SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NORTH VALLEY BANCORP
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
NORTH VALLEY BANCORP
880 East Cypress Avenue
Redding, California 96002
Dear Shareholders:
The 1999 Annual Meeting of Shareholders of North Valley Bancorp will be
held at 4:30 p.m. on Monday, May 17, 1999, in Administration, North Valley Bank,
880 East Cypress Avenue, Redding, California. In connection with the Annual
Meeting, we are enclosing the following:
1. Notice of Annual Meeting of Shareholders.
2. Proxy Statement.
3. Proxy.
4. Annual Report to Shareholders.
We encourage you to read all of the enclosed materials carefully and invite
you to attend the Annual Meeting. Whether or not you plan to attend the Annual
Meeting in person, please return the Proxy, properly completed and executed, as
promptly as possible so that your shares may be represented at the Annual
Meeting.
This year, as an added convenience, a shareholder can choose to vote by
telephone by calling the toll-free number indicated on the Proxy. If you vote by
telephone, you do not need to return the Proxy. Please refer to the Proxy
Statement for a more complete description of the voting by telephone procedures.
We appreciate your support and look forward to seeing you at the Annual
Meeting on Monday, May 17, 1999.
Cordially,
/s/ Rudy V. Balma
Rudy V. Balma
Chairman of the Board
/s/ Michael J. Cushman
Michael J. Cushman
President
<PAGE>
NORTH VALLEY BANCORP
Notice of Annual Meeting of Shareholders
Monday, May 17, 1999
4:30 P.M.
TO THE SHAREHOLDERS:
The Annual Meeting of Shareholders of North Valley Bancorp, a California
corporation (the "Corporation"), will be held in Administration, North Valley
Bank, 880 East Cypress Avenue, Redding, California, on Monday, May 17, 1999, at
4:30 P.M., for the following purposes:
1. To elect the following eight (8) Directors of the Corporation to
serve until the 2000 Annual Meeting and until their successors are
elected and qualified:
Rudy V. Balma Dan W. Ghidinelli
William W. Cox Thomas J. Ludden
Michael J. Cushman Douglas M. Treadway
Royce L. Friesen J. M. ("Mike") Wells, Jr.
2. To approve adoption of the North Valley Bancorp 1999 Director Stock
Option Plan.
3. To approve an amendment of the North Valley Bancorp 1998 Employee
Stock Incentive Plan.
4. To ratify the appointment of Deloitte & Touche LLP as independent
public accountants for the Corporation for 1999.
5. To consider such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
Section 15 of the By-laws of the Corporation provides for the nomination of
Directors, as follows:
Nomination for election of members of the Board of Directors may be made by
the Board of Directors or by any shareholder of any outstanding class of capital
stock of the corporation entitled to vote for the election of directors. Notice
of intention to make any nominations shall be made in writing and shall be
delivered or mailed to the President of the corporation not less than 21 days
nor more than 60 days prior to any meeting of shareholders called for election
of directors; provided however, that if less than 21 days notice of the meeting
is given to shareholders, such notice of intention to nominate shall be mailed
or delivered to the President of the corporation not later than the close of
business on the tenth day following the day on which the notice of meeting was
mailed; provided further, that if notice of such meeting is sent by third-class
mail as permitted by Section 6 of these By-laws, no notice of intention to make
nominations shall be required. Such notification shall contain the following
information to the extent known to the notifying shareholder: (a) the name and
address of each proposed nominee; (b) the principal occupation of each proposed
nominee; (c) the number of shares of capital stock of the corporation owned by
each proposed nominee; (d) the name and residence address of the notifying
shareholder; and (e) the number of shares of capital stock of the corporation
owned by the notifying shareholder. Nominations not made in accordance herewith
may, in the discretion of the Chairman of the meeting, be disregarded and upon
the Chairman's instructions, the inspectors of election can disregard all votes
cast for each such nominee.
<PAGE>
Only shareholders of record at the close of business on April 1, 1999 are
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
By Order of the Board of Directors,
/s/ J.M. Wells, Jr.
J. M. ("Mike") Wells, Jr.
Secretary
Redding, California
April 23, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE. IF YOU VOTE BY TELEPHONE, AS DESCRIBED IN THE PROXY STATEMENT
ACCOMPANYING THIS NOTICE, YOU DO NOT NEED TO RETURN THE PROXY.
<PAGE>
First mailed to Shareholders on
or about April 23, 1999
NORTH VALLEY BANCORP
880 East Cypress Avenue
Redding, California 96002
(530) 221-8400
PROXY STATEMENT
The enclosed proxy (the "Proxy") is solicited on behalf of the Board of
Directors of North Valley Bancorp, a California corporation (the "Corporation"),
for use at the Annual Meeting of Shareholders to be held in Administration,
North Valley Bank, 880 East Cypress Avenue, Redding, California, at 4:30 P.M.,
on Monday, May 17, 1999 and any adjournment or postponement thereof (the
"Meeting"). Only shareholders of record at the close of business on April 1,
1999 (the "Record Date"), will be entitled to notice of and to vote at the
Meeting. At the close of business on the Record Date, the Corporation had
outstanding 3,699,556 shares of its common stock, no par value (the "Common
Stock").
On each matter submitted to a shareholder vote, each holder of Common Stock
will be entitled to one vote, in person or by proxy, for each share of Common
Stock outstanding in the holder's name on the books of the Corporation as of the
Record Date. At the 1998 Annual Meeting of Shareholders, the Corporation's
Articles of Incorporation were amended to provide that no holder of any class of
stock of the Corporation shall be entitled to cumulate votes in connection with
any election of Directors of the Corporation. Therefore, in the election of
Directors, each outstanding share of Common Stock is entitled to cast one vote
for as many separate nominees as there are Directors to be elected. The nominees
who receive the most votes for the number of positions to be filled are elected
Directors. With regard to Proposals 2, 3 and 4 herein, the affirmative vote of a
majority of the votes cast is required for approval of each proposal.
Shareholders of record may vote their proxies by telephone or mail. A
toll-free telephone number is included on the Proxy. Any person submitting a
Proxy in the form accompanying this Proxy Statement has the power to revoke or
suspend such Proxy prior to its exercise. A Proxy is revocable prior to the
Meeting by a written directive to the Corporation, or by a duly executed Proxy
bearing a later date, delivered to the Secretary of the Corporation. A Proxy may
also be revoked if the shareholder is present and elects to vote in person at
the Meeting.
Any shareholder may choose to vote shares of Common Stock by telephone, by
calling the toll-free number (at no cost to the shareholder) indicated on the
Proxy. Telephone voting is available 24 hours per day. Easy to follow voice
prompts allow a shareholder to vote shares and to confirm that instructions have
been properly recorded. The Corporation's telephone voting procedures are
designed to authenticate the identity of shareholders by utilizing individual
control numbers. If a shareholder votes by telephone, there is no need to return
the Proxy.
The Corporation will bear the entire cost of preparing, assembling,
printing and mailing proxy materials furnished by the Board of Directors to
shareholders. Copies of proxy materials will be furnished to brokerage houses,
fiduciaries and custodians to be forwarded to the beneficial owners of the
Common Stock. The Corporation will reimburse brokerage houses, fiduciaries,
custodians and others holding stock in their names or names of nominees or
otherwise for reasonable out-of-pocket expenses incurred in sending proxies and
proxy materials to the beneficial owners of such stock. In addition to the
solicitation of Proxies by use of the mail, some of the officers, directors and
employees of the Corporation may (without additional compensation) solicit
Proxies by telephone or personal interview, the costs of which the Corporation
will bear. The Corporation may, at its discretion, engage the services of a
proxy solicitation firm to assist in the solicitation of proxies. The total
expense of this solicitation will be borne by the
1
<PAGE>
Corporation and will include reimbursement paid to brokerage firms and others
for their expenses in forwarding soliciting material and such expenses as may
be paid to any proxy solicitation firm engaged by the Corporation.
Each Proxy will be voted as directed by the shareholder submitting the
Proxy, and, if no instructions are given on the Proxy, it will be voted "FOR"
the election of the eight nominees for Director recommended by the Board of
Directors, "FOR" approval of adoption of the North Valley Bancorp 1999 Director
Stock Option Plan, "FOR" approval of an amendment of the North Valley Bancorp
1998 Employee Stock Incentive Plan, and "FOR" ratification of the appointment of
Deloitte & Touche LLP as independent public accountants for the Corporation for
the 1999 fiscal year, all as described in the Proxy Statement; and, at the proxy
holders' discretion, on such other matters, if any, which may properly come
before the Meeting (including any proposal to adjourn the Meeting). A majority
of the shares entitled to vote, represented either in person or by a properly
executed Proxy, will constitute a quorum at the Meeting. Abstentions and broker
non-votes are each included in the determination of the number of shares present
and voting for purposes of determining the presence of a quorum. Abstentions
will be included in tabulations of the votes cast on proposals presented to the
shareholders and therefore will have the effect of a negative vote. Broker
non-votes will not be counted for purposes of determining the number of votes
cast for a proposal.
A copy of the Annual Report of the Corporation for the fiscal year ended
December 31, 1998, including audited financial statements (the "Annual Report"),
is enclosed. Additional copies of the Annual Report are available upon request
to J. M. ("Mike") Wells, Jr., Secretary of the Corporation. A COPY OF THE
CORPORATION'S 1998 ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION MAY ALSO BE OBTAINED WITHOUT CHARGE BY WRITING TO MR. WELLS,
C/O NORTH VALLEY BANCORP, 880 EAST CYPRESS AVENUE, REDDING, CALIFORNIA 96002.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-laws of the Corporation provide a procedure for nomination for
election of members of the Board of Directors, which procedure is printed in
full on the Notice of Annual Meeting of Shareholders accompanying this Proxy
Statement. Nominations not made in accordance therewith may, in the discretion
of the Chairman of the Meeting, be disregarded, and, upon his instruction, the
inspectors of election shall disregard all votes cast for such nominee(s).
The authorized number of Directors shall be not less than six (6) nor more
than eleven (11). The number of members of the Board of Directors to be elected
at the Meeting to hold office for the ensuing year and until their successors
are elected and qualified is eight (8).
All Proxies will be voted for the election of the following eight (8)
nominees recommended by the Board of Directors, unless authority to vote for the
election of any or all Directors is withheld. All of the nominees are incumbent
Directors except for Royce L. Friesen, who is being nominated to fill the
vacancy created by the retirement of Kelly V. Pierce.
Rudy V. Balma Dan W. Ghidinelli
William W. Cox Thomas J. Ludden
Michael J. Cushman Douglas M. Treadway
Royce L. Friesen J. M. ("Mike") Wells, Jr.
If any of the nominees should unexpectedly decline or be unable to act as a
Director, the Proxies may be voted for a substitute nominee to be designated by
the Board of Directors. The Board of Directors has no reason to believe that
any nominee will become unavailable and has no present intention to nominate
persons in addition to or in lieu of those named above. The eight candidates
receiving the highest number of votes will be elected.
The Board of Directors recommends a vote "FOR" each of the nominees listed
above.
2
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
To the knowledge of the Corporation, as of the Record Date, no person or
entity was the beneficial owner of more than five percent (5%) of the
outstanding shares of the Corporation's Common Stock, except as described below
and in the following tables. For the purpose of this disclosure and the
disclosure of ownership of shares by management, shares are considered to be
"beneficially" owned if the person has or shares the power to vote or direct
the voting of the shares, the power to dispose of or direct the disposition of
the shares, or the right to acquire beneficial ownership (as so defined) within
60 days of the Record Date.
Amount and
Name and Address Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------------------ -------------------- ----------
Common Stock North Valley Bancorp Employee 191,199 (1) 5.2%
Stock Ownership Plan ("ESOP")
880 East Cypress Avenue
Redding, CA 96002
Common Stock Banc Fund 211,576 5.7%
c/o The Banc Funds Company LLC
208 South LaSalle Street
Chicago, IL 60604
- ------------
(1) Messrs. Balma, Cushman and Wells constitute the Administrative Committee
(ESOP) and have authority to instruct the ESOP Trustee with regard to
voting of these shares. Messrs. Balma, Cushman and Wells, as members of
the Administrative Committee (ESOP), disclaim beneficial ownership with
respect to all such shares. Mr. Cushman is a participant in the ESOP.
3
<PAGE>
The following table sets forth certain information regarding ownership of
the Corporation's Common Stock with respect to each Director, each person
nominated for election as a Director and each executive officer named in the
Summary Compensation Table elsewhere herein, as well as for all current
Directors and executive officers as a group. All of the shares of Common Stock
of the Corporation shown in the following table are owned both of record and
beneficially, except as indicated in the notes to the table, as of April 1,
1999. The table should be read with the understanding that more than one person
may be the beneficial owner or possess certain attributes of beneficial
ownership with respect to the same securities. Therefore, careful attention
should be given to the footnote references set forth in the column "Amount and
Nature of Beneficial Ownership."
<TABLE>
There are no arrangements or understandings pursuant to which any of the
Directors was or is to be selected as a Director or nominee.
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner(1) Ownership(2) Class (9)
- ------------------------------------------------- ------------------------ --------------------
<S> <C> <C>
Rudy V. Balma ........................ 262,375(3)(4) 7.1%
James F. Cowee, Jr. .................. 0 *
William W. Cox ........................ 2,506 *
Michael J. Cushman .................. 215,289(3) 5.8%
Fred A. Drake II ..................... 25,578 *
Royce L. Friesen ..................... 2,210 *
Dan W. Ghidinelli ..................... 31,712(5) *
Thomas J. Ludden ..................... 20,908 *
Kelly V. Pierce ..................... 87,396(6) 2.4%
Jack R. Richter ..................... 11,400 *
Martin R. Sorensen .................. 9,524 *
Douglas M. Treadway .................. 1,920 *
J. M. ("Mike") Wells, Jr. ............ 260,647(3)(7) 7.0%
All Executive Officers and Directors
as a group (nine in number)(8) ...... 438,403(9) 11.6%(10)
<FN>
- ------------
* Indicates less than 1%
(1) The address for all persons listed is c/o North Valley Bancorp, 880 East
Cypress Avenue, Redding, California 96002. Mr. Cowee retired effective on
January 30, 1998, Mr. Drake retired effective on December 31, 1998, and
Mr. Sorensen resigned effective on December 18, 1998.
(2) Includes shares beneficially owned, directly and indirectly, together with
associates. Subject to applicable community property laws and shared
voting and investment power with a spouse, sole investment and voting
power is held by the beneficial owner of all shares unless noted
otherwise. Includes stock options granted pursuant to the North Valley
Bancorp 1989 Director Stock Option Plan and the North Valley Bancorp 1998
Employee Stock Incentive Plan with: 14,500 shares exercisable within 60
days by Director Cushman; 9,800 shares exercisable within 60 days by
Director Ghidinelli; 1,000 shares each exercisable within 60 days by
Directors Cox and Treadway; 3,700 shares exercisable within 60 days by
Director Ludden; 1,960 shares exercisable within 60 days by Director
Pierce; 10,000 shares exercisable within 60 days by Mr. Richter; and
16,696 shares exercisable within 60 days by Director Wells.
(3) Includes 191,199 ESOP shares. Messrs. Balma, Cushman and Wells constitute
the Administrative Committee (ESOP) and have authority to instruct the
ESOP Trustee with regard to voting of these shares. Messrs. Balma, Cushman
and Wells, as members of the Administrative Committee (ESOP), disclaim
beneficial ownership with respect to all such shares. Mr. Cushman is a
participant in the ESOP.
(4) Includes 71,176 shares held by The Balma Family Trust, of which Mr. Balma
is trustee.
(5) Includes 18,312 shares held by the Balma Grandchildren Trust, of which Mr.
Ghidinelli is a trustee and as to which Mr. Ghidinelli disclaims
beneficial ownership.
(6) Includes 85,436 shares held by the Pierce Family Trust, of which Mr. Pierce
is trustee.
4
<PAGE>
(7) Includes 52,752 shares held by the Wells Family Trust, of which Mr. Wells
is trustee.
(8) This group includes all current executive officers and Directors, and
therefore excludes Messrs. Cowee, Drake, Pierce and Sorensen.
(9) See footnotes 3 through 7. Includes 32,196 shares subject to options
exercisable within 60 days by the Directors under the 1989 Director Stock
Option Plan, and 24,500 shares subject to options exercisable within 60
days by Messrs. Cushman and Richter under the 1998 Employee Stock
Incentive Plan.
(10) In calculating the percentage of ownership, all shares which the
identified person or persons have the right to acquire by exercise of
options are deemed to be outstanding for the purpose of computing the
percentage of the class owned by such person, but are not deemed to be
outstanding for the purpose of computing the percentage of the class owned
by any other person.
</FN>
</TABLE>
Certain information with respect to the Directors, nominees for Director
and the current executive officers of the Corporation and its banking
subsidiary, North Valley Bank (the "Bank"), is provided below:
Rudy V. Balma (age 70), the Chairman of the Board of Directors and a
Director of the Corporation since 1982, is a retired licensed funeral
director and President of Redding Memorial Park, doing business as Redding
Cemetery and McDonald's Chapel.
Sharon L. Benson (age 46) has been Senior Vice President & Chief
Financial Officer of the Corporation and its subsidiaries since July 1997.
Prior to that, she was Vice President, Accounting, of the Bank since
December 1990.
William W. Cox, CRE, CCIM (age 51), a Director of the Corporation since
February 1997, has been owner and President of Cox Real Estate Consultants,
Inc., since April 1996. From October 1987 to August 1996, he was President
and 50% owner of Haedrich & Cox, Inc., a real estate brokerage company.
Michael J. Cushman (age 44) was promoted and appointed President &
Chief Executive Officer of the Corporation and its subsidiaries on February
10, 1999. Prior to that and from the time he joined North Valley Bank on
March 23, 1998, he served as Senior Vice President & Chief Business Banking
Officer. From March 1995 through March 1998, he was a self-employed
investor, and from November of 1994 through March of 1995 served as Vice
President of Tri-Counties Bank, who acquired Country National Bank in
November of 1994 where Mr. Cushman served as President & Chief Executive
Officer since September of 1992.
Errol K. DeRose (age 55) has been Senior Vice President & Chief Real
Estate/Construction Officer and Manager of the Bank's Redding Office since
April of 1998. Prior to that he served as Senior Vice President & Chief
Credit Officer from December 1997. Mr. DeRose joined the Bank in March of
1991, serving as Vice President & Manager of the Bank's Redding Branch and
Real Estate Department.
Royce L. Friesen (age 60) has been President, Chief Executive Officer
and owner of Owens Healthcare in Redding, California, since 1968. Owens
Healthcare, a management company, was formed to provide support and
coordination among ten retail and home care pharmacies located throughout
Northern California.
Dan W. Ghidinelli (age 51), a Director of the Corporation since 1993,
has been a Certified Public Accountant and partner with Nystrom & Company
LLP since 1974.
Thomas J. Ludden (age 66), a Director of the Corporation since 1991, is
a retired educator in the Weaverville School District in Trinity County,
California, owner of the Tri-L Ranch, a tree farm, since 1956, and retired
owner and President of Ludden & Co., Inc., a dry goods and clothing
business located in Weaverville, California. He has also served as Trustee
for the Shasta-Tehama-Trinity JCCD since 1967, and as Trustee for the Lions
Eye Foundation CA/NEV since July 1988.
Jack R. Richter (age 52) has served as the Bank's Senior Vice President
& Chief Credit Officer since joining the Bank on April 14, 1998. From
February 1996 until April 1998 he was Relationship
5
<PAGE>
Manager for Tri-Counties Bank in Redding; and from February 1990 until
February 1996, Mr. Richter served as Senior Business Banking Officer for
Bank of California in Redding, California.
Douglas M. Treadway (age 56), a Director of the Corporation since
February 1997, is President of Shasta College and has served in that
capacity since 1994. From 1991 to 1994, he was Chancellor for the North
Dakota University System.
J. M. ("Mike") Wells, Jr. (age 58), the General Counsel and Secretary
of the Board of Directors of the Corporation and a member of the Board of
Directors since 1982, is an attorney with Wells, Small, Selke & Graham, a
Law Corporation, located in Redding, California. Mr. Wells has practiced
law with that firm since 1972.
None of the Corporation's Directors is a director of any other reporting
company. There are no family relationships between any of the Directors and
executive officers of the Corporation.
Committees of the Board of Directors
The Board of Directors of the Corporation and of the Bank have established
an Audit Committee. As of April 1, 1999, the members of the Audit Committee are
Messrs. Balma, Cushman (ex-officio), Ghidinelli (Chairman), Pierce, and Ludden.
The Audit Committee met two times during 1998. The functions of the Audit
Committee are to recommend the appointment of and to oversee a firm of
independent public accountants whose duty is to audit the books and records of
the Corporation for the fiscal year for which it is appointed, to review and
analyze the reports of the Corporation's independent public accountants, to
analyze the results of internal and regulatory examinations, to monitor the
effectiveness of the Corporation's accounting system and financial reporting and
to interface with the Corporation's independent public accountants concerning
additional specific engagements requested by the Corporation.
The Corporation has a Director Replacement Committee, or nominating
committee, which recommends and nominates qualified individuals to serve on the
Corporation's Board of Directors. Committee members are Balma, Cushman and Cox.
The Committee did not meet during 1998. See the Notice of Annual Meeting of
Shareholders for procedures for submitting nominations.
The Corporation has an Executive Committee, the current members of which
are Messrs. Balma, Cox, Cushman (Chairman), Ghidinelli, Ludden, Pierce, Treadway
and Wells. The functions of the Executive Committee are to review and make
decisions on actions that are required between regular Board Meetings. The
Executive Committee met eleven times during 1998.
During 1998, the Corporation did not have a compensation committee. The
Board of Directors of the Corporation performed the function of a compensation
committee during 1998, which was to determine annual compensation for executive
officers of the Corporation and its subsidiaries.
Compensation Committee Interlocks and Insider Participation
During the fiscal year 1998, Mr. Sorensen (who resigned effective December
18, 1998) participated in deliberations of the Corporation's Board of Directors
concerning executive officer compensation for all executive officers excluding
himself.
Meetings of the Board of Directors
During 1998, the Board of Directors held twelve regularly scheduled
meetings and two special meetings. In 1998, each Director attended at least 75%
of the aggregate of the total number of meetings of the Board of Directors (held
during the period for which he was a Director) and the total number of meetings
of Committees of the Board of Directors on which such Director served (during
the periods that he served).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Corporation's Directors and executive officers and
persons who own more than 10% of a registered class
6
<PAGE>
of the Corporation's equity securities to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Corporation.
Officers, Directors and greater than 10% shareholders are required by the SEC
to furnish the Corporation with copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of such reports
furnished to the Corporation and written representations that no other reports
were required, during the fiscal year ended December 31, 1998, all Section 16(a)
filing requirements applicable to its officers, Directors and 10% shareholders
were complied with on a timely basis.
7
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation of the
President and Chief Executive Officer of the Corporation and the Bank and the
other most highly compensated executive officers (whose total annual salary and
bonus exceeds $100,000) for services in all capacities to the Corporation, the
Bank and other subsidiaries during 1998, 1997 and 1996:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- -------------
Name and Securities All Other
Principal Other Annual Underlying Compensation
Position(1) Year Salary(2) Bonus Compensation(3) Options (4)(5)
- ------------------------------- ------ ----------- --------- ----------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Cushman 1998 $ 96,000 $25,000 $ 547 25,000 $ -0-
President & Chief 1997 N/A
Executive Officer 1996 N/A
Martin R. Sorensen 1998 $175,000 $40,000 $ 2,619 50,000 $2,000
(Former) President & Chief 1997 N/A
Executive Officer 1996 N/A
James F. Cowee, Jr. 1998 $168,808 $ -0- $ 8,122 2,000 $5,194
(Former) President & Chief 1997 130,526 46,680 7,765 -- 6,147
Executive Officer 1996 98,331 28,884 5,550 -- 6,612
Fred A. Drake II 1998 $113,035 $30,000 $ 1,066 -- $3,868
(Former) Executive Vice 1997 94,788 30,360 2,720 -- 4,655
President of the Bank 1996 85,728 24,444 1,540 -- 4,347
Jack R. Richter 1998 $ 85,008 $25,000 $ -0- 20,000 $ -0-
Senior Vice President & Chief 1997 N/A
Credit Officer of the Bank 1996 N/A
<FN>
- ------------
(1) Upon Donald V. Carter's death on June 24, 1997, Mr. Cowee became President
& Chief Executive Officer of the Bank and the Corporation, retiring in
January 1998. In accordance with his employment agreement, Mr. Cowee
continued to be compensated during 1998. Mr. Sorensen served as President
& Chief Executive Officer of the Bank and the Corporation from February
1998 until his resignation effective on December 18, 1998, and will
continue to be compensated in 1999 as disclosed elsewhere herein. Mr.
Drake retired effective on December 31, 1998. Mr. Cushman, hired in March
1998 as Senior Vice President & Chief Business Banking Officer of the
Bank, was promoted by the Board of Directors in February 1999 to President
& Chief Executive Officer of the Bank and the Corporation at a salary of
$140,000 per year. Mr. Richter also joined the Bank and the Corporation
during 1998.
(2) Base salary includes 401(k) Plan and Executive Deferred Compensation Plan
("EDCP") contributions.
(3) Represents the above-market portion of interest earned under the EDCP for
Messrs. Sorensen, Cowee, and Drake; and the cost of a company car for each
of Messrs. Sorensen, Cowee, Drake and Cushman.
(4) Represents matching contributions under the Corporation's 401(k) Plan and
EDCP.
(5) Includes a yearly allocation of Common Stock under the ESOP, excluding
shares allocated as a result of the three-for-two stock split effected as
a 50% stock dividend in 1995 and the two-for-one stock split in October
1998.
</FN>
</TABLE>
8
<PAGE>
The following table describes stock options (adjusted for the two-for-one
stock split in October 1998) granted pursuant to the North Valley Bancorp 1989
Director Stock Option Plan, the North Valley Bancorp 1989 Employee Stock Option
Plan, and the North Valley Bancorp 1998 Employee Stock Incentive Plan to the
persons named in the Summary Compensation Table during the fiscal year ended
December 31, 1998:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
----------------------------------------------------------------------- Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options Market of Stock Price Appreciation
Underlying Granted to Exercise or Price on for Option Term(4)
Options Employees In Base Price Date of Expiration ---------------------------------
Name Granted Fiscal Year ($/Sh) Grant Date 0% 5% 10%
- ---------------------- --------------- --------------- ------------- -------- ---------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael J. Cushman .. 25,000(1) 25.7% $15.94 $15.94 August 19, 2008 $ -0- $219,704 $ 541,142
Martin R. Sorensen .. 50,000(2) 51.5% $12.75 $15.00 February 5, 2008 $112,500 $525,996 $1,130,961
James F. Cowee Jr. .. 2,000(3) 2.1% $12.75 $15.00 January 20, 2008 $ 4,500 $ 21,040 $ 45,238
Jack R. Richter ..... 20,000(1) 20.6% $15.94 $15.94 August 19, 2008 $ -0- $175,763 $ 432,914
<FN>
- ------------
(1) Options were granted to Messrs. Cushman and Richter under the North Valley
Bancorp 1998 Employee Stock Incentive Plan at 100% of the fair market
value of the Corporation's Common Stock on the date of grant. See the
discussion of the 1998 Employee Stock Incentive Plan below.
(2) Mr. Sorensen's options were granted under the 1989 Employee Stock Option
Plan at 85% of the fair market value of the Corporation's Common Stock on
the date of grant. See the discussion of the 1989 Employee Stock Option
Plan below. Mr. Sorensen's stock options (50,000 shares) were cancelled
upon his resignation in December 1998 under the terms of his severance
agreement.
(3) Mr. Cowee's options were granted under the 1989 Director Stock Option Plan
at 85% of the fair market value of the Corporation's Common stock on the
date of grant. See the discussion of the 1989 Director Stock Option Plan
below. Mr. Cowee's unexercised stock options (1,600 shares) were cancelled
upon his retirement in January 1998 under the terms of the 1989 Director
Stock Option Plan.
(4) The 0%, 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and are not an estimate or
projection of future prices for the Corporation's Common Stock.
</FN>
</TABLE>
The following table sets forth the stock options exercised in 1998 and the
December 31, 1998 unexercised value of both vested and unvested stock options
for each of the persons named in the Summary Compensation Table:
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<CAPTION>
Value of Unexercised
Shares Number of Securities Underlying In-The-Money
Unexercised Options at Fiscal
Year End Options at Fiscal Year End(1)
Acquired Value ------------------------------- -------------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- ------------- ---------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Cushman ...... -0- $ -0- 5,000 20,000 $ -0- $-0-
Martin R. Sorensen ...... -0- $ -0- 10,000 40,000 $ -0- $-0-
James F. Cowee Jr. ...... 400 $1,452 -0- -0- $ -0- $-0-
Jack R. Richter ......... -0- $ -0- 4,000 16,000 $ -0- $-0-
<FN>
- ------------
(1) Based on the fair market value of the Corporation's Common Stock of $12.25
per share at December 31, 1998. Mr. Cowee's unexercised stock options
(1,600 shares) were cancelled upon his retirement in January 1998 under
the terms of the 1989 Director Stock Option Plan. Mr. Sorensen's
unexercised stock options (50,000 shares) were cancelled upon his
resignation in December 1998, under the terms of his severance agreement.
</FN>
</TABLE>
9
<PAGE>
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Mr. Cowee entered into an employment agreement with the Corporation on
November 10, 1997, which contract was retroactively effective to June 1, 1997,
naming him as President & Chief Executive Officer of the Corporation and its
subsidiaries at a salary of $155,823 per year. Mr. Cowee chose to enter into
retirement effective January 31, 1998, and under the terms of said employment
agreement continued to receive compensation at the rate of $155,823 per year for
the remainder of the 1998 calendar year.
Martin R. Sorensen was appointed by the Board of Directors as the new
President and Chief Executive Officer of the Corporation and its subsidiaries,
and entered into an employment agreement effective February 1, 1998. Mr.
Sorensen resigned from all positions with the Corporation and the Bank effective
December 18, 1998, and his employment agreement was terminated pursuant to a
severance agreement with the Corporation. In accordance with such agreement, Mr.
Sorensen will continue to receive compensation during 1999 in an amount equal to
his salary for 1998.
Supplemental Executive Retirement Plan. The Supplemental Executive
Retirement Plan (the "Executive Retirement Plan") was established by the
Corporation effective October 1, 1988, for the purpose of providing supplemental
retirement benefits to key employees of the Corporation and its subsidiaries
designated by the Board of Directors. The Executive Retirement Plan is
administered by a committee of three persons appointed by the Chairman of the
Board, and is an unfunded and unsecured plan as defined in sections 201, 301 and
401 of ERISA (Employee Retirement Income Security Act of 1974).
The Executive Retirement Plan provides for two general classes of benefits:
(1) Retirement benefits commencing at age 65 or upon termination within
two years after a change in control of the Corporation, payable monthly for
not less than ten years in an amount, depending upon length of service,
equal to up to 45% of the executive's highest average monthly compensation
for any 36 consecutive months during his last 60 months of service.
"Compensation" includes base salary and bonuses. An early retirement
benefit is also available if the executive retires early between the ages
of 55 and 65 after not less than ten years of service. If commencement of
payment of the early retirement benefit is deferred until the executive
attains age 65, it is equal to the normal retirement benefit; if payment
commences prior to age 65, the monthly benefit is reduced according to a
formula set forth in the Executive Retirement Plan. Optional benefit forms,
such as joint/survivor annuities, are also available.
(2) Survivor benefits payable after death occurring either while
employed or after employment but before commencement of normal retirement
benefits. The survivor benefit is generally equal to the greater of the
normal retirement benefit which would have been payable to the executive or
36 times his highest average monthly compensation and is payable in ten
equal annual installments.
Vesting of benefits under the Executive Retirement Plan is 100% if
termination occurs within 24 months after change in control of the Corporation
or as a result of disability, retirement on or after the age of 65 or death. For
any other reason, vesting occurs at the rate of 25% for each year of credited
service. Benefits are reduced by an amount equal to 50% of the amount of any
monthly primary Social Security benefit (determined at age 65) or, in the case
of commencement of payment of early retirement benefits prior to age 65, by 50%
of the monthly primary Social Security benefit that would become payable at age
65, determined under the terms of the Social Security Act in effect at the time
early retirement benefits commence.
As in the case of the Directors' Retirement Plan (as defined below), the
Corporation (or the subsidiary responsible for payment of benefits) may purchase
insurance policies or annuity contracts to provide for payment of benefits under
the Executive Retirement Plan, but persons entitled to benefits have no right to
such policies or contracts or other specific assets or properties of the
Corporation or subsidiary unless express trusts of any such assets or properties
have been established for the purpose of payment of benefits.
For the year ended December 31, 1998, the Bank paid insurance premiums of
$51,000 in order to fund obligations under the Executive Retirement Plan, with a
cash residual value of $1,033,000.
10
<PAGE>
The following table illustrates the approximate retirement income that may
become payable to a key employee credited with the number of years of service
shown, assuming that benefits commence at age 65 and are payable in the form of
an annuity for the employee's life or for 10 years (whichever is greater):
ANNUAL RETIREMENT INCOME
Years of Credited Service
Final Average 10
Compensation 2 4 6 8 or more
------------- ------ ------ ------ ------ -------
$ 60,000 5,400 10,800 16,200 21,600 27,000
80,000 7,200 14,400 21,600 28,800 36,000
100,000 9,000 18,000 27,000 36,000 45,000
120,000 10,800 21,600 32,400 43,200 54,000
140,000 12,600 25,200 37,800 50,400 63,000
160,000 14,400 28,800 43,200 57,600 72,000
180,000 16,200 32,400 48,600 64,800 81,000
200,000 18,000 36,000 54,000 72,000 90,000
Pursuant to the Executive Retirement Plan, Mr. Carter's widow will receive
annual payments in the amount of $74,285 for ten years. The first two such
payments were made in July of 1997 and 1998.
Executive Deferred Compensation Plan. The EDCP was established by the
Corporation effective January 1, 1989, in order to provide current tax planning
opportunities and supplemental retirement or death benefits to Directors and
selected key employees or their designated beneficiaries or surviving spouses,
children or estates. It is administered by a committee of not less than three
persons appointed by the Chairman of the Board of Directors. Although the EDCP
is intended to be an unfunded and unsecured plan as defined in sections 201, 301
and 401 of ERISA, the employer (the Corporation or a subsidiary thereof)
responsible for payment of benefits may establish trusts, which may be
irrevocable but which are subject to the claims of the Corporation's creditors,
to provide for payment thereof.
Participants may elect to defer to their account under the EDCP not less
than $2,400 in amount, up to 100%, of their annual compensation. The employer is
required to make matching contributions in the amount of 25% of the amount
deferred up to a maximum of 5% of compensation before deferrals, and may also
make discretionary contributions in any amount.
EDCP benefits are payable from participants' individual accounts upon
termination within 24 months of a change of control of the Corporation or as the
result of normal or early retirement, disability or death, or under other
limited circumstances. Benefits are payable usually over a period of five years
in the case of directors and 10 years in the case of executives, in equal
monthly installments commencing on a date chosen by the participant not later
than 60 days after the end of the month in which termination of service occurs.
Other payment alternatives which may be elected at the discretion of the
administrative committee of the EDCP include payment in a single sum or over a
period of 15 years, and early withdrawals in limited amounts and hardship
distributions are permitted. All amounts deferred are immediately vested at
100%; discretionary contributions are vested as set forth by agreement with the
participant at the time of the related deferral, and matching contributions are
vested according to the schedule set forth for matching contributions under the
Corporation's Deferred Salary Profit-Sharing Thrift Plan. In 1998, amounts which
were deferred by the executive officers totaled $30,400 for Mr. Sorensen,
$30,000 for Mr. Cowee, and $12,000 for Mr. Drake, which amounts are included in
the Summary Compensation Table. For the period ending December 31, 1998, the
Bank paid insurance premiums of $866,000 in order to fund obligations under the
EDCP, with a cash residual value of $1,909,000.
Pursuant to the EDCP, Mr. Carter's widow has been receiving, since July
1997, monthly payments of $2,305. The compensation represented by these payments
was previously reported in the year deferred.
As of December 31, 1998, the Corporation's accrued pension obligation under
the Directors' Retirement Plan, the Executive Retirement Plan and the EDCP was
$2,325,000.
11
<PAGE>
Compensation of Directors
General. During 1998, each Director received fees of $850 per Board Meeting
attended (except that if the Director was a member of the Board of Directors of
both the Corporation and the Bank, and both Boards met on the same day, the
Director only received a single $850 fee for attending both meetings) and
payments per Committee meeting attended of $200 (with the exception of Loan
Committee, which effective in May 1998 pays $100 per meeting). As executive
officers, Messrs. Cowee and Sorensen did not receive Director's fees, and Mr.
Cushman will not receive Director's fees. During 1998, cash compensation paid to
all Directors totaled $30,600, and payment of additional Director compensation
of $74,856 was deferred under the EDCP. Directors electing coverage under the
group health insurance plan available to employees of the Corporation have been
required to pay 100% of their premiums since January 1989.
At a meeting of the Board of Directors on December 4, 1997, after which
Chairman Rudy Balma had excused himself from said meeting, the Board unanimously
passed a resolution to pay Chairman Balma a sum equal to seventy-five percent
(75%) of the currently established regular Board Meeting fee in addition to the
regular monthly Board Meeting and committee fees, due to the amount of extra
work the Chairman must necessarily perform on behalf of the Bank and the
Corporation, and such additional fee remained effective throughout 1998.
Commencing in 1998, each outside Director of the Corporation receives an
award of 300 shares of Common Stock as part of his annual retainer as a Director
pursuant to the 1998 Employee Stock Incentive Plan. Each award is fully vested
when granted to the outside Director. For additional information regarding said
Plan, see Proposal No. 3 herein.
Supplemental Retirement Plan for Directors. The Supplemental Retirement
Plan for Directors (the "Directors' Retirement Plan") was established by the
Corporation as of October 1, 1988 as an unfunded and unsecured plan to provide
deferred compensation to Directors of the Corporation who are not also employees
of the Corporation or any affiliate ("Outside Directors"). Its general purpose
is to aid in retaining the services of such Outside Directors. Outside Directors
with 10 years of service to the Corporation or any of its subsidiaries are
eligible to receive benefits under the Directors' Retirement Plan, which
benefits consist of the payment (commencing upon the earlier of death or the
72nd birthday of the Director) of $5,000 per year for 10 years to the Director,
his designated beneficiaries or (in the absence of such a designation) his
surviving spouse, children or estate (in that order).
The obligation to pay benefits under the Directors' Retirement Plan is the
responsibility of the Bank. The Bank is authorized to purchase life insurance
policies and/or annuity contracts in order to provide for payment of its
obligations under the Directors' Retirement Plan, but such obligations have only
the legal status of unfunded, unsecured promises to pay money in the future, and
no one entitled to receive benefits under the Directors' Retirement Plan has, as
a result, any rights to such policies or contracts or other specific property or
assets of the Bank unless an express trust is established for such purpose. For
the period ending December 31, 1998, the Bank paid insurance premiums of $61,000
in order to fund obligations under the Directors' Retirement Plan, with a cash
residual value of $908,000.
North Valley Bancorp 1989 Director Stock Option Plan. Under the North
Valley Bancorp 1989 Director Stock Option Plan, as amended (the "1989 Director
Plan"), which was adopted by the Board of Directors in December 1989 and by the
shareholders of the Corporation at the 1990 Annual Meeting, each member of the
Board of Directors, including employees who are Directors, automatically
receives every January a nonstatutory stock option to purchase 1,000 shares of
the Corporation's Common Stock. Pursuant to the 1989 Director Plan, as of April
1, 1999, the Corporation had outstanding options to purchase 54,156 shares of
Common Stock. As of April 1, 1999, 96,682 shares remained available for grants
under the 1989 Director Plan.
Options granted under the 1989 Director Plan vest immediately as to 20%,
with an additional 20% vesting on each of the first four anniversary dates
following the date of grant. Such options are exercisable for a period of 10
years from the date of grant at a price which shall be 85% of the fair market
value of the Corporation's Common Stock on the date of grant. The exercise price
can be paid by cash, certified check, official bank check or the equivalent
thereof acceptable to the Corporation. Options granted pursuant to the 1989
Director Plan automatically expire three months after termination of service as
a
12
<PAGE>
Director for any reason other than cause, death or disability. In the case of
termination of service due to death or disability, such options terminate one
year from the date of such termination of service. In the event that service as
a Director is terminated for cause, the options granted pursuant to the
Director Plan expire 30 days after such termination.
Each Director was granted an option to purchase 1,000 shares in January
1998 at an exercise price per share of $25.50 (before adjustment for the two-for
one stock split in October 1998), and 1,000 shares in January 1999 at an
exercise price of $10.20. The 1989 Director Plan is scheduled to expire in
December 1999, and it is anticipated that no additional options will be granted
to Directors, subject to approval of the North Valley Bancorp 1999 Director
Stock Option Plan (see Proposal No. 2 below).
The 1989 Director Plan is presently administered by the Board of Directors,
which has the authority to delegate some or all of its duties to a committee of
the Board of Directors appointed for this purpose, which committee must be
composed of not less than three members of the Board of Directors. This
committee is generally authorized to administer the 1989 Director Plan in all
respects, subject to the express terms of the 1989 Director Plan.
The 1989 Director Plan provides for adjustment of and changes in the shares
of Common Stock reserved for issuance in the event certain changes occur or in
the event of the sale, dissolution or liquidation of the Corporation or any
reorganization, merger or consolidation of the Corporation.
The Board of Directors may amend or terminate the 1989 Director Plan as
provided therein and the Board of Directors intends to terminate the 1989
Director Plan upon approval by the shareholders of the North Valley Bancorp 1999
Director Stock Option Plan (see Proposal No. 2, below). No amendment or
termination may adversely affect the rights of an optionee under a previously
granted option without that optionee's consent.
North Valley Bancorp 1989 Employee Stock Option Plan
Under the North Valley Bancorp 1989 Employee Stock Option Plan, as amended
(the "1989 Employee Plan"), which was adopted by the Board of Directors in
December 1989 and by the shareholders of the Corporation at the 1990 Annual
Meeting, officers and key full-time salaried employees of the Corporation and
its affiliates may be granted options to purchase shares of the Corporation's
Common Stock. As of April 1, 1999, there were no options outstanding under the
1989 Employee Plan and 341,550 shares remained available for awards under the
1989 Employee Plan. The 1989 Employee Plan is scheduled to expire on December
15, 1999, unless sooner terminated by action of the Board of Directors. The
Board of Directors intends to terminate the 1989 Employee Plan at its next
scheduled meeting.
The exercise price, term and vesting period of each option granted under
the 1989 Employee Plan is determined by the committee which administers the 1989
Employee Plan at the time the option is granted; provided, however, that the
exercise price may in no event be less than 85% of the fair market value of the
Corporation's Common Stock on the date of grant, nor may the term of an option
exceed 10 years or vest at a rate of less than 20% per year during the first
five years of the option term.
Each option granted under the 1989 Employee Plan automatically expires
three months after termination of employment other than for cause, except that
in the case of termination of employment due to death or disability, an option
will expire one year from the date of such termination of employment. In the
event the optionee's employment is terminated for cause, the option will expire
30 days after such termination of employment.
The 1989 Employee Plan is administered by a committee of the Board of
Directors appointed for this purpose, which committee is composed of not less
than three members who are not also employees of the Corporation or any of its
affiliates (in the absence of such a separate committee, the Board of Directors
acts as the committee).
The 1989 Employee Plan provides for adjustment of and changes in the shares
reserved for issuance in the event certain changes occur or in the event of the
sale, dissolution or liquidation of the Corporation or any reorganization,
merger or consolidation. The Board of Directors may amend or terminate the 1989
Employee Plan. No amendment or termination may adversely affect the rights of an
optionee under a previously granted option without that optionee's consent.
13
<PAGE>
North Valley Bancorp 1998 Employee Stock Incentive Plan
Under the North Valley Bancorp 1998 Employee Stock Incentive Plan (the
"Stock Incentive Plan"), which was adopted by the Board of Directors in February
1998 and approved by the shareholders of the Corporation at the 1998 Annual
Meeting, options to purchase shares of the Corporation's Common Stock may be
granted to key employees of the Corporation and its affiliates. The Stock
Incentive Plan also provides for the award of shares of Common Stock to outside
directors. During 1998, options for 25,000 shares and 20,000 shares were granted
to Messrs. Cushman and Richter, respectively. On February 16, 1999, the Board
approved the grant of options totaling 149,000 shares to 57 key employees of the
Bank, including options for 22,500 shares and 10,000 shares to Messrs. Cushman
and Richter, all at an exercise price of $12.875 (the market price on such
date). Pursuant to the Stock Incentive Plan, as of April 1, 1999, the
Corporation had outstanding options to purchase 194,000 shares of Corporation
Common Stock, with 418,600 shares remaining available for grant.
For more information regarding the Stock Incentive Plan, see Proposal No. 3
herein.
REPORT OF THE COMPENSATION COMMITTEE
The Board of Directors acts as the Corporation's compensation committee and
reviews salaries recommended by the Chief Executive Officer for executive
officers other than the Chief Executive Officer, and can, at its discretion,
grant stock options to key officers of the Corporation and its affiliates who
are primarily responsible for the management and growth of the Corporation's
business (such options, as disclosed elsewhere herein, were granted to Messrs.
Sorensen, Cushman and Richter during 1998). In conducting its review of
salaries, the Board of Directors takes into consideration the overall
performance of the Corporation and the Chief Executive Officer's evaluation of
individual executive officer performance, with final decisions on base salary
adjustments made in conjunction with the Chief Executive Officer.
The Board of Directors determines the base salary for the Chief Executive
Officer by: (1) examining the Corporation's performance against its preset
goals, (2) examining the Corporation's performance within the banking industry,
(3) evaluating the overall performance of the Chief Executive Officer, and (4)
comparing the base salary of the Chief Executive Officer to that of other chief
executive officers in the banking industry in the Corporation's market area.
Upon Donald V. Carter's death in June 1997, Mr. Cowee became President & Chief
Executive Officer of the Bank and the Corporation until his retirement in
January 1998. Mr. Sorensen served in those capacities from February 1998 until
his resignation effective December 18, 1998. Mr. Cushman was hired by the Bank
in March of 1998. He was promoted by the Board of Directors in February 1999 to
President & Chief Executive Officer of the Bank and the Corporation with a
salary of $140,000 per annum. Other terms and conditions are expected to be
contained in an employment agreement currently under discussion between the
Compensation Committee of the Corporation and Mr. Cushman.
The Corporation does not have a formal bonus plan. However, at its
discretion, the Board of Directors can, and has since 1990, set aside a
percentage of the after-tax profits of the Bank (approximately 6% for 1998),
which is then divided by the Chief Executive Officer among the top three most
highly compensated executive officers. This is not a formal bonus plan and there
is no guarantee that such bonuses will be granted in the future.
During 1988, the Board of Directors acted as the Corporation's Compensation
Committee. As of April 1, 1999, the members of the Compensation Committee were
Messrs. Pierce, Ghidinelli and Ludden.
14
<PAGE>
[The following descriptive data is supplied in accordance with Rule 304(d)
of Regulation S-T]
Period Ending
----------------------------------------------------------
Index 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------
North Valley Bancorp 100.00 79.39 112.26 131.12 199.88 157.09
S&P 500 100.00 101.32 139.39 171.26 228.42 293.69
Northern California
Proxy 100.00 97.87 148.40 160.71 319.27 306.78
- ------------
(1) Assumes $100 invested on December 31, 1993 in the Corporation's Common
Stock, the S&P 500 composite stock index and SNL Securities' Northern
California Proxy index, with reinvestment of dividends.
(2) Source: SNL Securities
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Through its banking subsidiary, the Corporation has had and expects in the
future to have banking transactions, including loans and other extensions of
credit, in the ordinary course of its business with many of the Corporation's
Directors, executive officers, holders of five percent or more of the
Corporation's Common Stock and members of the immediate family of any of the
foregoing persons, including transactions with corporations or organizations of
which such persons are directors, officers or controlling shareholders, on
substantially the same terms (including interest rates and collateral) as those
prevailing at the time for comparable transactions with others, except that all
employees (other than executive officers or Directors of the Corporation or its
subsidiaries) are granted rate concessions on installment loans and are not
charged origination fees on residential real estate loans. Management believes
that in 1998 such loan transactions did not involve more than the normal risk of
collectibility or present other unfavorable features.
J. M. "Mike" Wells, Jr., the General Counsel of the Corporation, Secretary
of the Board of Directors and Director, is an attorney in the law firm of Wells,
Small, Selke & Graham, a Law Corporation, which contracted to provide
professional legal services to the Corporation and the Bank during 1998 and
expects to provide professional legal services to them in the future. Wells,
Small, Selke & Graham, a Law Corporation, received from the Bank in 1998 a total
of $42,850 in legal fees and costs reimbursed.
15
<PAGE>
PROPOSAL NO. 2
APPROVAL OF 1999 DIRECTOR STOCK OPTION PLAN
On April 1, 1999, the Board Directors adopted the North Valley Bancorp 1999
Director Stock Option Plan (the "1999 Director Stock Option Plan"), pursuant to
which all members of the Board of Directors are eligible for the grant of
nonstatutory stock options to purchase shares of the Corporation's Common Stock.
Nonstatutory stock options are options not intended to qualify as incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.
The 1999 Director Stock Option Plan is intended to replace the existing
North Valley Bancorp 1989 Director Stock Option Plan, as amended (the "1989
Director Plan"). Assuming a favorable vote on the 1999 Director Stock Option
Plan by the shareholders, the Board of Directors intends to terminate the 1989
Director Plan at its next scheduled meeting.
The 1989 Director Plan was approved by the shareholders of the Corporation
at the 1990 Annual Meeting of Shareholders and provides for the grant of
nonstatutory stock options to all members of the Board of Directors, including
employees who are Directors. Under the 1989 Director Plan, each non-employee
member of the Board of Directors has automatically received every January the
grant of a nonstatutory option to purchase 1,000 shares of the Corporation's
Common Stock. As of April 1, 1999, the Corporation had outstanding options to
purchase 54,156 shares of the Common Stock and 96,682 shares remained available
for grants under the 1989 Director Plan. The contemplated termination of the
1989 Director Plan will not adversely affect any option previously granted or
the rights of any holder of such option.
At the Annual Meeting, the shareholders are being requested to ratify and
approve the adoption of the 1999 Director Stock Option Plan. This summary
description of the 1999 Director Stock Option Plan is qualified in its entirety
by reference to the 1999 Director Stock Option Plan itself, a copy of which
attached to this Proxy Statement.
Purpose
The 1999 Director Stock Option Plan is intended to further the growth,
development and financial success of the Corporation and its subsidiaries by
providing additional incentives to members of the Board of Directors, including
employees who are Directors, and by assisting them in acquiring shares of the
Corporation's Common Stock, which will allow them to benefit directly from the
Corporation's growth, development and financial success.
Administration
The 1999 Director Stock Option Plan will be administered by the Board of
Directors. All grants of options will be at the discretion of the Board of
Directors. The Board of Directors will have the authority to delegate some or
all of its duties in administering the 1999 Director Stock Option Plan to a
committee of the Board of Directors appointed for this purpose, composed of not
less than two members of the Board of Directors who qualify as non-employee
directors. The body administering the 1999 Director Stock Option Plan is
generally authorized to administer such Plan in all respects, subject to the
express terms of such Plan, including the full power to make all determinations
necessary or advisable for its administration.
Eligibility for Participation
All members of the Board of Directors, including employees of the
Corporation who are Directors, are eligible to participate in the 1999 Director
Stock Option Plan. As of April 1, 1999, there were eight Directors eligible to
participate in the 1999 Director Stock Option Plan.
Number of Shares Subject to the Plan
Shares covered by options granted pursuant to the 1999 Director Stock
Option Plan are authorized but unissued shares of the Corporation's Common
Stock. The maximum aggregate number of shares of Common Stock which may be
optioned and sold under the 1999 Director Stock Option Plan is equal to
16
<PAGE>
10 percent of the total shares of the Corporation's Common Stock issued and
outstanding from time to time. As of April 1, 1999, there were a total of
3,699,556 shares of Common Stock issued and outstanding, so the maximum number
of shares available for the grant of options as of such date was 369,956.
The 1999 Director Stock Option Plan includes provisions for adjustment of
and changes in the shares reserved for issuance in the event that the shares of
Common Stock of the Corporation are changed into or exchanged for a different
number or kind of shares of stock or other securities of the Corporation or
other corporation, whether by reason or reorganization, merger, consolidation,
recapitalization, reclassification, stock dividend, stock split or other
changes.
The 1999 Director Stock Option Plan also includes provisions regarding the
sale, dissolution or liquidation of the Corporation and any reorganization,
merger or consolidation in which the Corporation is not the surviving or
resulting corporation. If the Corporation is not the surviving or resulting
corporation, the Board of Directors shall have the power to terminate all
options under the 1999 Director Stock Option Plan, provided that each optionee
shall have the right prior to the effective date of such sale, dissolution,
liquidation, reorganization, merger or consolidation to exercise any outstanding
option in full, without regard to the option's vesting schedule.
Terms and Conditions of Options
Options granted under the 1999 Director Stock Option Plan may only be
nonstatutory stock options. Each option will be 20 percent exercisable or
"vested" immediately upon the date of grant and will become further vested at
the rate of 20 percent on each of the first four anniversary dates thereafter.
Options are exercisable for a period of ten years after the date of grant. The
exercise price for the options will be 85 percent of the fair market value of
the shares on the date of grant, as determined by the Board of Directors. So
long as the Corporation's Common Stock is traded on the NASDAQ National Market
System, such fair market value shall be equal to the last transaction price
quoted for such date by the NASDAQ National Market System.
Each option granted under the 1999 Director Stock Option Plan will have a
termination date of ten years after the date of grant. In addition, each option
automatically expires three months after termination of service as a Director
other than for cause, except that in the case of termination of service due to
mandatory retirement, death or disability, an option will remain in effect
unchanged. If a Director is removed from the Board of Directors for cause, the
option will expire 30 days after such termination of service.
On April 12, 1999, the Board of Directors granted an option for 30,000
shares of Common Stock to each of the non-employee Directors of North Valley
Bancorp, namely: Rudy V. Balma, William W. Cox, Dan W. Ghidinelli, Thomas J.
Ludden, Kelly V. Pierce, Douglas M. Treadway and J.M. ("Mike") Wells, Jr. The
exercise price for each of such options was set at $10.31. The Company has
entered into a stock option agreement with each such optionee, dated as of April
12, 1999, subject to the terms and conditions set forth in the 1999 Director
Stock Option Plan. The exercise of such options is conditioned upon the approval
of the 1999 Director Stock Option Plan by the shareholders.
Amendment and Termination of the Plan
The Board of Directors may amend, suspend or terminate the 1999 Director
Stock Option Plan at any time and for any reason. Any amendment is subject to
the approval of the shareholders of the Corporation only to the extent required
by applicable laws or regulations. No amendment or termination may adversely
affect the rights of an optionee under a previously granted option, without the
optionee's consent.
Tax Information
No taxable income is recognized by an optionee upon the grant of a
nonstatutory stock option under the 1999 Director Stock Option Plan. The
exercise of a nonstatutory stock option granted under the 1999 Director Stock
Option Plan results in the realization of ordinary income to the optionee in an
amount equal to the difference between the exercise price and the fair market
value of the shares on the date of
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exercise. For federal income tax purposes, the Corporation will be entitled to
a compensation expense deduction in the same amount. The 1999 Director Stock
Option Plan allows an optionee to satisfy any withholding tax requirement in
connection with the exercise of an option by the withholding of shares from the
total number of shares issuable upon exercise of the option or by the delivery
to the Corporation of shares of Corporation Common Stock that have been held by
the optionee for at least six months. Any such arrangement must be acceptable
to the Corporation.
Required Vote
An affirmative vote of a majority of the shares of the Corporation's Common
Stock represented and voting at the Annual Meeting is required for approval of
the 1999 Director Stock Option Plan.
Recommendation of Management
The Board of Directors believes that this proposal is in the best interests
of the Corporation and its shareholders and unanimously recommends a vote "FOR"
its ratification and approval.
PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO
THE NORTH VALLEY BANCORP 1998 EMPLOYEE STOCK INCENTIVE PLAN
The North Valley Bancorp 1998 Employee Stock Incentive Plan (the "Stock
Incentive Plan") was adopted by the Corporation's Board of Directors on February
17, 1998, subject to the approval of the Corporation's shareholders which was
obtained at the 1998 Annual Meeting of Shareholders held on May 26, 1998. The
Stock Incentive Plan was effective February 17, 1998.
Article 8 of the Stock Incentive Plan provides for the payment of
director's fees in shares of Corporation Common Stock. The provisions of Article
8 became effective upon a determination by the Board of Directors, as
contemplated by Article 8, that such provisions should be implemented.
Accordingly, on September 21, 1998, each of the seven non-employee Directors was
awarded 300 shares of Common Stock. The market price of such shares on that date
was $27.50.
The Board of Directors of the Corporation proposes to amend Section 8.2 of
the Stock Incentive Plan in regard to the annual award of shares of Common Stock
to non-employee Directors. The purpose of the proposed amendment is to ensure
that the economic value of the shares to be awarded each year will be protected
against dilution caused by the payment of stock dividends, reclassifications,
recapitalizations or similar occurrences. This was the intent of the Board of
Directors when the Stock Incentive Plan was originally adopted, but was
inadvertently omitted from the wording of the Stock Incentive Plan as adopted
and then approved by the shareholders.
Summary of the Stock Incentive Plan
The following is a summary of the material provisions of the Stock
Incentive Plan. A copy of the Stock Incentive Plan may be obtained without
charge by writing to J. M. Wells, Jr., Secretary of the Corporation c/o North
Valley Bancorp, 880 East Cypress Avenue, Redding, California 96002. Shareholders
are urged to read the Stock Incentive Plan in its entirety. This summary is
qualified entirely by reference to the Stock Incentive Plan. Any capitalized
terms which are used in this summary description but not defined herein have the
meanings assigned to them in the Stock Incentive Plan.
The Stock Incentive Plan provides for awards in the form of options (which
may constitute incentive stock options or non-statutory stock options to key
employees and also provides for the award of shares of Common Stock to outside
directors. The shares of Common Stock authorized to be granted as options under
the Stock Incentive Plan consist of 300,000 shares, increased in an amount equal
to 2% of shares outstanding each year, commencing January 1, 1999. The Stock
Incentive Plan defines "key employee" as a common-law employee of the
Corporation, its parent or any subsidiary of the Corporation, an "outside
director", or a consultant or advisor who provides services to the Corporation,
its parent or any subsidiary of the Corporation. For purposes of the Stock
Incentive Plan, an "outside director" is defined as a
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member of the Board who is not a common-law employee of the Corporation, its
parent or any subsidiary of the Corporation. The Stock Incentive Plan is
intended to aid the Corporation in its efforts to attract and retain such
individuals.
Each outside director is eligible to receive a stock award of 300 shares of
Common Stock of the Corporation as part of his or her annual retainer payment
from the Corporation. Such stock award shall be fully vested when granted to the
outside director.
The Stock Incentive Plan is administered by a Committee appointed by the
Board of Directors. As of April 1, 1999, the Committee members are Rudy V.
Balma, Michael J. Cushman, William W. Cox, Dan W. Ghidinelli, Thomas J. Ludden,
Kelly V. Pierce, Douglas M. Treadway and J. M. Wells, Jr. The Committee shall
have membership composition which enables the Stock Incentive Plan to qualify
under SEC Rule 16b-3 with regard to the grant of Options or other rights under
the Stock Incentive Plan to persons who are subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Subject to the
requirements of applicable law, the Committee may designate persons other than
members of the Committee to carry out its responsibilities and may prescribe
such conditions and limitations as it may deem appropriate, except that the
Committee may not delegate its authority with regard to the selection for
participation of or the granting of Options or determining awards or other
rights under the Stock Incentive Plan to persons subject to Section 16 of the
Exchange Act.
The award of Common Stock to outside directors is fully taxable at the time
of the grant. The Corporation receives a deduction for this amount. If the
outside director disposes of the Common Stock prior to 12 months after the date
of grant, any gain (or loss) will be a short-term capital gain. If the shares
are held for longer than 12 months, any gain (or loss) will be taxed at
long-term capital gain rates.
Proposed Amendment
Section 8.2 of the Stock Incentive Plan presently reads as follows:
"8.2 Receipt of Stock Awards. An Outside Director shall receive a Stock
Award of 300 shares of Common Stock as part of his or her annual retainer
payment from the Company. Such Stock Awards shall be issued under the Plan.
Such an Award shall be fully vested when granted to the Outside Director."
The proposed amendment of Section 8.2, which is subject to approval by the
shareholders of the Corporation, would add the following wording at the end
thereof:
"In the event the shares of Common Stock shall be changed into or
exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation (whether by reason of
reorganization, merger, consolidation, recapitalization, reclassification,
split-up, combination of shares, or otherwise), or if the number of shares
of Common Stock shall be increased through the payment of a stock dividend,
the Board shall substitute for or add to each share of Common Stock
theretofore appropriated or thereafter subject or which may become subject
to a Stock Award under this Section 8.2, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock
shall be so changed, or for which each share shall be exchanged, or to
which each such share shall be entitled, as the case may be. Such
adjustments shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No right to fractional shares of
Common Stock shall result from any adjustment in Stock Awards pursuant to
this Section 8.2. In case of any such adjustment, the shares shall be
rounded down to the nearest whole share."
Required Approval
Approval of the proposed amendment of Section 8.2 of the Stock Incentive
Plan requires the affirmative vote of the holders of a majority of the shares
present or represented by proxy and voting at the Meeting.
Recommendation of Management
The Board of Directors believes that this proposal is in the best interests
of the Corporation and its shareholders, and unanimously recommends a vote "FOR"
its approval.
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PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP, which served the Corporation as
independent public accountants for the 1998 fiscal year, has been selected by
the Audit Committee of the Board of Directors of the Corporation as the
Corporation's independent public accountants for the 1999 fiscal year. Deloitte
& Touche LLP has no interest, financial or otherwise, in the Corporation. All
Proxies will be voted for the ratification of the appointment of Deloitte &
Touche LLP, unless authority to vote for the ratification of such selection is
withheld or an abstention is noted. If Deloitte & Touche LLP should for any
reason decline or be unable to act as independent public accountants, the
Proxies will be voted for a substitute independent public accounting firm to be
designated by the Audit Committee.
Required Approval
The approval of the ratification of the appointment of Deloitte & Touche
LLP as the Corporation's independent public accountants for the 1999 fiscal year
requires the affirmative vote of the holders of a majority of the shares present
or represented by Proxy and voting at the Meeting.
Recommendation of Management
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Deloitte & Touche LLP.
A representative of Deloitte & Touche LLP is expected to attend the Meeting
and will have the opportunity to make a statement if he or she desires to do so
and respond to appropriate questions from shareholders present at the Meeting.
SHAREHOLDER PROPOSALS
The Corporation's 2000 Annual Meeting of Shareholders will be held on May
15, 2000. Shareholder proposals must be received by the Corporation no later
than December 17, 1999, to be considered for inclusion in the Proxy Statement
and Proxy for the 2000 Annual Meeting of Shareholders. Management of the
Corporation will have discretionary authority to vote proxies obtained by it in
connection with any shareholder proposal not submitted on or before the December
17, 1999, deadline.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the Meeting, but if such matters are properly presented to the Meeting,
Proxies solicited hereby will be voted in accordance with the judgment of the
persons holding such Proxies. All shares represented by duly executed Proxies
will be voted at the Meeting.
By Order of the Board of Directors,
/s/ J.M. Wells, Jr.
J. M. ("Mike") Wells, Jr.,
Secretary
Redding, California
April 23, 1999
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ANNEX A
NORTH VALLEY BANCORP
1999 DIRECTOR STOCK OPTION PLAN
1. Purpose
The purpose of this North Valley Bancorp 1999 Director Stock Option Plan
(hereinafter the "Plan") is to provide a method whereby the members of the Board
of Directors (hereinafter the "Board") of North Valley Bancorp (hereinafter the
"Company") may acquire or increase their proprietary interests in the success of
the Company, thereby advancing the interests of the Company and its
shareholders, while providing an incentive for the recruitment and retention of
capable directors in the future.
2. Administration
The following provisions shall govern the administration of the Plan:
(a) The Plan shall be administered by the Board of Directors of North
Valley Bancorp (hereinafter the "Board"), which may delegate some or all of
its duties in administering the Plan to a committee of the Board appointed
for this purpose composed of two (2) or more members of the Board who
qualify as "non-employee directors" as defined in Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Hereinafter, the body administering
the Plan, whether it be the Board or any committee so appointed, shall be
referred to as the "Committee". The Board may, from time to time, remove
members from or add members to the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board. The Board may designate a
Chairman and Vice-Chairman of the Committee from among the Committee
members. Acts of the Committee (i) at a meeting, held at a time and place
and in accordance with rules adopted by the Committee, at which a quorum of
the Committee is present and acting, or (ii) reduced to and approved in
writing by a majority of the members of the Committee, shall be the valid
acts of the Committee.
(b) The Company shall effect the grant of options under the Plan by the
execution of stock option agreements in a form or forms approved by the
Committee. Subject to the express terms of the Plan, the Committee shall
have full power to construe the Plan and the terms of any option granted
under the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan or such options, and to make all other determinations
necessary or advisable for the Plan's administration; provided, however,
that the Committee shall exercise no discretion with respect to the grant
of options under the Plan or otherwise alter or amend the terms of any
option so that an option or the terms of an option fail to comply with the
terms and conditions in Section 5 hereof.
3. Eligibility
All members of the Board (including employee-directors) shall be eligible
to receive options under this Plan; provided, however, that no option may be
granted to a member of the Board who, at the time of such grant, owns Common
Stock of the Company possessing more than ten percent (10%) of the total
combined voting power or value of all classes of stock of the Company or any of
its affiliates. All stock options granted pursuant to the Plan shall be
nonstatutory stock options. A nonstatutory stock option is an option not
intended to qualify as an incentive stock option within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
4. The Shares
Shares offered under the Plan shall be authorized but unissued shares of
the Company's Common Stock. The maximum aggregate number of shares of Common
Stock which may be optioned and sold under the Plan shall equal ten percent
(10%) of the total shares of the Company's no par value Common Stock issued and
outstanding from time to time (hereinafter the "Shares"), or the number and kind
of shares of stock or other securities which shall be substituted for such
Shares or to which such shares shall be adjusted as provided in Section 6
hereof. Upon the expiration or termination for any reason of an
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outstanding option under the Plan which has not been exercised in full, all
unissued Shares thereunder shall again become available for the grant of
options under the Plan. The Company, during the term of the Plan, shall at all
times reserve and keep available sufficient Shares to satisfy the requirements
of the Plan.
5. Grant, Terms and Conditions of Options
Options granted pursuant to the Plan shall be subject to the following
terms and conditions:
(a) Grant of Options. The Committee shall, from time to time, at its
discretion, (i) select the members of the Board who are to receive grants
of options under the Plan, and (ii) determine the number of Shares subject
to such grants and any other features and terms and conditions of such
grants not expressly provided for in the Plan. All stock options granted
pursuant to the Plan shall be nonstatutory stock options. Each grant of an
option under the Plan shall be evidenced by a stock option agreement
executed by the optionee and the Company. Each option shall be subject to
all applicable terms and conditions of the Plan and may be subject to any
other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a stock option
agreement. The provisions of the various stock option agreements entered
into under this Plan need not be identical.
(b) Option Prices. The purchase price under each option shall be
eighty-five percent (85%) of the fair market value of the Shares subject
thereto on the date the option is granted, as such value is determined by
the Committee as follows:
(i) If the Company's Common Stock was traded over-the-counter
on the date in question and was traded on the NASDAQ National Market
System, then the fair market value shall be equal to the last
transaction price quoted for such date by the NASDAQ National Market
System;
(ii) If the Company's Common Stock was traded on a stock
exchange on the date in question, then the fair market value shall be
equal to the closing price reported by the applicable composite
transactions report for such date; and
(iii) If neither of the foregoing provisions is applicable,
then the fair market value shall be determined by the Committee in good
faith on such basis as it deems appropriate.
In all cases, the determination of fair market value by the Committee shall be
conclusive and binding on all persons.
(c) Duration and Exercise of Options. Each option shall be for a ten
(10) year term and shall vest twenty percent (20%) immediately upon the
date of grant and shall vest an additional twenty percent (20%) on each of
the first four (4) anniversary dates thereafter; provided however, that
each option that is not fully vested shall become one hundred percent
(100%) vested and exercisable in the event of a sale, dissolution or
liquidation of the Company or a merger or consolidation in which the
Company is not the surviving or resulting corporation, as described in
Section 6 hereof. The termination of the Plan shall not alter the maximum
duration, the vesting provisions, or any other term or condition of any
option granted prior to the termination of the Plan.
To the extent the right of an optionee to purchase Shares has vested
under a stock option agreement, options may be exercised from time to time
by delivering payment therefor in cash, certified check, official bank
check, or the equivalent thereof acceptable to the Company, together with
written notice to the Secretary of the Company, identifying the option or
part thereof being exercised and specifying the number of Shares for which
payment is being tendered. An optionee may also exercise an option by
electing to deliver shares of Company Common Stock that have been held by
the optionee for at least six (6) months or have the Company withhold from
those Shares that would otherwise be received upon exercise of the option.
Such an election is subject to approval or disapproval by the Committee,
and the timing of the election must satisfy the requirements of Rule 16b-3.
The Company shall deliver to the optionee, which delivery shall be not less
than fifteen (15) days and not more than thirty (30) days after the giving
of such notice, without transfer or issue tax
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to the optionee (or other person entitled to exercise the option), at the
principal office of the Company, a certificate or certificates for such
Shares dated the date the options were validly exercised; provided,
however, that the time of such delivery may be postponed by the Company for
such period as may be required for it with reasonable diligence to comply
with any requirements of law.
(d) Termination of Tenure on the Board. Unless the Committee determines
otherwise, upon the termination of an optionee's T status as a member of
the Board, his or her rights to exercise an option then held shall be only
as follows:
Mandatory Retirement: If an optionee's tenure on the Board is
terminated by reason of compliance with any mandatory retirement age
requirement of the Board, his or her rights to exercise an option
existing on the date of such termination shall not change or otherwise
be diminished solely by virtue of such retirement.
Disability: If an optionee's tenure on the Board is terminated
by disability, the rights of such optionee or such optionee's qualified
representative (in the event of the optionee's mental disability) to
exercise an option existing on the date of such termination shall not
change or otherwise be diminished solely by virtue of such disability.
Death: If an optionee's tenure on the Board is terminated by
death, such optionee's estate shall have the right for a period of
twelve (12) months following the date of such death to exercise the
option without regard to the vesting provisions of Section 5(c) hereof,
provided the actual date of exercise is in no event after the
expiration of the term of the option. An optionee's "estate" shall mean
the optionee's legal representative or any person who acquires the
right to exercise an option by reason of the optionee's death.
Cause: If a member of the Board is determined by the full
Board to have committed an act of embezzlement, fraud, dishonesty,
breach of fiduciary duty to the Company, or to have deliberately
disregarded the rules of the Company which resulted in loss, damage or
injury to the Company, or if an optionee makes any unauthorized
disclosure of any of the secrets or confidential information of the
Company, induces any client or customer of the Company to break any
contract with the Company or induces any principal for whom the Company
acts as agent to terminate such agency relations, or engages in any
conduct which constitutes unfair competition with the Company, or if an
optionee is removed from any office of the Company by any bank
regulatory agency, the optionee shall have the right for a period of
thirty (30) days following the date of such termination to exercise the
option to the extent the optionee was entitled to exercise such option
on the date of the optionee's termination of tenure on the Board,
provided the actual date of exercise is in no event after the
expiration of the term of the option. In making such determination, the
Board shall act fairly and shall give the optionee an opportunity to
appear and be heard at a hearing before the full Board and present
evidence on the optionee's behalf.
Other Reasons: If an optionee's tenure on the Board is
terminated for any reason other than those mentioned above under
"Mandatory Retirement," "Disability," "Death" and "Cause," the optionee
may, within three (3) months following such termination, exercise the
option to the extent such option was exercisable by the optionee on the
date of such termination; provided the date of exercise is in no event
after the expiration of the term of the option.
(e) Use of Proceeds from Stock. Proceeds from the sale of Shares
pursuant to the exercise of options granted under the Plan shall constitute
general funds of the Company.
(f) Rights as a Shareholder. An optionee shall have no rights as a
shareholder with respect to any Shares until the date of issuance of a
stock certificate for such Shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date of
such issuance, except as provided in Section 6 hereof.
(g) Withholding. The Company shall have the right to condition the
issuance of shares upon exercise of an option upon payment by the optionee
of any income taxes required to be withheld under federal, state or local
tax laws or regulations in connection with such exercise. To the extent
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withholding is required, such payment may be made by any method of payment
acceptable to the Company, including the withholding of Shares from the
total number of Shares issuable upon exercise or the delivery to the
Company of shares of Company Common Stock that have been held by the
optionee for at least six (6) months. Any election to have Shares withheld
or to deliver Shares must satisfy the requirements of Rule 16b-3.
(h) Other Terms and Conditions. Options may also contain such other
provisions, which shall not be inconsistent with any of the foregoing
terms, as the Committee shall deem appropriate. No option, however, nor
anything contained in the Plan, shall confer upon any optionee any right to
continue to serve on the Board.
6. Adjustment Of, and Changes In, The Shares
In the event the shares of Common Stock of the Company, as presently
constituted, shall be changed into or exchanged for a different number or kind
of shares of stock or other securities of the Company or of another corporation
(whether by reason of reorganization, merger, consolidation, recapitalization,
reclassification, split-up, combination of shares, or otherwise), or if the
number of shares of Common Stock of the Company shall be increased through the
payment of a stock dividend, the Board shall substitute for or add to each
Shares of Common Stock of the Company theretofore appropriated or thereafter
subject or which may become subject to an option under the Plan, the number and
kind of shares of stock or other securities into which each outstanding share of
Common Stock of the Company shall be so changed, or for which each share shall
be exchanged, or to which each such share shall be entitled, as the case may be.
In addition, the Board shall make appropriate adjustment in the number and kind
of Shares as to which outstanding options, or portions thereof then unexercised,
shall be exercisable, so that any optionee's proportionate interest in the
Company by reason of his or her rights under unexercised portions of such
options shall be maintained as before the occurrence of such event. Such
adjustment in outstanding options shall be made without change in the total
price to the unexercised portion of the option and with a corresponding
adjustment in the option price per share.
In the event of a sale, dissolution or liquidation of the Company or a
merger or consolidation in which the Company is not the surviving or resulting
corporation, the Board shall have the power to cause the termination of every
option outstanding hereunder; except that the surviving or resulting corporation
may, in its absolute and uncontrolled discretion, assume all outstanding options
under the Plan; provided, however, that in all events the optionee shall have
the right immediately prior to such sale, dissolution, liquidation, or merger or
consolidation in which the Company is not the surviving or resulting corporation
to notification thereof as soon as practicable and, thereafter, to exercise the
option without regard to the annual vesting provisions of Section 5(c) hereof.
This right shall be conditioned upon the execution of a final plan of
dissolution or liquidation or a definitive agreement of merger or consolidation.
In the event of an offer by any person or entity to all shareholders of the
Company to purchase any or all shares of Common Stock of the Company (or shares
of stock or other securities which shall be substituted for such shares or to
which such shares shall be adjusted as provided in Section 6 hereof), any
optionee under this Plan shall have the right upon the commencement of such
offer to exercise the option and purchase shares subject thereto to the extent
of any unexercised or unvested portion of such option.
No right to purchase fractional shares shall result from any adjustment in
options pursuant to this Section 6. In case of any such adjustment, the shares
subject to the option shall be rounded down to the nearest whole share. Notice
of any adjustment shall be given by the Company to each holder of an option
which was in fact so adjusted and such adjustment (whether or not such notice
is given) shall be effective and binding for all purposes of the Plan.
To the extent the foregoing adjustments relate to stock or securities of
the Company, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided in this Section 6, an optionee shall have no
rights by reason of any of the following events: (i) subdivision or
consolidation of shares of stock of any class issued by the Company; (ii)
payment by the Company of any stock dividend; (iii) any other increase or
decrease in the
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number of shares of stock of any class; (iv) any dissolution, liquidation,
merger, consolidation, spin-off or acquisition of assets or stock of another
corporation by the Company. Any issue by the Company of shares of stock of any
class, or securities convertible into shares of any class, shall not affect the
number of price of shares of Common Stock subject to the option, and no
adjustment by reason thereof shall be made.
The grant of an option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
7. Listing or Qualification of Shares
All options granted under the Plan are subject to the requirement that if
at any time the Committee shall determine in its discretion that the listing or
qualification of the Shares subject thereto on any securities exchange or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of or in connection with the
issuance of the Shares under the option, the option may not be exercised in
whole or in part unless such listing, qualification, consent or approval shall
have been effected or obtained, free of any condition not acceptable to the
Committee.
8. Amendment and Termination of the Plan
The Board shall have complete power and authority to amend, suspend or
terminate the Plan at any time and for any reason. An amendment of the Plan
shall be subject to the approval of the shareholders of the Company only to the
extent required by applicable laws or regulations. No termination, modification
or amendment of the Plan may, without the consent of any member of the Board to
whom such option was previously granted under the Plan, adversely effect the
rights of such member of the Board under such option.
9. Effectiveness and Term of the Plan
The Plan, as set forth herein, shall become effective as of the date the
Plan is adopted by the Board (the "Effective Date"). The Plan shall also be
submitted to the shareholders of the Company for approval in the manner required
by applicable law or regulation. Such shareholder approval shall consist of
approval by the affirmative votes of the holders of a majority of the shares of
Company Common Stock present, or represented, and entitled to vote at a meeting
duly held in accordance with applicable law, or by the written consent of the
holders of a majority of the outstanding Company Common Stock entitled to vote.
The exercise of any options granted pursuant to the Plan shall be conditioned
upon the approval of the Plan by the shareholders of the Company and compliance
with any applicable federal and state securities laws. The Plan shall continue
in effect for a term of ten (10) years after the Effective Date, unless sooner
terminated under Section 8 of the Plan.
10. Securities Law Compliance and Notice of Sale
No Shares shall be purchased upon the exercise of any option unless and
until all of the then applicable requirements of any (i) regulatory agencies
having jurisdiction and (ii) any exchanges upon which the Common Stock of the
Company may be listed shall have been fully complied with. The Company shall
diligently endeavor to comply with all applicable securities laws before any
options are granted under the Plan and before any Shares are issued pursuant to
the exercise of such options.
11. Indemnification
To the extent permitted by applicable law in effect from time to time, no
member of the Board or the Committee shall be liable for any action or omission
of any other member of the Board of Committee nor for any act or omission on the
member's own part, excepting only the member's own willful misconduct or gross
negligence. The Company shall pay expenses incurred by, and satisfy a judgment
or fine rendered or levied against, a present or former director or member of
the Committee in any action against such person (whether or not the Company is
joined as a party defendant) to impose liability or a penalty
A-5
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on such person for an act alleged to have been committed by such person while a
director or member of the Committee arising with respect to the Plan or
administration thereof or out of membership on the Committee or by the Company,
or all or any combination of the preceding; provided, the director or Committee
merger was acting in good faith, within what such director or Committee member
reasonably believed to have been within the scope of his or her employment or
authority and for a purpose which he or she reasonable believed to be in the
best interests of the Company or its shareholders. Payments authorized
hereunder include amounts paid and expenses incurred in settlement any such
action or threatened action. This section does not apply to any action
instituted or maintained in the right of the Company by a shareholder or holder
of a voting trust certificate representing shares of the Company. The
provisions of this section shall apply to the estate, executor, administrator,
heirs, legatees or devisees of a director or Committee member, and the term
"person" as used in this section shall include the estate, executor,
administrator, heirs, legatees or devisees of such person.
12. Information to Optionees
The Company shall provide to each optionee during the period for which he
or she has one or more outstanding options, copies of all annual reports and all
other information which are provided to shareholders of the Company. The Company
shall not be required to provide such information to any optionee whose duties
in connection with the Company assure his or her access to equivalent
information.
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ANNEX B
PROXY NORTH VALLEY BANCORP PROXY
Proxy Solicited on Behalf of the Board of Directors
of North Valley Bancorp
for the Annual Meeting of Shareholders, May 17, 1999
The undersigned holder of Common Stock acknowledges receipt of the Notice
of Annual Meeting of Shareholders of North Valley Bancorp and the accompanying
Proxy Statement dated April 23, 1999, and revoking and heretofore given, hereby
constitutes and appoints Michael J. Cushman and Sharon L. Benson, and each of
them, each with full power of substitution, as attorneys and proxies to
represent and vote, as designated on the reverse side, all shares of Common
Stock of North Valley Bancorp (the "Corporation"), which the undersigned would
be entitled to vote at the Annual Meeting of Shareholders of the Corporation to
be held in Administration, North Valley Bank, 880 East Cypress Avenue, Redding,
California, on Monday, May 17, 1999, at 4:30 P.M., or at any postponement or
adjournment thereof, upon the matters set forth in the Notice of Annual Meeting
and Proxy Statement and upon such other business as may properly come before the
meeting of any postponement or adjournment thereof. All properly executed
proxies will be voted as indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS
NOMINATED BY THE BOARD OF DIRECTORS AND "FOR" PROPOSALS 2, 3 AND 4. WHEN THE
PROXY IS PROPERLY EXECUTED, SHARES REPRESENTED BY THE PROXY WILL BE VOTED "FOR"
THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS, "FOR" PROPOSALS
2, 3 AND 4, AND, IN THE DISCRETION OF THE PROXY HOLDERS, ON ALL OTHER MATTERS
WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY POSTPONEMENT OR ADJOURNMENT
THEREOF.
THIS PROXY IS SOLICITED BY, AND ON BEHALF OF, THE BOARD OF DIRECTORS OF THE
CORPORATION AND MAY BE REVOKED PRIOR TO ITS EXERCISE.
(Continued, and to be signed on the other side)
-FOLD AND DETACH HERE-
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<S> <C>
Please mark
your votes [X]
as this
WITHHOLD
FOR FOR ALL FOR AGAINST ABSTAIN
1. To elect as Directors the nominees [ ] [ ] 2. To approve adoption of the North [ ] [ ] [ ]
set forth below: Valley Bancorp 1999 Director Stock
Option Plan.
INSTRUCTION: To withhold authority to
vote for any individual nominee strike a 3. To approve an amendment of the North [ ] [ ] [ ]
line through the nominee's name in the Valley Bancorp 1998 Employee Stock
list below: Incentive Plan.
01 Rudy V. Balma, 02 William W. Cox, 03 4. To ratify the appointment Deloitte & [ ] [ ] [ ]
Michael J. Cushman, 04 Royce L. Friesen, Touche LLP as independent public
05 Dan W. Ghidinelli, 06 Thomas J. accountants of 1999.
Ludden, 07 Douglas M. Treadway, 08 J.M.
("Mike") Wells, Jr. 5. In their discretion the proxy holders are authorized to vote
upon such other business as may properly come before the meeting.
I PLAN TO ATTEND THE MEETING [ ]
Signature(s) __________________________________________________________________________________________ Date _______________, 1999
Please mark, date and sign exactly as your name(s) appear(s) above. When signing as attorney, executor, administrator, trustee or
guardian, please give full title. If one or more than one Trustee, all should sign. WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING,
PLEASE SIGN AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE PAID ENVELOPE.
-FOLD AND DETACH HERE AND READ THE REVERSE SIDE-
----------------------------
VOTE BY TELEPHONE
QUICK *** EASY *** IMMEDIATE
----------------------------
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free 1-800-840-1208 on a touch tone telephone 24 hours a day-7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand.
You will be asked to enter a Control Number, which is located in the box in the lower right hand corner of this form.
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 1: To vote as the Board of Directors recommends on ALL proposals, press 1
- ------------------------------------------------------------------------------------------------------------------------------------
When asked, please confirm by Pressing 1.
- ------------------------------------------------------------------------------------------------------------------------------------
OPTION 2: If you choose to vote on each Proposal separately, press 0, You will hear these instructions:
- ------------------------------------------------------------------------------------------------------------------------------------
Proposal 1 - To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL nominees, press 9
To WITHHOLD FOR AN INDIVIDUAL nominee, Press 0 and listen to the instructions
Proposal 2 - To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
When asked, please confirm by Pressing 1.
The instructions are the same for all remaining proposals.
or
--
2. TO VOTE BY PROXY: Mark, sign and date your proxy card and return promptly in the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
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