participants will not have to report any taxable income upon receipt of an incentive stock option.
Exercise with Cash.
In most cases participants will not have to report any taxable income when exercising an incentive stock
option with cash. However, the federal income tax system includes a separate tax, the alternative minimum tax, intended to ensure that taxpayers cannot completely eliminate all income taxes through the use of various special provisions of the
Internal Revenue Code. The special treatment of incentive stock options generally does not apply for purposes of calculating whether participants owe any alternative minimum tax, however, so for that purpose a participant will have to report the
difference between the value of the shares on the date that the option is exercised and the amount the participant paid for the shares as though it were taxable compensation income. As a result, and depending on a participants particular
circumstances, a participant may have to pay an alternative minimum tax when exercising an incentive stock option even though the participant has no taxable income for regular income tax purposes because the participant does not sell the shares
acquired as a result of the exercise until a subsequent year.
Exercise with Stock
. Subject to the discussion above regarding
the alternative minimum tax, in most cases a participant also will not have to report any taxable income on exercising an incentive stock option with shares already owned but there will be other consequences unique to exercising an option with
shares, as follows:
14
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For purposes of determining the amount of gain or loss on any later sale of those shares, the number of shares that the participant receives on exercise whose value equals the value of the shares delivered will have a
basis equal to the basis of the shares delivered and a holding period which includes the length of time the participant held the shares delivered. The additional shares received will have basis equal to any cash paid to exercise the option.
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However, for purposes of determining whether any later sale of any of the shares received is a disqualifying disposition (described in Sale of Shares immediately below), all of the shares
received will be treated as newly acquired.
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In addition, if a participant later sells less than all of the shares received when exercising the incentive stock option with shares, the participant will be considered to have first sold the shares with the lowest
basis.
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If the participant acquired the shares used to exercise the option by exercising another incentive stock option or through an employee stock purchase plan, and the holding periods required for favorable tax treatment
are not met with respect to the shares used, those shares will be treated as sold in a disqualifying disposition for purposes of reporting compensation income (that is, the participant will not have any capital gain or loss on exchanging those
shares, but may be required to report compensation income as if the participant sold the shares).
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Sale of
Shares
. A participant may have to report taxable gain or loss when selling a share received on exercise of an incentive stock option. The amount of gain or loss will be measured by the difference between the amount the participant receives
from selling that share and the participants basis in the share. Any such gain or loss will usually be capital gain or loss. Capital gains qualify to be taxed at long-term capital gains tax rates rather than the rates which apply to
compensation income if the participant had held the share more than one year. However, if the participant has a gain when selling a share received on exercising an incentive stock option, some or all of that gain will be taxed as compensation income
if the participant sells that share
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within two years from the date that the participant received the option, or
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within one year after the participant exercised the option.
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A participants sale of shares within the
above time periods is known as a disqualifying disposition. In the case of a disqualifying disposition, a participant will have to report as additional compensation income the portion of the gain that the participant otherwise would report on
selling the share equal to the difference between the value of the share at the date that the participant exercised the option and the amount that the participant paid for the share on exercise. Note that the amount of the participants
compensation income will not be limited to the gain on the sale, but instead will include all of the difference between value and amount paid, if the participants sale is the type of transaction where a loss, had the participant sustained one,
would not be recognized for federal income tax purposes such as, for example, a sale to certain relatives. Any such compensation income is not subject to income and employment tax withholding, but will be reported by TriCo to the IRS.
Restricted Stock Awards.
Grant and
Lapse of Restrictions
. A participant receiving an award of stock that is subject to a substantial risk of forfeiture will not have to report any taxable income except as follows:
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If the participant makes an 83(b) election (described below), at the date that the participant receives the restricted stock award, the participant will have to report compensation income equal to the
difference between the value of the shares and the price paid for the shares, if any. Value is determined without regard to the risk of forfeiture that applies to the award.
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If the participant does not make an 83(b) election (described below), at the date or dates the substantial risk of forfeiture which applies to the award expires, the participant will have to report
compensation income equal to the difference between the value of the shares and the price paid for the shares, if any.
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15
83(b) Elections
. An 83(b) election is a special tax election that a participant can make
to have any risk of forfeiture that otherwise applies to a restricted stock award disregarded for tax purposes. An 83(b) election has three effects. First, the participant will have to report compensation income, if any, at the time that the shares
are received, rather than later as the risk of forfeiture expires. Second, the amount of the participants compensation income will be based on the value of the shares when the participant receives the shares (disregarding the risk of
forfeiture) rather than based on the value as the risk of forfeiture expires. Third, the date that the participant is first treated as holding the shares for purposes of later determining whether the participant qualifies for the tax rates that
apply to long-term capital gains or losses will be the date that the participant receives the award rather than the date or dates the risk of forfeiture which applies to the award expires. An 83(b) election must be made within 30 days of
receiving a restricted stock award, and generally cannot be revoked once made.
Sale of Shares
. A participant may have to report
taxable gain or loss when selling shares received as a restricted stock award. The amount of gain or loss that the participant must report will be measured by the difference between the amount received on selling those shares and the
participants basis in the shares. A participants basis in the shares is the amount that the participant paid for the shares, if any,
plus
the amount of compensation income the participant previously reported in
connection with the restricted stock award. Any such gain or loss will be a capital gain or loss. Any such gain will qualify for long-term capital gains tax rates rather than the rates which apply to compensation income if the participant held the
awarded shares more than one year after the date that the participant received the shares, assuming the participant makes an 83(b) election. If the participant does not make an 83(b) election, then the participant must have held the awarded shares
more than one year after the date or dates the risk of forfeiture which applies to the award expires to qualify for long-term capital gains tax rates.
Forfeiture of Shares
. If a participant should forfeit a restricted stock award, the participant will have to report taxable gain or
loss based on the difference between the amount paid for the award and the amount received on forfeiture, if anything. That gain or loss will be an ordinary gain or loss if the participant did not make a Section 83(b) election and capital gain
or loss if the participant did make a Section 83(b) election. Note that if the participant made an 83(b) election and the shares are subsequently forfeited, only the amount paid for the shares, and not any amount of compensation income
recognized because of the Section 83(b) election, will be taken into account for purposes of determining the participants capital gain or loss.
Stock Appreciation Rights; Restricted Stock Unit Awards.
A participant will generally recognize taxable income on receipt of cash or other property pursuant to an award of stock appreciation rights or
restricted stock units. The amount that the participant must report is the difference between the amount of cash or value of the shares received and the amount, if any, paid for any such shares. This income will be taxed to the participant just as
any other income received as compensation for services.
Performance Awards.
Participants will generally recognize taxable income in connection with the grant and/or vesting of performance awards depending upon the form
of the grant as described above (e.g., restricted stock award or restricted stock unit award).
Section 16 Officers and Directors.
For tax purposes, shares acquired upon exercise of an option or as a restricted stock award may be considered subject to a substantial risk of
forfeiture if the sale of such shares at a profit could subject the seller to Section 16(b) liability. The existence of a substantial risk of forfeiture may change some of the tax consequences described above. In these circumstances,
participants should consult their tax advisors regarding the tax consequences of an exercise of an option or receipt of an award of restricted stock.
Company Deductions; Tax Withholding.
Except as has been previously described, whenever a participant has to report compensation income in connection with an award, TriCo generally
will be entitled to deduct the same amount in computing its taxable income and TriCo must withhold income and employment taxes based on that compensation income if paid to a participant as an employee. Participants are responsible for ensuring that
adequate funds are available to TriCo for such withholding.
16
2001 Stock Option Plan
General
. In 2001, TriCo adopted a 2001 stock option plan for key officers, employees, directors and consultants, as subsequently
approved by shareholders, which provides that options to purchase an aggregate of 2,124,650 shares of TriCos common stock may be granted under the plan. With the adoption of the 2009 plan, TriCo decided that it would make no additional
grants of options under the 2001 plan, even though there were 128,140 shares still available for grant under the 2001 plan. Vesting schedules are determined individually for each grant. The stock options that TriCo issued to TriCos
executives were granted at exercise prices equal to the fair market value of TriCo stock on the date of grant. Aside from certain stock options granted to TriCos directors, which vest in their entirety on the first anniversary of the
grant date, all stock options granted vest ratably over a five-year period beginning either on the grant date or the first anniversary of the grant date.
The 2001 plan authorized the issuance incentive stock options and non-qualified stock options. The plan imposes individual limitations on the
amount of certain awards so that no single participant may generally receive options in any calendar year that relate to more than $1 million. Finally, options may generally be adjusted to prevent dilution or enlargement of benefits when certain
events occur, such as a stock dividend, reorganization, recapitalization, stock split, combination, merger or consolidation.
The 2001
plan is administered by TriCos compensation and management succession committee, which is authorized to: (i) amend the terms and conditions of any option, including the vesting schedule, (ii) interpret the rules relating to the plan,
and (iii) otherwise administer the plan. See Compensation of Named Executive OfficersPotential Payments Upon Termination or Change of Control.
Tax consequences to TriCo and to participants receiving options vary with the type of option. The plan is not intended to be a qualified
plan under Section 401(a) of the Internal Revenue Code.
Grants of Plan-Based Awards for 2013
The following table presents information concerning plan-based awards granted to each named executive in 2013:
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Estimated possible
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Estimated future
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All other
option
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payouts under non-equity
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payouts under equity
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awards:
number of
securities
underlying
options
(#)
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Exercise
or base
price of
option
awards
($/Sh)
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Grant
date fair
value of
option
award
($) (1)
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incentive plan awards
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incentive plan awards
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Name
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Grant
Date
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Threshold
($)
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Target
($)
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Maximum
($)
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Threshold
(#)
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Target
(#)
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Maximum
(#)
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Mr. Smith
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5/9/2013
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40,000
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(2)
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19.46
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359,200
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Mr. Smith
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5/9/2013
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4,000
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(2)
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19.46
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36,640
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Mr. Reddish
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5/9/2013
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11,000
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(2)
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19.46
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99,990
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Mr. OSullivan
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5/9/2013
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11,000
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(2)
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19.46
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95,920
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Mr. Carney
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5/9/2013
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11,000
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(2)
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19.46
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99,110
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Mr. Bailey
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5/9/2013
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11,000
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(2)
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19.46
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100,760
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(1)
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Reflects the fair value of the option awards on the grant date determined in accordance with FASB ASC Topic 718, using the valuation assumptions described in the Notes to the Consolidated Financial
Statements section of TriCos Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC.
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(2)
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Reflects stock options granted under TriCos 2009 stock option plan which vest in five equal installments each year beginning on the first anniversary of the grant date.
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17
Outstanding Equity Awards at 2013 Fiscal Year-End
The following table presents information for all stock option awards held by the named executives as of December 31, 2013. There are no stock awards
outstanding for any of the named executives. All stock options vest in five equal installments each year beginning on the grant date unless indicated otherwise in the chart below.
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Name
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Number of
securities underlying
unexercised options
(#)
exercisable
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Number of
securities
underlying
unexercised
options
(#)
unexercisable
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Equity incentive plan
awards: number of
securities underlying
unexercised unearned
options
(#)
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Option
exercise
price
($)(1)
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Option
expiration
date
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Mr. Smith
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51,520
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17.38
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2/17/2014
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4,000
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17.40
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5/4/2014
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4,000
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20.58
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5/24/2015
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4,000
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25.91
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5/23/2016
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45,000
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24.46
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8/22/2016
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4,000
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22.54
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5/22/2017
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45,000
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22.54
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5/22/2017
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2,000
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15.40
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5/20/2018
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12,000
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15.40
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5/20/2018
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4,000
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17.54
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5/25/2020
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36,600
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24,400
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(2)
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17.54
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5/25/2020
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4,000
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14.54
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12/20/2021
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20,000
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30,000
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(3)
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14.54
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12/20/2021
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8,000
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32,000
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(4)
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15.34
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5/22/2022
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40,000
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(5)
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19.46
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5/9/2023
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4,000
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(6)
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19.46
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5/9/2023
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Mr. Reddish
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25,000
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|
17.38
|
|
|
|
2/17/2014
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
19.35
|
|
|
|
2/22/2015
|
|
|
|
|
19,100
|
|
|
|
|
|
|
|
|
|
|
|
22.54
|
|
|
|
5/22/2017
|
|
|
|
|
8,500
|
|
|
|
|
|
|
|
|
|
|
|
15.40
|
|
|
|
5/20/2018
|
|
|
|
|
15,000
|
|
|
|
10,000
|
(2)
|
|
|
|
|
|
|
17.54
|
|
|
|
5/25/2020
|
|
|
|
|
12,000
|
|
|
|
18,000
|
(3)
|
|
|
|
|
|
|
14.54
|
|
|
|
12/20/2021
|
|
|
|
|
4,000
|
|
|
|
16,000
|
(4)
|
|
|
|
|
|
|
15.34
|
|
|
|
5/22/2022
|
|
|
|
|
|
|
|
|
11,000
|
(5)
|
|
|
|
|
|
|
19.46
|
|
|
|
5/9/2023
|
|
Mr. OSullivan
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
17.38
|
|
|
|
2/17/2014
|
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
19.35
|
|
|
|
2/22/2015
|
|
|
|
|
19,400
|
|
|
|
|
|
|
|
|
|
|
|
22.54
|
|
|
|
5/22/2017
|
|
|
|
|
8,000
|
|
|
|
|
|
|
|
|
|
|
|
15.40
|
|
|
|
5/20/2018
|
|
|
|
|
9,000
|
|
|
|
6,000
|
(2)
|
|
|
|
|
|
|
17.54
|
|
|
|
5/25/2020
|
|
|
|
|
4,000
|
|
|
|
6,000
|
(3)
|
|
|
|
|
|
|
15.34
|
|
|
|
5/22/2022
|
|
|
|
|
3,000
|
|
|
|
12,000
|
(4)
|
|
|
|
|
|
|
15.34
|
|
|
|
5/22/2022
|
|
|
|
|
|
|
|
|
11,000
|
(5)
|
|
|
|
|
|
|
19.46
|
|
|
|
5/9/2023
|
|
Mr. Carney
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
|
17.38
|
|
|
|
2/17/2014
|
|
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
19.35
|
|
|
|
2/22/2015
|
|
|
|
|
10,450
|
|
|
|
|
|
|
|
|
|
|
|
22.54
|
|
|
|
5/22/2017
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
|
|
|
|
15.40
|
|
|
|
5/20/2018
|
|
|
|
|
12,000
|
|
|
|
8,000
|
(2)
|
|
|
|
|
|
|
17.54
|
|
|
|
5/25/2020
|
|
|
|
|
12,000
|
|
|
|
18,000
|
(3)
|
|
|
|
|
|
|
14.54
|
|
|
|
12/20/2021
|
|
|
|
|
4,000
|
|
|
|
16,000
|
(4)
|
|
|
|
|
|
|
15.34
|
|
|
|
5/22/2022
|
|
|
|
|
|
|
|
|
11,000
|
(5)
|
|
|
|
|
|
|
19.46
|
|
|
|
5/9/2023
|
|
Mr. Bailey
|
|
|
52,500
|
|
|
|
|
|
|
|
|
|
|
|
22.54
|
|
|
|
5/22/2017
|
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
|
15.40
|
|
|
|
5/20/2018
|
|
|
|
|
14,400
|
|
|
|
9,600
|
(2)
|
|
|
|
|
|
|
17.54
|
|
|
|
5/25/2020
|
|
|
|
|
12,000
|
|
|
|
18,000
|
(3)
|
|
|
|
|
|
|
14.54
|
|
|
|
5/22/2022
|
|
|
|
|
4,000
|
|
|
|
16,000
|
(4)
|
|
|
|
|
|
|
15.34
|
|
|
|
5/22/2022
|
|
|
|
|
|
|
|
|
11,000
|
(5)
|
|
|
|
|
|
|
19.40
|
|
|
|
5/9/2023
|
|
18
(1)
|
The exercise price equals the market value on the grant date.
|
(2)
|
Vests in two equal installments each year beginning May 25, 2014.
|
(3)
|
Vests in three equal installments each year beginning December 20, 2014.
|
(4)
|
Vests in four equal installments each year beginning May 22, 2014.
|
(5)
|
Vests in five equal installments each year beginning May 9, 2014.
|
(6)
|
Vests on May 9, 2014.
|
Option Exercises for 2013
The following table presents information on stock options exercised by each of the named executives in 2013 and the aggregate dollar amount
realized on exercise.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Name
|
|
Number of
shares
acquired
on exercise
(#)
|
|
|
Value realized
on exercise
($) (1)
|
|
Mr. Smith
|
|
|
104,000
|
|
|
|
838,728
|
|
Mr. Reddish
|
|
|
40,000
|
|
|
|
279,179
|
|
Mr. OSullivan
|
|
|
|
|
|
|
|
|
Mr. Carney
|
|
|
10,765
|
|
|
|
86,820
|
|
Mr. Bailey
|
|
|
|
|
|
|
|
|
(1)
|
The aggregate dollar value realized upon the exercise of an option represents the difference between the market price of the underlying shares on the date of exercise and the exercise price of the option.
|
Pension Benefits
Effective January 1, 2004, TriCo adopted a supplemental executive retirement plan to provide supplemental retirement benefits to
TriCos key employees. This plan replaced a supplemental retirement plan for executives that TriCo originally adopted in 1987, and any benefits accrued by an executive as of December 31, 2003 under the earlier plan will now be paid under
terms of the 2004 plan. TriCo selects the key employees who will participate in this plan. The plan is nonqualified, unsecured and unfunded. The plan was amended and restated effective January 1, 2009 to incorporate changes required by Internal
Revenue Code 409A, and to add a new provision for anyone who is designated as a participant on or after January 1, 2009.
19
For participants under the 2004 plan as of December 31, 2008, commencing on the first day of
the month coinciding or following the participants normal retirement date, the bank is obligated to pay to the participant a monthly cash benefit equal to the target retirement percentage (ranges from 0 to 70 percent depending on years of
credited service) multiplied by the participants final average compensation (defined as the 36 full consecutive months of employment during which the participants compensation is the highest divided by 36) less the sum of the
participants monthly estimated primary Social Security benefit and the participants ESOP offset. For participants who enter the 2004 Plan on or after January 1, 2009, commencing on the first day of the month following a
participants normal retirement date the bank is obligated to pay to the participant a monthly retirement cash benefit equal to the target retirement percentage (ranges from 0 to 45 percent depending on years of credited service) multiplied by
the participants final average compensation for the remainder of the participants life.
For purposes of this plan,
normal retirement date means the date on which the participant terminates employment if such termination occurs on or after the participants attainment of age 62. Early retirement date means the date on which a
participant terminates employment if such termination occurs on or after such participants attainment of age 55 and completion of 15 years of credited service, but prior to normal retirement date. If the participant receives a supplemental
retirement benefit under this plan before the normal retirement date, the monthly cash benefit shall be reduced by 0.5 percent per month for each month by which the benefit commencement date precedes the participants age 62, and in no case
shall the commencement of benefits precede the participants 55
th
birthday.
The following table presents certain information concerning the benefits of the named executives under TriCos supplemental executive
retirement plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Plan Name
|
|
Number of
years credited
service
(#)
|
|
|
Present value
of
accumulated
benefit
($) (1)
|
|
|
Payments
during 2013
($)
|
|
Mr. Smith
|
|
Supplemental Executive Retirement Plan
|
|
|
20
|
|
|
|
3,406,582
|
|
|
|
|
|
Mr. Reddish
|
|
Supplemental Executive Retirement Plan
|
|
|
19
|
|
|
|
1,394,795
|
|
|
|
|
|
Mr. OSullivan
|
|
Supplemental Executive Retirement Plan
|
|
|
28
|
|
|
|
753,410
|
|
|
|
|
|
Mr. Carney
|
|
Supplemental Executive Retirement Plan
|
|
|
16
|
|
|
|
1,130,960
|
|
|
|
|
|
Mr. Bailey
|
|
Supplemental Executive Retirement Plan
|
|
|
6
|
|
|
|
241,456
|
|
|
|
|
|
(1)
|
The value as of December 31, 2013, is determined using assumptions consistent with those used in note 25 of TriCos audited financial statements included in TriCos annual report on Form 10-K for the year
ended December 31, 2013.
|
Nonqualified Deferred Compensation
Our 2005 deferred compensation plan provides TriCos executives with the opportunity to defer all or part of their salaries and bonuses
until retirement, termination from employment or death. An executive can defer up to a lifetime maximum of $1.5 million for all deferrals under this plan and TriCos predecessor plan which permitted deferrals from 1987 until 2004. An executive
who elects to defer his compensation for any year must defer a minimum of $200 per month. The plan permits TriCo to make discretionary contributions to an executives account. Each year since the plans inception, TriCo has credited to
each executives account a contribution based on TriCos contributions made for him under TriCos ESOP for that year. This plan is nonqualified, unsecured and unfunded.
Monthly interest is credited to an executives account at the rate of 1% higher than the monthly equivalent of the annual yield of the
Moodys corporate bond yield index for the preceding month. From the time that his employment with TriCo ends until his benefit is paid, an executives account under the plan is credited with interest each month at the monthly equivalent
of the annual yield of the Moodys average corporate bond yield index for the preceding month.
20
Executives are immediately 100% vested in their own contributions and in TriCos reoccurring
contributions credited to their account. TriCo determines the vesting rate for any discretionary contributions credited to an executives account as well as for the interest related to these contributions. If an executive is terminated for
cause, TriCos compensation and management succession committee can decide whether the interest credited to the executives account with respect to his deferrals, TriCos discretionary contributions and TriCos reoccurring
contributions are forfeited. The distribution of an executives plan benefit in the event of a change of control or other termination is described at See Compensation of Named Executive OfficersPotential Payments Upon Termination or
Change of Control.
Any deferrals made by an executive, TriCos discretionary contributions, TriCos reoccurring
contributions credited to his account prior to January 1, 2005, and the related interest, are governed by a predecessor deferred compensation plan for executives that TriCo adopted in 1987. An executives account under the 1987 plan is
credited with interest each month at a rate that is 3% higher than the monthly equivalent of the annual yield of the Moodys average corporate bond yield index for the preceding month, but otherwise the 1987 plan is similar to the 2005 plan in
most respects.
The following table presents information concerning nonqualified deferred compensation under both plans for each of the
named executives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Executive
contributions
in 2013
($) (1)
|
|
|
TriCo
contributions
in 2013
($)
|
|
|
Aggregate
earnings
in 2013
($)(2)
|
|
|
Aggregate
withdrawals/
distributions
($)
|
|
|
Aggregate
balance at
2013 year end
($)
|
|
Mr. Smith
|
|
|
|
|
|
|
|
|
|
|
19,533
|
|
|
|
|
|
|
|
311,739
|
|
Mr. Reddish
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. OSullivan
|
|
|
246,206
|
|
|
|
|
|
|
|
59,578
|
|
|
|
|
|
|
|
986,306
|
|
Mr. Carney
|
|
|
5,247
|
|
|
|
227
|
|
|
|
18,514
|
|
|
|
|
|
|
|
284,261
|
|
Mr. Bailey
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These amounts were included as salary paid to such officer in the summary compensation table.
|
(2)
|
The following amounts were included in the summary compensation table as above-market rates earned under TriCos executive nonqualified deferred compensation plan: Mr. Smith, $9,135; Mr. OSullivan,
$31,805; and Mr. Carney, $9,158.
|
CEO Employment Agreement
In March, 2013, TriCo entered into an employment agreement with Richard Smith, TriCos president and chief executive officer, which
provided Mr. Smith with a base annual salary of $508,165 for 2013 with future increases as determined by the compensation and management succession committee. Mr. Smith is also eligible to receive an annual incentive bonus under the CEO
Incentive Plan and stock options and other awards under TriCos 2009 stock option plan. Mr. Smiths employment agreement also provides that Mr. Smith is entitled to 20 paid vacation days annually and a car allowance of $1,000 per
month or use of an automobile owned or leased by TriCo, membership in a country club and reimbursement of other reasonable out-of-pocket expenses incurred in the performance of his duties. Mr. Smith is also eligible to participate in
TriCos 401(k) savings plan, TriCos employee stock ownership plan, TriCos executive deferred compensation plan and TriCos supplemental executive retirement plan. Finally, Mr. Smith and his dependents receive disability,
health, dental or other insurance plans available to all of TriCos employees.
The term of Mr. Smiths employment
agreement ends in April 2014, but the agreement automatically extends for an additional year term each year unless one party notifies the other party to the contrary 90 days prior to the renewal date. If Mr. Smith is terminated without cause
and not in connection with a change of control, then TriCo will pay to Mr. Smith all amounts earned or accrued as salary and a prorated amount of Mr. Smiths minimum guaranteed annual bonus through the date of termination. In
addition, TriCo would pay Mr. Smith the amount of his salary that would be payable if his employment had not been terminated until the end of the then-current term. If Mr. Smiths employment is terminated in various circumstances as
described under Compensation of Named Executive OfficersPotential Payments Upon Termination or Change of Control, then Mr. Smith would be entitled to receive the potential benefits described in that section.
21
Potential Payments Upon Termination or Change of Control
Change of Control Agreements
. Each named executive has entered into an agreement with TriCo that provides him with benefits if TriCo
experiences a change of control. If a change of control occurs and the executives employment is terminated other than for cause or the executive terminates his employment after a substantial and material negative change in his
title, compensation or responsibilities within one year after such change of control, then the executive is entitled to receive a severance payment equal to twice the combined amount of his annual salary in effect at the time plus his most recent
annual bonus, paid in 24 equal monthly installments; provided that the present value of those payments shall not be more than 299% of executives compensation as defined by section 280G of the Internal Revenue Code (Section 280G).
The effect of this provision is that deductions for payments made under these agreements will not be disallowed due to Section 280G. All of TriCos executives change of control agreements are currently scheduled to expire in 2013,
except for Mr. Smiths agreement which renews with his employment agreement each year. However, each agreement will automatically renew for an additional one-year period unless terminated by either party 90 days prior to such anniversary
date. In exchange for receiving the benefits under the agreement, each executive has agreed to keep confidential all of TriCos trade secrets.
A change of control as defined in Mr. Smiths employment agreement generally occurs in connection with:
|
|
|
a person or group becoming the owner of 20% or more of TriCos outstanding common stock,
|
|
|
|
a person or group acquiring assets of TriCo having a value equal to one third or more of all of TriCos assets,
|
|
|
|
a person or group acquiring 50% or more of the total ownership of TriCo, based on either fair market value or voting power,
|
|
|
|
a replacement of at least a majority of TriCos directors.
|
A change of control as defined in
TriCos executives change of control agreements (other than Mr. Smiths employment agreement) generally occurs in connection with:
|
|
|
a person becoming the beneficial owner of 40% or more of TriCos outstanding common stock,
|
|
|
|
the purchase of TriCos common stock pursuant to a tender or exchange offer,
|
|
|
|
our shareholders approval of the merger of TriCo where TriCo is not the surviving corporation, the sale of all of TriCos assets or TriCos dissolution, or
|
|
|
|
a replacement of at least a majority of TriCos directors.
|
For cause as defined in these
agreements means:
|
|
|
an employees dishonesty, disloyalty, willful misconduct, dereliction of duty or conviction of a felony or other crime the subject matter of which is related to his duties for TriCo,
|
|
|
|
an employees commission of an act of fraud or bad faith upon TriCo,
|
|
|
|
an employees willful misappropriation of any funds or property of TriCo, or
|
|
|
|
an employees willful continued and unreasonable failure to perform his duties or obligations.
|
22
Upon termination of an executives employment or service, a participant will generally have
90 days following termination of employment or service to exercise any vested options. All options which are not exercised prior to 90 days after the date the executive ceases to serve as an employee of TriCo shall be forfeited. If an executive is
terminated for cause, all right to exercise his vested options terminates on the date of the executives termination.
Nonqualified Deferred Compensation Plans
. An executives plan benefit is generally payable upon his retirement, separation from
employment or death. However, if an executive is terminated for cause, TriCos compensation and management succession committee can determine in its discretion whether the interest credited to the executives account with respect to his
deferrals and any contributions made by TriCo are forfeited. For cause as defined in this plan is generally the same as an involuntary termination under TriCos supplemental executive retirement plan described below. An
executive can also elect in advance to receive a distribution of his plan benefit in the event of a change of control. A change of control as defined under TriCos 2005 deferred compensation plan generally means:
|
|
|
the acquisition of more than 50% of TriCos outstanding stock,
|
|
|
|
the acquisition in 12 months or less of at least 35% of TriCos stock,
|
|
|
|
the replacement in 12 months or less of a majority of TriCos directors, or
|
|
|
|
the acquisition in 12 months or less of at least 40% of TriCos assets.
|
In addition to
any advance election to receive his benefit in the event of a change of control, the executive can make an advance election as to the time and form for his benefit distribution after his separation from employment. In all cases, other than a
distribution to satisfy his severe financial hardship, the executive may elect to receive his benefit payments in a lump sum or in annual installments over 5, 10 or 15 years. An executives distribution election can be changed in advance of his
retirement or other separation in accordance with Section 409A of the Internal Revenue Code. All distributions under the plan are subject to Section 409A of the Internal Revenue Code including, for example, the rule that an employee who is
a specified employee may not receive a distribution of his benefit until at least 6 months following his separation.
Supplemental Executive Retirement Plans.
Under TriCos 2004 supplemental executive retirement plan, if, following a change of
control, a participant retires after age 55, is terminated without cause or voluntarily terminates within 24 months, he is entitled to a supplemental retirement benefit. The monthly lifetime benefit is determined by a formula based on the
executives highest average compensation, including salary and bonus, for 36 of the last 60 months of his employment and his years of service when he ceases employment. The executive is entitled to a supplemental retirement benefit under the
plan without regard to the minimum number of years of service that would be required if his retirement or termination had occurred before the change of control. An executives benefit is reduced by the sum of his ESOP and social security
benefits. In general, his monthly benefit payments begin on the first day of the month after his retirement or other termination from employment following a change of control without any reduction for payment of this benefit prior to age 62, as
would be the case if he had retired or terminated before a change of control. See Pension Benefits for a description of benefits payable not in connection with a change of control. A change of control as defined under this
plan is generally the same as under TriCos executive change of control agreements. An involuntary termination with cause as defined in this plan generally means a termination due to:
|
|
|
gross negligence or gross neglect,
|
|
|
|
commission of a felony, misdemeanor or any other act involving moral turpitude, fraud or dishonesty which has a material adverse impact on TriCo,
|
|
|
|
willful and intentional disclosure, without authority, of any secret or confidential information that has a material adverse impact on TriCo, or
|
|
|
|
willful and intentional violation of the rules of any regulatory agency that has a material adverse impact on TriCo.
|
Joint Beneficiary Agreements.
In 2003 TriCo entered into joint beneficiary agreements with each of TriCos executives named in the
Summary Compensation Table other than Mr. Bailey. Under these agreements, Tri Counties Bank purchased a life insurance policy on the executives life and the executive may designate beneficiaries to receive his share of the death proceeds,
if any. The value of the benefits that would be received by the executives beneficiaries depends on the executives age at the time of death, whether the executive was eligible for benefits under TriCos supplemental executive
retirement plan, and the cash value of the plan compared to the benefits payable on death.
23
Summary.
The amounts listed in the following table are estimated maximum amounts that
would have been payable to TriCos executives upon termination of employment in certain circumstances if payment had occurred on December 31, 2013. The actual amounts payable can only be determined when an executive is terminated from
TriCo and can be more or less than the amounts shown below, depending on the facts and circumstances actually prevailing at the time of the executives termination of employment. TriCos compensation and management succession committee may
in its discretion revise, amend or add to the benefits if it deems advisable. Thus, the actual amounts payable in certain circumstances could be significantly greater or less than the estimated amounts shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Benefit
|
|
Involuntary
termination
for
cause
($)
|
|
|
Involuntary
termination
not for
cause ($)
|
|
|
Retirement
or
voluntary
resignation
($)
|
|
|
Death ($)
|
|
|
Disability
($)
|
|
|
After
change in
control,
involuntary
or good
reason
termination
($)
|
|
Mr. Smith
|
|
Severance pay(1)
|
|
|
0
|
|
|
|
338,777
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,016,332
|
|
|
|
Option vesting
acceleration(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,488,152
|
|
|
|
Supplemental executive retirement plans(3)
|
|
|
0
|
|
|
|
3,406,582
|
|
|
|
3,406,582
|
|
|
|
0
|
|
|
|
3,406,582
|
|
|
|
3,406,582
|
|
|
|
Deferred compensation plan(4)
|
|
|
156,000
|
|
|
|
311,739
|
|
|
|
311,739
|
|
|
|
311,739
|
|
|
|
311,739
|
|
|
|
311,739
|
|
|
|
Joint beneficiary
agreement(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
5,291,750
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
156,000
|
|
|
|
4,057,098
|
|
|
|
3,718,321
|
|
|
|
5,603,489
|
|
|
|
3,718,321
|
|
|
|
6,222,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Reddish
|
|
Severance pay(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
621,592
|
|
|
|
Option vesting
acceleration(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
663,730
|
|
|
|
Supplemental executive retirement plans(3)
|
|
|
0
|
|
|
|
1,394,795
|
|
|
|
1,394,795
|
|
|
|
0
|
|
|
|
1,394,795
|
|
|
|
1,394,795
|
|
|
|
Deferred compensation plan(4)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Joint beneficiary
agreement(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,813,387
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
|
|
1,394,795
|
|
|
|
1,394,795
|
|
|
|
1,813,387
|
|
|
|
1,394,795
|
|
|
|
2,680,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. OSullivan
|
|
Severance pay(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
506,490
|
|
|
|
Option vesting
acceleration(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
402,330
|
|
|
|
Supplemental executive retirement plans(3)
|
|
|
0
|
|
|
|
753,410
|
|
|
|
753,410
|
|
|
|
0
|
|
|
|
753,410
|
|
|
|
753,410
|
|
|
|
Deferred compensation plan(4)
|
|
|
509,672
|
|
|
|
986,306
|
|
|
|
986,306
|
|
|
|
986,306
|
|
|
|
986,306
|
|
|
|
986,306
|
|
|
|
Joint beneficiary
agreement(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,648,698
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
509,672
|
|
|
|
1,739,716
|
|
|
|
1,739,716
|
|
|
|
2,635,004
|
|
|
|
1,739,716
|
|
|
|
2,648,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Carney
|
|
Severance pay(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
528,524
|
|
|
|
Option vesting
acceleration(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
598,750
|
|
|
|
Supplemental executive retirement plans(3)
|
|
|
0
|
|
|
|
1,130,960
|
|
|
|
1,130,960
|
|
|
|
0
|
|
|
|
1,130,960
|
|
|
|
1,130,960
|
|
|
|
Deferred compensation plan(4)
|
|
|
135,953
|
|
|
|
284,261
|
|
|
|
284,261
|
|
|
|
284,261
|
|
|
|
284,261
|
|
|
|
284,261
|
|
|
|
Joint beneficiary
agreement(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,561,790
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
135,953
|
|
|
|
1,415,221
|
|
|
|
1,415,221
|
|
|
|
1,846,051
|
|
|
|
1,415,221
|
|
|
|
2,542,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Bailey
|
|
Severance pay(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
518,372
|
|
|
|
Option vesting
acceleration(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
659,398
|
|
|
|
Supplemental executive retirement plans(3)
|
|
|
0
|
|
|
|
96,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
241,456
|
|
|
|
241,456
|
|
|
|
Deferred compensation plan(4)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
Joint beneficiary
agreement(5)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
|
|
96,582
|
|
|
|
0
|
|
|
|
0
|
|
|
|
241,456
|
|
|
|
1,419,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Payment based on annual salary as of December 31, 2013.
|
(2)
|
The value of accelerated stock option amounts represents the number of shares issuable upon the exercise of stock options for which vesting is accelerated multiplied by the difference between the market value on
December 31, 2013, and the option exercise price. The closing price of TriCos common stock on December 31, 2013, was $28.37 per share. Stock option vesting is accelerated following a change of control regardless of an
executives termination of employment.
|
(3)
|
Represents an estimate of the present value of the accumulated benefit obligation under TriCos supplemental executive retirement plans as of December 31, 2013, as adjusted to reflect the effect of vesting
considerations in the termination situations indicated.
|
(4)
|
The value of the benefits under TriCos deferred compensation plans assumed that the executive received a lump sum payment. Participants are fully vested in amounts deferred and interest earned on such deferrals.
In calculating the value of deferred compensation plans in the event of involuntary termination for cause, assumes that TriCos compensation and management succession committee determined that the executive forfeited interest on his deferrals
and any contributions made by TriCo.
|
(5)
|
Represents the lesser of the difference between death benefit and the cash value of the executives life insurance policies and the amount specified in the joint beneficiary agreement.
|
25
Regardless of the manner in which an executives employment terminates, he is also generally
entitled to receive amounts earned during his term of employment. Such amounts include:
|
|
|
annual incentive bonus compensation earned,
|
|
|
|
gain on exercise of vested stock options granted pursuant to TriCos stock option plan,
|
|
|
|
amounts contributed under TriCos 401(k) savings plan and TriCos ESOP, and
|
Analysis of Employee Compensation Plan Risks
The compensation committee reviewed each employee incentive compensation plan to determine whether the plan includes features that would
encourage the manipulation of TriCos reported earnings to enhance the compensation of any employee, and how compensation policies may be used to mitigate risks. In addition to the incentive plans in which the named executive officers
participate, TriCo has established incentive plans for certain bank employees that reward performance based on product referrals, business development and profitability as well as long-term incentive awards including stock options and restricted
stock awards. The compensation committee limited its review to these plans, which are the only plans under which the amount payable is based, directly or indirectly, on TriCos reported earnings.
The compensation committee believes that the features of these incentive compensation plans, either alone or combined with the systems of
controls in place, do not encourage unnecessary or excessive risk and do not encourage the manipulation of reported earnings to enhance the compensation of any employee.
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
TriCos executive
compensation program is designed to support TriCos mission to:
|
|
|
Improve the financial success and well-being of TriCos shareholders, customers, communities and employees;
|
|
|
|
Provide opportunities for TriCos people to achieve unparalleled personal and professional success; and
|
|
|
|
Enable TriCos shareholders to achieve the exceptional rewards of ownership.
|
26
Our Compensation Discussion and Analysis is organized into three sections:
Section 1- Executive Summary
Section 2- Performance and Pay
Section 3- Compensation Process and Decisions
Section 1Executive Summary
Our Response to
Say on Pay Vote:
The compensation and management succession committee (the Committee) continues to monitor and address the concerns of
TriCos major shareholders and proxy advisors. In 2013, TriCo was pleased that over 93% of the votes cast were in support of TriCos Say on Pay proposal. TriCos board of directors, the Committee, and TriCos
executive team continues to review TriCos executive compensation practice and look for opportunities to improve and strengthen its pay for performance objective and alignment with shareholders. In the past year TriCo took the following steps:
|
a.
|
The Committee reengaged Radford, an Aon Hewitt Company (Radford), a leading human resources consulting firm, to perform a review of TriCos executive compensation program and make recommendations for
enhancements. The Committees decision to engage Radford was made by the Committee and was not made or recommended by management.
|
|
b.
|
TriCo reviewed Institutional Shareholder Services (ISS) and Glass Lewis analysis to further understand any ongoing or new concerns about TriCos compensation program.
|
|
c.
|
TriCo reviewed alternative equity vehicles and mixes including the use of restricted stock and performance based metrics. As a result of this review, TriCo is shifting from 100% stock options to 50% time-based RSUs and
50% performance-based RSUs (or PSUs) for its 2014 equity grant to the CEO and direct reports. The PSU design is discussed further under the Equity Compensation section in the Compensation Discussion and Analysis. The Committee felt the 50/50% split
was a reasonable first year approach, but intends to revisit the weighting before the 2015 grant. In no event, will the performance weighting be less than 50%.
|
|
d.
|
TriCo implemented a stock ownership policy in 2012 requiring that TriCos chief executive officer, executive vice presidents, and board of directors acquire and maintain minimum positions in company stock. This
policy is reviewed annually to ensure all covered individuals are in compliance, and that the requirements are robust. While there were no changes made to the policy at this time, the Committee in approving the shift to RSUs and PSUs intends to
revisit the ownership requirements, and potentially strengthen them to promote long-term retention of the shares post-vesting / performance.
|
|
e.
|
TriCo continued to evaluate additional policies that can further bolster or enhance TriCos commitment to true pay-for-performance.
|
Financial Highlights:
In 2013, TriCo accomplished the
following:
|
|
|
Net income of $1.69 per diluted share, an increase of 43% from $1.18 in 2012.
|
|
|
|
Net interest income (FTE) for the year ended December 31, 2013 was $101,864,000, an increase of $492,000 or 0.5% compared to the year ended December 31, 2012.
|
|
|
|
Provision for loan losses declined from $9,423,000 in 2012 to $(715,000) in 2013.
|
|
|
|
Paid $0.42 per share in cash dividends in 2013, up 16.7% from the $0.36 paid in 2012.
|
|
|
|
On January 21, 2014, TriCo announced that it had entered into an Agreement and Plan of Merger and Reorganization under which it would acquire North Valley Bancorp.
|
27
Other Highlights:
In 2013, TriCo:
|
|
|
Opened our new campus building which houses our technology, operations, customer support, and training departments. We now have a facility that provides an environment for collaboration, learning,
communication and coordination with core departments that support our growing branch network.
|
|
|
|
Had 63 Tri Counties Bank branch locations, and North Valley Bank currently has 22 branch locations.
|
|
|
|
Established new customer service programs that allow us to track and respond to our customers comments and concerns.
|
|
|
|
Continued to implement numerous changes in order to comply with requirements under the Dodd Frank Act.
|
|
|
|
Continued to support programs for needed community initiatives and schools in TriCos service area.
|
Summary of Compensation Decisions:
|
|
|
Base salary for Mr. Smith was increased 5.3% for 2014 based on his performance in 2013.
|
|
|
|
Merit increases for the other named executive officers increased 0-2.5% for 2013.
|
|
|
|
TriCo exceeded the requirements for a 100% payout of the financial component of the 2013 annual incentive plans; however, the Committee utilized its discretion to limit the payout to no more than target.
|
|
|
|
Mr. Smith received a bonus of 31.5% (target is 50%) of base salary and bonuses to named executive officers ranged from 19.5% to 30% of base salary.
|
|
|
|
TriCo reviewed alternative equity vehicles and mixes including the use of restricted stock and performance based metrics. As a result of this review, TriCo is shifting from 100% stock options to 50% time-based RSUs and
50% performance-based RSUs (or PSUs) for its 2014 equity grant to the CEO and direct reports. The PSU design is discussed further under the Equity Compensation section in the Compensation Discussion and Analysis. The Committee felt the 50/50% split
was a reasonable first year approach, but intends to revisit the weighting before the 2015 grant. In no event, will the performance weighting be less than 50%.
|
|
|
|
The Committee reviewed the stock ownership guidelines that were implemented in 2012 for the CEO, executive vice presidents, and the board of directors. All individuals covered are in compliance with the Policy. No
changes were made at this time, but the Committee in approving the shift to RSUs and PSUs intends to revisit the ownership requirements, and potentially strengthen them to promote long-term retention of the shares post-vesting / performance.
|
Section 2Performance and Pay
TriCo has long maintained a strong pay-for-performance philosophy that links executive compensation to achievement of the operating and financial goals set by
the board of directors. TriCo anticipates that growth in net earnings per share and a continued focus on maintaining a strong balance sheet will be positively reflected in TriCos stock price.
28
In 2013, TriCo achieved the following results, compared with prior periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Metric
|
|
12/31/13
|
|
|
12/31/12
|
|
|
12/31/11
|
|
Net income per diluted share
|
|
$
|
1.69
|
|
|
$
|
1.18
|
|
|
$
|
1.16
|
|
Non-performing assets to total assets ratio
|
|
|
2.30
|
%
|
|
|
3.07
|
%
|
|
|
3.99
|
%
|
Loans, net of allowance at FYE (000s)
|
|
$
|
1,633,762
|
|
|
$
|
1,522,175
|
|
|
$
|
1,505,118
|
|
Deposits at FYE (000s)
|
|
$
|
2,410,483
|
|
|
$
|
2,289,702
|
|
|
$
|
2,190,536
|
|
Dividends declared per share
|
|
$
|
0.44
|
|
|
$
|
0.36
|
|
|
$
|
0.36
|
|
Total risk based capital ratio
|
|
|
14.8
|
%
|
|
|
14.5
|
%
|
|
|
13.9
|
%
|
The following graph shows TriCos total shareholder return compared with the KRX total return index over the past five
years. The KRX is a regional bank stock index compiled by Keefe Bruyette and Woods, a global investment bank focused on the financial services sector. The index is comprised of 50 regional bank stocks maintained by Keefe, Bruyette & Woods,
Inc.
As the chart indicates, the return to investors is up over the past five years (growth primarily during 2013). TriCo is just
slightly behind KRX Index during this time. Further, TriCo made compensation decisions that reflect a pay-for-performance commitment during this period. Prior to 2012, no bonuses were paid to TriCos chief executive officer for the last four
out of five years and the last three out of five years for the executive team. Since that time, TriCo has paid bonuses to the CEO and named executive officers, but has exhibited some discretion in limiting the amount that would have otherwise been
paid due to continued uncertainty and a challenging banking environment. Furthermore, the Committee maintained its commitment to stock options over the years since it required positive TSR in excess of the dividend yield in order for the executives
to have any value gained.
New for 2014, the Committee is shifting the equity grant strategy for the CEO and named executive officers to a 50% / 50% mix
of time-based restricted stock units (RSU) and performance-based restricted stock units (PSU). The RSUs will vest annually over four years. The PSUs will be measured based on relative total shareholder return
(TSR) for TriCo against the KBW Regional Banking Index over a three-year performance period. The actual number of shares earned can range from 0% to 150% of the target number granted.
Section 3Compensation Process and Decisions
Compensation Philosophy
TriCos executive
compensation program is designed to maximize shareholder value by aligning compensation with TriCos performance and to attract, retain, motivate and reward a highly qualified executive management team. The Committee believes that these
objectives can best be met by linking compensation to the achievement of both individual and corporate performance.
29
The underlying philosophy behind TriCos compensation program is very straightforward: TriCo pays
competitive salaries and rewards executives for enhancement of shareholder value and sustained individual superior performance. Consistent with this philosophy is TriCos commitment to offer fair pay based on the respective roles of
TriCos executives, the market value of their jobs and the opportunity to earn additional cash and non-cash compensation when they provide superior performance.
Role of the Compensation and Management Succession Committee
The Committee has the primary authority to determine TriCos compensation philosophy and to establish compensation for Richard P. Smith, TriCos
chief executive officer, and TriCos other executive officers. Each component of compensation for TriCos executives is generally administered under the direction of TriCos Committee and is reviewed on an annual basis to ensure that
remuneration levels and benefits are competitive and reasonable using the guidelines described below. In determining each level of compensation and the total compensation package, the Committee reviews a variety of sources to determine and set
compensation. Mr. Smith aids the Committee by providing annual recommendations regarding the compensation of all executive officers, other than himself. The Committee can exercise its discretion in modifying any recommended adjustments or
awards to the executives. Each executive also participates in an annual performance review with Mr. Smith to provide input about his contributions to TriCos success for the period being assessed.
While the Committee does not set compensation at specific percentage levels compared to the market, the Committee does seek to provide salary, incentive
compensation opportunities and employee benefits that fall within the average practice of TriCos competitors. The Committee periodically, and as warranted, considers compensation levels of executives with similar qualifications and experience
at banks of similar size. In 2013 the Committee retained Radford to assist in identifying a peer group of competitive banks as a baseline comparator to which TriCo would refer when establishing executive compensation on a go forward basis. The
Committee has developed a compensation peer group consisting of 20 publicly traded bank holding companies which the Committee believed were similar to TriCo in terms of market place, total assets, net income, market capitalization and shareholder
return. The companies were Columbia Banking System, PacWest Bancorp, CVB Financial Corp., BBCN Bancorp, National Bank Holdings, Westamerica Bancorp, Banner Corp., Banc of California, HomeStreet, Hanmi Financial, Wilshire Bancorp, CoBiz Financial,
Farmers & Merchants Bancorp, Guaranty Bancorp, Preferred Bank, Heritage Financial Corp., Bank of Marin Bancorp, Bridge Capital Holdings, and Pacific Continental Corp.
Surveys prepared by management are also used periodically to ensure that TriCo is maintaining its labor market competitiveness. These surveys compare
TriCos compensation programs to the compensation programs of similarly-sized bank holding companies located in California.
Compensation Program
Components
The compensation program for TriCos executives consists of three fundamental components:
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annual performance-based incentive compensation consisting of a cash bonus, and
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long-term incentive compensation composed of equity-based awards intended to reward executives for the enhancement of shareholder value and promote retention.
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This program enables TriCo to tie executive compensation to TriCos performance, reward individual performance and attract and retain a highly-qualified
executive management team. As a result, the Committee believes that this program best serves the interests of TriCo and TriCos shareholders. The particular elements of TriCos compensation programs are set forth below. Each
executives current and prior compensation is considered in setting future compensation.
A percentage of total compensation is allocated to
incentives as a result of TriCos philosophy. TriCo has no pre-established policy or target for the allocation between either cash and non-cash, or short- and long-term, incentive compensation. Based on the summary compensation table,
compensation for the named executive officers in 2013 and 2012 was allocated as follows (excluding the change in pension value and nonqualified deferred compensation earnings):
30
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Mix of Total Compensation
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2013
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2012
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|
Base salaries
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53.0
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%
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|
53.8
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%
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Short-term incentives (annual incentive bonuses)
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15.1
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%
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12.6
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%
|
Long-term incentives (stock options)
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|
26.5
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%
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|
27.3
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%
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Benefits
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|
5.4
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%
|
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6.3
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%
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|
|
|
|
|
|
|
|
|
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100.0
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%
|
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|
100.0
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%
|
Base Salaries
The
Committee reviews base salaries annually to align them with market and industry levels as appropriate and after taking into account TriCos general financial performance and the executives responsibilities, experience and future
potential. The Committee seeks to establish base salaries that are within the range of salaries for persons holding similarly responsible positions at other peer company banks and bank holding companies with an emphasis placed on those located in
California. Specific criteria considered in Mr. Smiths 2013 performance were the banks performance to budget, asset growth, loan quality, loan growth, deposit pricing, net interest margin, capital management, bank compliance with
rules, regulations, and bank safety and soundness. In addition, the Committee considered other meaningful bank objectives including the full integration of Citizens Bank of Northern California, and the recently announced acquisition of North
Valley Bancorp. As a result of the Committees performance evaluation Mr. Smiths salary was increased 5.3% from $508,166 in 2013 to $535,000 for 2014. Mr. Smith did not receive a salary adjustment in 2009, 2010 or 2011. He
received 3% in 2012 and 2% in 2013.
Based upon guidance provided by Radford and additional information captured through a variety of sources including
Towers Watson, California Bankers Association and Mercer Human Resources Consulting regarding market ranges for salaries of equivalent positions at peer group companies, TriCo believes that TriCo compensates TriCos executives equitably when
compared to competitive companies in that peer group.
Annual Incentive Bonuses
It is the Committees objective to have a substantial portion of each executives compensation contingent upon TriCos performance as well as
upon the executives own level of performance and contribution toward TriCos performance. TriCo utilizes annual cash bonuses to align executive compensation with TriCos business objectives and TriCos performance. Placing an
emphasis on incentive compensation is consistent with TriCos philosophy of rewarding executives for TriCos performance.
CEO Incentive
Plan
.
Under TriCos CEO Incentive Plan approved in May 2010, Mr. Smith was eligible to receive an annual incentive bonus if certain
budgeted corporate goals were achieved. The goals included measurements for performance to budget, asset growth, loan quality, loan growth, deposit pricing, net interest margin, capital management, bank compliance with rules, regulations, and bank
safety and soundness. The potential incentive bonus for Mr. Smiths performance in 2013 ranged from 0% to 100% of his base salary. If TriCo achieved less than 90% of its budgeted corporate goals, Mr. Smith would not be eligible for a
bonus. If TriCo achieved substantially all of the following corporate goals, Mr. Smith would be eligible for a bonus of up to 50% of his annual salary. If TriCo achieved 120% or more of these budgeted corporate goals, Mr. Smith would be
eligible for a bonus of up to 100% of his annual salary. The Committee retained discretion regarding the determinations as to whether TriCo reached these goals. In 2013, TriCos net income increased to $1.69 per diluted share, a 43% increase
over 2012; loans and leases grew $111 million or 7%, provisions for loan losses decreased entirely from $9,423,000 to ($707,000), and net charge-offs declined by 71%. In March 2014, the Committee determined that TriCo had achieved substantially all
of the corporate goals, allowing for a payout of the target 50% of annual salary, and that a payout was warranted; however, the Committee utilized its discretion to hold back a portion of Mr. Smiths bonus and awarded him an incentive
bonus for 2013 of $160,000, or 31.5% of his annual salary.
31
For 2014 performance, the Committee has determined that Mr. Smiths potential incentive bonus will
range from 0% to 100% with a target of 50% of his base salary depending on TriCos achievement of budgeted corporate performance goals, integration of North Valley Bancorp, personal leadership traits and other items such as results of
examinations and audits. The following table shows the historical target and actual payout percentages:
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|
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2008
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|
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2009
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|
|
2010
|
|
|
2011
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|
|
2012
|
|
|
2013
|
|
Target %
|
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|
65
|
%
|
|
|
65
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
|
|
50
|
%
|
Company Performance
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|
|
<90
|
%
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|
|
<90
|
%
|
|
|
<90
|
%
|
|
|
>90
|
%
|
|
|
>90
|
%
|
|
|
>100
|
%
|
Actual %
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
30
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%
|
|
|
30
|
%
|
|
|
31.5
|
%
|
Other Executives.
The Committee may provide incentive compensation to TriCos other executives in the form of an
annual cash bonus. For 2013, the Committee determined that the incentive bonus compensation for TriCos other named executive officers would be based on the achievement of a combination of goals and targets that take into account both
TriCos performance and that of the executives individually. Although the achievement of certain financial objectives as measured by TriCos earnings was considered in determining incentive bonus compensation, other subjective and less
quantifiable criteria were also considered. In March of 2014, the Committee considered TriCos 2013 financial performance and the specific achievements of TriCos executives that are expected to affect TriCos future earnings and
performance or that had an identifiable impact on the prior years results and based primarily on TriCos 2013 financial performance and with consideration of the continued uncertainty in the market, the Committee determined that bonuses
would be awarded to other named executive officers for their performances in 2013. The Committee paid bonuses ranging from 19.5% to 30% of annual salary to the named executive officers based upon their individual and company performance metrics.
Equity Compensation
The Committee provides
long-term incentive compensation to TriCos executive officers through the grant of stock options under TriCos equity incentive plans. In accordance with TriCos philosophy, the use of equity compensation is intended to provide
incentives to TriCos executive officers to work toward the long-term growth of TriCo by providing them with an award that will increase in value only to the extent that the value of TriCos common stock increases. Since the value awards
under TriCos equity incentive plan bears a direct relationship to TriCos stock price, the Committee believes it is an effective long-term incentive to create value for shareholders and appropriately align the interests of TriCos
executives with the interest of TriCos shareholders. The grant of equity awards also serves as a long-term retention incentive for TriCos executives because equity awards are generally subject to vesting schedules of four or five years.
Equity awards are made at regular Committee meetings. The effective date for all grants is the date that the Committee approves the grant and all key
terms have been determined. The Committee generally grants stock options to TriCos executives, including the chief executive officer, on the date of TriCos annual shareholders meeting each year. The Committee may also grant stock
options and other types of awards in its discretion in connection with the hiring of a new executive officer or other employee or to address other special circumstances. The exercise price for stock option grants is determined by reference to the
last quoted price per share on the NASDAQ Global Select Market at the close of business on the date of grant. TriCos annual shareholders meeting typically occurs within four weeks after the official announcement of TriCos first quarter
results so that the stock option exercise price will reflect a fully informed market price. Each option grant allows the executive to acquire shares of common stock over the term of the option, typically ten years, subject to vesting. Accordingly,
the option will provide a return to the executive only if the market price of the shares appreciates over the option term. TriCos trading policies prohibit TriCos executive from short-selling or otherwise hedging against decreases in the
trading price of TriCos common stock.
In 2013, TriCo granted equity awards to the chief executive officer and the other named executive officers as
reported under Grants of Plan-based Awards for 2013. The number of options and other awards granted each year by the Committee to an executive is not set, but is based on a subjective evaluation of:
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the perceived incentive that the grant will provide,
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the executives prior performance and level of responsibility,
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the benefit that the grant may have on long-term shareholder value, and
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the value of the stock option at the time of grant.
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32
The Committee views the grant of options and other equity awards as a retention device and therefore also reviews
the status of vesting and the number of vested versus unvested awards held by an executive at the time of grant and the annual grants made to executives at TriCos peer group companies.
New for 2014, the Committee is shifting the equity grant strategy for the CEO and named executive officers to a 50% / 50% mix of time-based restricted stock
units (RSU) and performance-based restricted stock units (PSU). The RSUs will vest annually over four years. The PSUs will be measured based on relative total shareholder return (TSR) for TriCo against the KBW
Regional Banking Index over a three-year performance period. The actual number of shares earned can range from 0% to 150% of the target number granted.
Stock Ownership and Retention Policies
We believe that
key executives should have significant stake in the performance of TriCos stock, to align their decisions with creating shareholder value and to minimize negative market perceptions caused by excessive insider sales of Company shares.
TriCos
Stock Ownership Guidelines Policy
(posted on TriCos website) requires directors and executive officers to accumulate a meaningful position in Company shares. TriCos board of directors adopted the ownership
requirement and tied it to a multiple of base salary for the executive officers and a multiple of retainer, as noted below:
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Position
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Minimum Ownership
(multiple of base salary)
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Chief Executive Officer
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3.0
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|
Executive Vice Presidents
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1.5
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Directors
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Minimum Ownership
(multiple of director compensation)
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Outside Director
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3.0
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|
Under this policy, share ownership is determined from the totals on Table 1 of SEC Form 4, which includes unvested RSAs or
RSUs and shares in which beneficial ownership is disclaimed, but outstanding vested stock options that are in the money are included based on the intrinsic value converted to an equivalent number of full shares (i.e., net of exercise price).
Compliance with share ownership guidelines is reviewed annually by the Nominating and Corporate Governance Committee. This minimum ownership must be achieved within five years after any new officer or director takes office (or within five years of
the adoption of this policy for existing officers and directors).
Other Elements of Compensation and Perquisites
In order to attract and retain talented executives who will focus on achieving TriCos long-term goals, TriCo provides to TriCos executives,
including Mr. Smith, the following benefits and perquisites:
Supplemental Executive Retirement Plan
. TriCo maintains a supplemental executive
retirement plan described at Compensation of Named Executive OfficersPension Benefits, which provides TriCos executives with benefits upon their retirement or upon the termination of employment with 24 months of a change of
control.
Deferred Compensation Plan
. TriCo maintains a nonqualified, unsecured and unfunded executive deferred compensation plan, which is
described at Compensation of Named Executive OfficersNonqualified Deferred Compensation. This plan provides TriCos executives with the opportunity to defer all or part of their salaries and bonuses until retirement, earlier
termination from employment or death, in addition to any discretionary contribution or reoccurring contribution that TriCo credits to his account. All amounts are credited with interest and are paid in the form and at the time elected by the
executive, generally after the executives cessation of employment.
33
Change of Control Agreements
. The change of control agreements protect income for TriCos executives
who would likely be involved in decisions regarding, and the successful implementation of, a merger or acquisition and would be at risk for a job loss if a change of control occurs. The Committee believes it was important to adopt such agreements in
order to provide an incentive for executives to remain employed with TriCo throughout the turmoil and uncertainty that an unsolicited tender offer or merger can cause. Such continuity in leadership benefits both TriCos shareholders and
employees. These agreements enable the executives to make decisions that are in the best interests of TriCos shareholders without being distracted or influenced in the exercise of his business judgment by personal concerns. Change of control
agreements are typically offered to executives in the marketplace and thus are necessary to attract and retain executives as well as protect shareholders interests. A change of control will also accelerate the vesting of all of the
executives outstanding options and accelerate benefits under some of TriCos benefit plans as described at Compensation of Named Executive OfficersPotential Payments Upon Termination and Change of Control.
ESOP Contributions
. TriCo makes yearly contributions to each executives account under TriCos employee stock ownership plan described at
Compensation of Named Executive OfficersESOP.
Defined Contribution Plan
. TriCo offers a 401(k) savings plan to all eligible
employees as described at Compensation of Named Executive Officers401(k).
Medical Insurance
. TriCo provides to each executive
and their family such health, dental and vision insurance coverage as TriCo may from time to time make available to its other executives of the same level of employment. TriCo pays a portion of the premiums for this insurance for all employees.
Life and Disability Insurance
. TriCo provides each officer such disability and/or life insurance as TriCo in its sole discretion determines from time
to time to make available.
Other
. TriCo makes available certain other perquisites to executives such as country club memberships and automobile
allowances which are listed in the perquisites and personal benefits table. Although TriCo allows its executives officers and directors to utilize TriCos corporate airplane for personal use in limited circumstances, TriCo requires its
executive officers and directors to reimburse TriCo for such personal use on an operating cost per flight hour which is predetermined each year. The hourly reimbursement rate represents the aggregate incremental cost to TriCo for such personal use
and takes into account items such as maintenance and repair, operating expenses, the pilots salary, landing and ramp fees, fuel costs, airport taxes and crew travel expenses.
Revenue Code Section 162(m)
The Committee considers
the potential impact of section 162(m) of the Internal Revenue Code. Section 162(m) disallows a tax deduction for any publicly held corporation for individual compensation exceeding $1 million in any taxable year for the chief executive officer
and the other senior executive officers, other than performance based compensation that is approved by the shareholders of the corporation and that meets certain other technical requirements. For stock option grants, Section 162(m) requires
that the grant be made by a compensation Committee comprised of at least two outside directors (as defined in the Treasury regulations), that the option exercise price be not less than the fair market value of the stock at the time of
grant, that the option plan states the maximum number of shares with respect to which options may be granted to any employee in a specified period, and that the plan be approved by shareholders. TriCo believes that TriCos 2009 equity incentive
plan satisfies these requirements so that any compensation paid in connection with the exercise of options granted under the plan will qualify as performance-based compensation. Therefore, awards granted under the 2009 plan should not be subject to
the $1 million deduction limitation in most cases. Certain options granted under TriCos 2001 stock option plan may not meet these requirements and it is therefore possible that an executive officers exercise of such options, either alone
or combined with other compensation, could cause his annual compensation to exceed 162(m)s limit for deductibility. The board of directors has determined that no further awards will be granted under the 2001 stock option plan. Otherwise, based
on current levels of compensation, no executive is expected to receive compensation for 2013 services that would be non-deductible under Section 162(m) of the Internal Revenue Code.
TriCos policy is to generally qualify compensation paid to executive officers for deductibility under the Internal Revenue Code including
Section 162(m), but reserves the right to pay compensation that is not deductible. Based on current levels of compensation, and except as described above, no executive officer is expected to receive compensation for 2013 services that would be
non-deductible under section 162(m) of the Internal Revenue Code. At the annual meeting of shareholders, the board of directors will request that its shareholders reapprove the existing performance criteria under the 2009 plan.
34
Summary
The
Committee believes that TriCos philosophy of aligning compensation with TriCos performance and individual superior performance was met and that the compensation for TriCos executive officers has been competitive and comparable to
the compensation received by executive officers of similarly-sized banks located in the western United States. In addition, TriCos executive compensation philosophy and programs support TriCos overall objective to enhance shareholder
value through profitable management of TriCos operations. The Committee is firmly committed to the ongoing review and evaluation of TriCos executive compensation program.
COMPENSATION OF DIRECTORS
Director
Compensation for 2013
The following table summarizes the compensation paid by TriCo to its non-employee directors in 2013:
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|
|
|
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|
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|
|
|
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|
|
Name (1)
|
|
Fees earned or
paid in cash
($) (2)
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|
|
Option
awards
($) (3)
|
|
|
Change in
pension
value and
nonqualified
deferred
compensation
earnings
($) (4)
|
|
|
All other
compensation
($) (5)
|
|
|
Total
($)
|
|
|
Number of stock
options
outstanding as of
December 31,
2013
|
|
Donald J. Amaral
|
|
$
|
30,000
|
|
|
$
|
36,640
|
|
|
$
|
22,247
|
|
|
$
|
1,180
|
|
|
$
|
90,067
|
|
|
|
19,500
|
|
William J. Casey
|
|
$
|
40,000
|
|
|
$
|
35,920
|
|
|
$
|
6,750
|
|
|
$
|
2,097
|
|
|
$
|
84,767
|
|
|
|
38,500
|
|
L. Gage Chrysler III
|
|
$
|
24,000
|
|
|
$
|
36,640
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
60,640
|
|
|
|
38,000
|
|
Craig S. Compton
|
|
$
|
24,000
|
|
|
$
|
36,640
|
|
|
$
|
4,119
|
|
|
$
|
1,401
|
|
|
$
|
66,160
|
|
|
|
34,000
|
|
Cory W. Giese
|
|
$
|
20,000
|
|
|
$
|
92,965
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
112,965
|
|
|
|
11,500
|
|
John S. A. Hasbrook
|
|
$
|
24,000
|
|
|
$
|
36,640
|
|
|
$
|
3,953
|
|
|
$
|
1,231
|
|
|
$
|
65,824
|
|
|
|
34,000
|
|
Michael W. Koehnen
|
|
$
|
24,000
|
|
|
$
|
36,640
|
|
|
$
|
2,966
|
|
|
$
|
1,213
|
|
|
$
|
64,819
|
|
|
|
34,000
|
|
Carroll R. Taresh(6)
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
4,858
|
|
|
$
|
14,858
|
|
|
|
0
|
|
W. Virginia Walker
|
|
$
|
24,000
|
|
|
$
|
35,920
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
59,920
|
|
|
|
36,000
|
|
(1)
|
Mr. Smith, TriCos president and chief executive officer, is not included in this table as he is an employee of TriCo. Mr. Smith receives no additional cash compensation for his service.
Mr. Smiths compensation is shown at Compensation of Named Executive Officers.
|
(2)
|
Includes a $2,000 monthly retainer for each named director, $1,000 per month for the chairman of the board of directors, $333 per month for the chairman of the compensation and management succession committee and $500
per month for the chairman of the audit committee. TriCo does not pay its directors any additional compensation to attend board of directors or committee meetings.
|
(3)
|
Represents full grant date fair value of options awarded in 2013, determined in accordance with FASB ASC Topic 718, using the valuation assumptions described in the Notes to the Consolidated Financial
Statements section of TriCos Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC.
|
(4)
|
Reflects the change in value during 2013 of each directors account under the director supplemental retirement plan and the above-market interest earned during 2013 under TriCos executive deferred
compensation plan described below, if any.
|
(5)
|
Reflects the taxable value attributable to the split dollar life insurance benefits.
|
(6)
|
Carroll R. Taresh did not stand for reelection as a director in 2013 and retired from TriCos board of directors at the 2013 annual meeting after 15 years of service.
|
35
In addition, each director has an indemnity agreement under which TriCo will indemnify the
director against claims arising or relating to his or her service as a director, was covered by directors and officers liability insurance and was reimbursed for expenses incurred in connection with attendance at board of directors
meetings (including expenses related to spouses when spouses are invited to attend board of directors events).
Deferred Compensation Plans
In 2005 TriCo adopted a deferred compensation plan permitting TriCos directors to defer payment of their retainer fees until retirement,
termination of directorship or death. A director can defer up to a lifetime maximum of $1.5 million for all deferrals under this plan and TriCos predecessor plan which permitted director deferrals from 1992 until 2004. A director who elects to
defer retainer fees for any year must defer a minimum of $200 per month. In 2012 none of the directors elected to defer any of their retainer fees. The plan also permits TriCo to make discretionary contributions to a directors account. To
date, TriCo has not made any discretionary contributions on behalf of any directors. A directors plan benefit is payable upon the directors retirement, the termination of directorship or death. All distributions under the plan are
subject to the rules of Section 409A of the Internal Revenue Code. The plan is nonqualified, unsecured and unfunded.
Interest
accrues on directors deferred compensation plan accounts at a rate equal to 1% above the monthly equivalent of the annual yield of the Moodys corporate bond yield index for the preceding month. From the time that a director leaves
TriCos board of directors and until benefits are paid, a directors account under the plan is credited with interest each month at the monthly equivalent of the annual yield of the Moodys average corporate bond yield index for the
preceding month. A director is immediately 100% vested in any deferrals and any related interest on those deferrals. TriCo determines the vesting rate for any discretionary contributions credited to a directors account and any related
interest. Notwithstanding the foregoing, if a director is removed for cause, TriCos compensation and management succession committee can decide whether the interest credited to the directors account with respect to any deferrals and
TriCos discretionary contributions, if any, are forfeited.
Any deferrals made by a director and any discretionary contributions
credited by TriCo prior to January 1, 2005, and any related interest, are governed by a predecessor deferred compensation plan for directors that TriCo adopted in 1992. The 1992 plan credits accounts at the monthly equivalent of three percent
above the annual yield of the Moodys average corporate bond yield index but is otherwise similar to the 2005 plan in most respects.
Director
Supplemental Retirement Plan
In 2004 TriCo adopted a supplemental retirement plan to provide additional retirement benefits to
directors who retire on or after January 1, 2004. This plan replaced TriCos supplemental retirement plan for directors originally adopted in 1987 and any benefit accrued by a director as of December 31, 2003 under this earlier plan
will be paid under the terms of the 2004 plan. Directors joining TriCos board of directors after 2007 are not eligible to participate in this plan. However, any of the eligible outside directors who attains director emeritus status
becomes qualified to participate in the 2004 plan. A participating director retiring on or after age 55 with at least 15 years of service, or after a change of control with any number of years of service, can receive an annual lifetime benefit equal
to the amount of his base board of directors fees paid by TriCo during the final year of service. The amount of the retirement benefit is reduced for each month that the benefit commencement date precedes the directors 65th birthday. A
directors annual benefit payments under the plan begin the month after retirement. If a director is involuntarily removed, all benefits under this plan are forfeited. The plan is nonqualified, unsecured and unfunded.
Split Dollar Life Insurance
TriCo has
entered into joint beneficiary agreements with all of its directors, except for Mr. Chrysler, Mr. Giese and Ms. Walker. These agreements provide that TriCo owns and pays premiums on a split dollar life insurance policy to provide
various death benefits in certain circumstances to the beneficiaries named by each of these directors.
36
COMPENSATION AND MANAGEMENT SUCCESSION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of
TriCos compensation and management succession committee is an officer, former officer or employee of TriCo or Tri Counties Bank. No executive officer of TriCo had any interlocking relationship with any other for-profit entity during 2013,
including serving on the compensation committee for any other for-profit entity.
REPORT OF THE COMPENSATION
AND MANAGEMENT SUCCESSION COMMITTEE
To
TriCo Shareholders:
The compensation and management succession committee has reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K with TriCos management. Based on such review and discussion, the committee recommended to the board of directors that the Compensation Discussion and Analysis be included in TriCos
Annual Report on Form 10-K and proxy statement on Schedule 14A.
This report shall not be deemed to be soliciting material or
to be filed with the Securities and Exchange Commission or subject to Regulation 14A promulgated by the Commission or Section 18 of the Securities Exchange Act of 1934, as amended.
Respectfully submitted:
William J. Casey (Chairman)
Donald J. Amaral
Craig S. Compton
John S. A. Hasbrook
Michael Koehnen
W. Virginia Walker