CoBiz DEF 14A 2006
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Statement Pursuant to Section 14(a) of
April 13, 2006
Dear Fellow Shareholder:
This year's Annual Meeting of Shareholders of CoBiz Inc., a Colorado corporation (the "Company"), will be held at the Magnolia Ballroom, 817 17th Street, Denver, Colorado 80202 on May 18, 2006 at 8:00 a.m., M.D.T. You are cordially invited to attend. The matters to be considered at the meeting are described in the attached Proxy Statement and Notice of Annual Meeting of Shareholders. The Company's Board of Directors recommends that you vote: (i) FOR the election of management's thirteen nominees to serve as directors of the Company and (ii) FOR the ratification of the selection of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending December 31, 2006.
To be certain that your shares are voted at the Annual Meeting, whether or not you plan to attend in person, you should sign, date and return the enclosed proxy as soon as possible. Your vote is important.
At the Annual Meeting, I will review the Company's activities during the past year and its plans for the future. Shareholders will be given the opportunity to address questions to the Company's management. I hope you will be able to join us.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF COBIZ INC.:
Notice is hereby given that the Annual Meeting of Shareholders of CoBiz Inc., a Colorado corporation (the "Company"), will be held at 8:00 a.m., M.D.T., on May 18, 2006, at the Magnolia Ballroom, 817 17th Street, Denver, Colorado, for the following purposes:
The Board of Directors has fixed the close of business on March 29, 2006 as the record date for the meeting. Only shareholders of record as of the close of business on that date are entitled to notice of and to vote at the meeting.
We encourage you to take part in the affairs of your Company either by attending the meeting in person or by executing and returning the enclosed proxy.
Dated: April 13, 2006
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE PROXY CARD IN THE ENCLOSED ENVELOPE AT YOUR EARLIEST CONVENIENCE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE ANNUAL MEETING, AND IF YOU ARE PRESENT AT THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of CoBiz Inc., a Colorado corporation (the "Company"), for use at the Annual Meeting of Shareholders of the Company to be held on May 18, 2006, at 8:00 a.m., M.D.T., at the Magnolia Ballroom, 817 17th Street, Denver, Colorado 80202, and at any adjournment or postponement of the Annual Meeting.
This Proxy Statement and the accompanying form of proxy are first being transmitted or delivered to holders of the Company's common stock beginning on or about April 13, 2006, together with the Company's 2005 Annual Report to Shareholders.
The Company's principal executive offices are located at 821 17th Street, Denver, Colorado 80202.
Only shareholders of record at the close of business on March 29, 2006 are entitled to notice of and to vote at the Annual Meeting or at any adjournment or postponement thereof. As of that date, there were 22,455,311 shares of common stock outstanding. Each share is entitled to one vote. Cumulative voting is not permitted. Shares as to which the shareholder instructs the proxy to abstain from voting on any matter or withholds authority to vote for a director will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum at the Annual Meeting but as not voted for purposes of determining the approval of any such matter or the election of directors. If a broker submits a proxy that indicates the broker does not have discretionary authority as to certain shares to vote on one or more matters (a "broker non-vote"), those shares will be treated in the same manner as abstentions.
All Annual Meeting proxies, ballots and tabulations that identify individual shareholders are kept secret and no such document will be available for examination, nor will the identity or the vote of any shareholder be disclosed except as may be necessary to meet legal requirements and the laws of Colorado.
The Company's bylaws provide that the holders of not less than a majority of the shares entitled to vote at any meeting of shareholders, present in person or represented by proxy, will constitute a quorum. Directors are elected by plurality vote, which means that the thirteen nominees who receive the most votes will be elected. The proposal to ratify the selection of the Company's independent auditors will be approved if more votes are cast for the proposal than are cast against it. Accordingly, an abstention, a broker non-vote or a failure to submit a proxy (assuming a quorum is present) has no effect on the outcome of the election of directors or the votes on those proposals.
The Company will pay all expenses in connection with the solicitation of proxies. In addition to solicitation by mail, officers, directors and regular employees of the Company, who will receive no extra compensation for their services, may solicit proxies by telephone calls or facsimile transmissions.
A shareholder submitting the enclosed proxy may revoke it at any time before his or her vote is cast at the Annual Meeting by delivering to the Secretary of the Company a written notice of termination of the proxy's authority or of a duly executed proxy bearing a later date or by voting in person at the meeting. Shares entitled to vote and represented by properly completed proxies received prior to the Annual Meeting and not revoked will be voted in the manner directed by the shareholder granting such proxy. If no direction is made in the proxy, the shares represented by the proxy will be voted as recommended by the Board of Directors.
The business and affairs of the Company are managed under the direction of its Board of Directors. The Board has the authority under the Bylaws to set the number of directors, which may not be less than three. The number of directors is currently fixed at thirteen. Candidates for nomination to the Board are selected by the Governance and Nominating Committee, and recommended to the Board of Directors for approval, in accordance with the guidelines established by such Committee, taking into consideration the overall composition and diversity of the Board and areas of expertise that new Board members might be able to offer. Directors are elected by the shareholders at each Annual Meeting, to serve for a one-year term, which expires on the date of the next Annual Meeting.
Steven Bangert, Michael B. Burgamy, Jerry W. Chapman, Thomas M. Longust, Jonathan C. Lorenz, Evan Makovsky, Harold F. Mosanko, Howard R. Ross, Noel N. Rothman, Timothy J. Travis, Mary Beth Vitale and Mary M. White are the twelve incumbent directors who were elected at the 2005 Annual Meeting of Shareholders and are being nominated for re-election at this year's Annual Meeting. In January 2006, based on the recommendation of the Board's Governance and Nominating Committee, the Board expanded its size to thirteen and appointed Morgan Gust as director. Mr. Gust was recommended to the Governance and Nominating Committee for consideration by a non-management director of the Company.
The Board has determined that directors Burgamy, Chapman, Gust, Longust, Ross, Rothman, Travis, Vitale and White qualify as independent directors under the Nasdaq listing standards as currently in effect. Directors are encouraged but are not required to attend the Annual Meeting. Last year, all twelve incumbent directors attended the Annual Meeting.
Each of the nominees standing for re-election has indicated a willingness to serve, but in case any of them is not a candidate at the Annual Meeting, which is not presently anticipated, the persons named as proxies in the enclosed form of proxy may vote for a substitute nominee at their discretion.
The Board of Directors recommends a vote FOR the election of these directors.
Information regarding director nominees is set forth below:
The Board of Directors has appointed Deloitte & Touche LLP as the Company's independent accountants for the year ending December 31, 2006. Deloitte & Touche LLP has no relationship with the Company other than that arising from its engagement as independent accountants. See "Relationship with Independent Public Accountants" below. Representatives of Deloitte & Touche LLP will be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote FOR the ratification of the appointment of Deloitte & Touche LLP as the Company's independent accountants for the year ending December 31, 2006.
The Board of Directors of the Company has standing Executive, Audit, Governance and Nominating and Compensation Committees.
The Company maintains an Internet website located at www.cobizinc.com on which, among other things, the Company makes available, free of charge, various reports that it files with or furnishes to the Securities and Exchange Commission ("SEC"), including its Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. These reports are made available as soon as reasonably practicable after they are filed with or furnished to the SEC. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company has also made available on its website its Corporate Governance Guidelines and its Code of Conduct and Ethics, as well as the charters for its Audit Committee, Governance and Nominating Committee and Compensation Committee. To access these materials, visit the Company's website at www.cobizinc.com and select "Investor Relations," then select "Corporate Governance," and then select the name of the document you wish to view. The content on any website referred to in this filing is not incorporated by reference into this filing unless expressly noted otherwise.
The Executive Committee is authorized to exercise certain of the powers of the Board of Directors, subject to ratification by the full Board of Directors, and meets as needed, usually in situations where it is not feasible to take action by the full Board of Directors. The Executive Committee is comprised of Messrs. Rothman, Lorenz and Bangert.
The Audit Committee operates pursuant to a written Charter adopted by the Company's Board of Directors, a copy of which is attached as Appendix A to this Proxy Statement. The Audit Committee reports to the Board of Directors and has the responsibility to:
The Audit Committee consists of three members, Messrs. Burgamy and Chapman and Ms. Vitale, all of whom are "independent" under the Nasdaq listing standards currently in effect. The Board of Directors has designated Mr. Chapman and Ms. Vitale each as an "audit committee financial expert" as defined in Item 401(h)(2) of Regulation S-K. The Board of Directors has determined that the Committee members do not have any relationship to the Company that may interfere with the exercise of independent judgment in carrying out their responsibilities. None of the Committee members are current officers or employees of the Company or its affiliates.
The Governance and Nominating Committee has the responsibility to:
When evaluating whether an incumbent director should be nominated for reelection, the Governance and Nominating Committee reviews the director's overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance. When searching for new director candidates, the Governance and Nominating Committee canvasses its network of professional contacts to compile a list of potential candidates and may also engage a professional search firm if it deems appropriate. The Governance and Nominating Committee then meets to discuss and consider each candidate's qualifications and selects by majority vote a nominee to recommend to the full Board. The Governance and Nominating Committee will consider individuals recommended by a shareholder of the Company to serve on the Board. For a description of the procedures for nominating a candidate to the Board and the minimum qualifications for Board membership, please see "Shareholder Recommendations of Director Nominees" below.
Each member of the Governance and Nominating Committee must meet the independence requirements of the Nasdaq listing standards and any other applicable laws, rules and regulations governing independence, as determined by the Board. The Governance and Nominating Committee currently consists of Mr. Longust and Ms. White, each of whom is "independent" under the listing standards currently in effect.
The Compensation Committee assists the Board in the discharge of its responsibilities relating to the fair and competitive compensation of the executives and other key employees of the Company, and in connection with the Company's employee benefit plans. The Compensation Committee has responsibility to:
The Compensation Committee is comprised of Messrs. Rothman and Travis, each of whom is independent under the Nasdaq listing standards currently in effect.
No member of the Compensation Committee was at any time during 2005, or at any other time, an officer or employee of the Company or any of its subsidiaries. Furthermore, no executive officer of the Company served on the compensation committee or as a director of any other entity that had an executive officer who served as a director or on the Compensation Committee of the Company.
The Bank has invested or committed to invest in several licensed Small Business Investment Companies ("SBIC") in which certain directors (including members of the Compensation Committee) and executive officers of the Company also own interests. These investments and the interests of the directors and executive officers in the SBICs are described below.
In July 1997, the Bank committed to purchase up to $500,000 of limited partnership interests in Prairie Capital Mezzanine Fund, L.P. ("Prairie Capital"), an investment fund that makes subordinated debt and preferred stock investments in a wide variety of small businesses throughout the United States. Prairie Capital is licensed as a SBIC. As of December 31, 2005, the Bank's aggregate investment in Prairie Capital was $450,000, and the Bank was subject to additional capital calls of up to $50,000. Messrs. Bangert, Ross, Mr. Ross' wife and Namtor Denver Property LLC ("Namtor"), an entity controlled by Mr. Rothman, have made individual capital commitments to Prairie Capital in amounts of $2,000,000, $2,000,000, $50,000 and $1,500,000, respectively, and own interests in Prairie Capital proportionate to their capital commitments. Messrs. Bangert and Ross are members of the advisory board of Prairie Capital. The general partner of Prairie Capital has agreed to make certain payments to the Bank, Messrs. Bangert and Ross, Mrs. Ross and Namtor (pro rata, in proportion to their respective investments in Prairie Capital) following the liquidation of Prairie Capital in the event that they do not realize an internal rate of return of at least 25% on their respective investments.
In addition, the Bank has committed $1,000,000 to a second fund, Prairie Capital Mezzanine Fund II, L.P. ("Prairie Capital II"). As of December 31, 2005, the Bank's aggregate investment in Prairie Capital II was $900,000, and the Bank was subject to additional capital calls of up to $100,000. Messrs. Bangert, Ross, Rothman and Burgamy have capital commitments to Prairie Capital II in amounts of $2,000,000, $3,600,000, $285,000 and $500,000, respectively, and own interests in Prairie Capital II proportionate to their capital commitments. The general partner of Prairie Capital II has not made any guarantees regarding the financial returns of this fund. Messrs. Bangert and Ross are members of the advisory board of Prairie Capital II.
The Bank has also committed $1,000,000 to a third fund, Prairie Capital Mezzanine Fund III, L.P. ("Prairie Capital III"). As of December 31, 2005, the Bank's aggregate investment in Prairie Capital III was $500,000, and the Bank was subject to additional capital calls of up to $500,000 in Prairie Capital III. Messrs. Bangert, Ross, Rothman and Burgamy have capital commitments to Prairie Capital III in amounts of $2,000,000, $2,000,000, $1,5000,000 and $500,000, respectively, and own interests in Prairie Capital III proportionate to their capital commitments. The general partner of Prairie Capital III has not made any guarantees regarding the financial returns of this fund. Messrs. Bangert and Ross are members of the advisory board of Prairie Capital III.
The Bank has committed $7,500,000 to GMB Mezzanine Capital, L.P. (the "GMB Mezz Fund"). As of December 31, 2005, the Bank's aggregate investment in the GMB Mezz Fund was $2.1 million, and the Bank was subject to additional capital calls of up to $5.4 million in the fund. The GMB Mezz Fund's general partner is Lakeside Capital Partners, LLC, ("Lakeside Capital"). The Company
advanced start-up funding to Lakeside Capital while it was forming and marketing the GMB Mezz Fund. In return, Lakeside Capital granted naming rights of the fund to CoBiz and agreed to allocate a portion of their carried-interest in the GMB Mezz Fund to the Company. In addition, Lakeside Capital executed a service agreement with Green Manning & Bunch, Ltd. ("GMB"), a wholly owned investment banking subsidiary of the Company for certain services that GMB provided to Lakeside Capital during the GMB Mezz Fund's formation. The service agreement provided for compensation to GMB on an agreed-upon basis at market rates. GMB recognized advisory fees of approximately $368,000 in the first quarter of 2004 related to services provided to the GMB Mezz Fund. The following directors have also made capital commitments to the GMB Mezz Fund, as indicated, and own interests proportionate to their capital commitments: Mr. Bangert$2,000,000; Mr. Burgamy$500,000; Mr. Lorenz$200,000; Mr. Mosanko$100,000; Mr. Ross$2,000,000; Mr. Rothman$2,000,000; and Mr. Travis$500,000. Mr. Bangert is also a member of the advisory board of GMB Mezz Fund.
During 2005, the Board of Directors held five meetings, the Audit Committee held seven meetings, the Governance and Nominating Committee held four meetings and the Compensation Committee held five meetings. No Executive Committee meetings were held in 2005. No director attended fewer than 75% of the aggregate of all meetings of the Board of Directors and the committees on which he or she served, with the exception of Mr. Burgamy and Mr. Ross. Mr. Burgamy missed one of two Governance and Nominating Committee meetings during his tenure on the committee. Mr. Ross missed one of three Governance and Nominating Committee meetings during his tenure on the Committee.
Information regarding executive officers of the Company is set forth below. Biographical information for Messrs. Bangert and Lorenz is set forth above under "Election of Directors."
The following table sets forth the cash and noncash compensation for fiscal years 2003, 2004 and 2005 awarded to or earned by (i) the individual who served as the Company's CEO in fiscal year 2005; and (ii) the Company's four most highly compensated executive officers, other than the CEO
(collectively, with the CEO, the "Named Executive Officers"), who were serving as executive officers at the end of fiscal year 2005:
The following table summarizes individual grants of stock options made during the 2005 fiscal year to each of the Named Executive Officers:
The following table summarizes, on an aggregate basis, each exercise of stock options during the 2005 fiscal year by each of the Named Executive Officers and the 2005 fiscal year-end value of their unexercised options.
The Company has adopted several incentive stock option plans to reward and provide long-term incentives for directors and key employees of the Company. The term of all options issued may not exceed ten years. The significant terms of each plan are set forth below.
The 1995 Plan permits the granting of Incentive Stock Options to officers and other key employees. The exercise price of options granted under the 1995 Plan must be at least 100% of the fair market value of the common stock on the date of grant. Options granted under the 1995 Plan vest in equal installments on each of the first four anniversaries of the date of grant. No additional shares under the 1995 Incentive Stock Option Plan are available to be granted.
The 1997 Plan permits the granting of Incentive Stock Options to officers and other key employees. The exercise price of options granted under the 1997 Plan must be at least 100% of the fair market value of the common stock on the date of grant. Options granted under the 1997 Plan vest in equal installments on the first four anniversaries of the date of grant. There are currently 2,164 shares remaining for issuance under the 1997 Plan.
The 1998 Plan permits the granting of Incentive Stock Options and non-qualified stock options to officers and other key employees. The exercise price of options granted under the 1998 Plan must be at least 100% of the fair market value of the common stock on the date of grant. The Compensation Committee has the authority to establish the terms of vesting, payment and termination of options granted under the 1998 Plan. There are currently 633 shares remaining for issuance under the 1998 Plan.
CoBiz assumed the First Capital Plan as part of its acquisition of First Capital Bank of Arizona. The First Capital Plan provides for the granting of Incentive Stock Options and non-qualified stock options. Options granted under the First Capital Plan vest 25% per year for the first two years and 50% in the third year. No additional options will be granted under the First Capital Plan.
The 2002 Plan provides for the issuance of Incentive Stock Options and non-qualified stock options to officers and other key employees, as well as consultants and directors. The exercise price of Incentive Stock Options granted under the 2002 Plan must be at least 100% of the fair market value of the common stock on the date of grant, and the exercise price of non-qualified stock options must be at least 85% of the fair market value of the common stock on the date of grant. The Compensation Committee has the authority to establish the exercise price and the terms of vesting, payment and termination of options granted under the 2002 Plan. There are currently 18,869 shares remaining for issuance under the 2002 Plan.
Under the 2005 Plan, the Compensation Committee of the Company has the authority to determine the identity of the key employees, consultants, and directors who shall be granted options; the option price, which shall not be less than 85% of the fair market value of the common stock on the date of grant; and the manner and times at which the options shall be exercisable. There are currently 992,800 shares available for grant under the 2005 Plan.
The following table sets forth certain information concerning all equity compensation plans previously approved by stockholders and all equity compensation plans not previously approved by the stockholders as of December 31, 2005. Options and exercise prices have been adjusted to reflect stock dividends.
In 2004, CoBiz implemented a supplemental executive retirement plan (the "SERP") for certain executive officers of CoBiz (the "Executives") to provide retirement benefits to those officers. The SERP is unsecured and unfunded and there are no plan assets. CoBiz has purchased single premium Bank Owned Life Insurance ("BOLI policies") on the lives of the Executives and intends to use income from the BOLI policies to offset SERP benefit expenses. Under the terms of the SERP, participants will be entitled to an annual supplemental retirement benefit of up to one-half of their final average annual compensation (the five highest paid years during the first ten years of participation in the SERP), prorated based on their years of participation in the SERP for a period of up to ten years. SERP benefits vest at the rate of 20 percent per year of service and generally are payable at the participant's normal retirement date or any earlier termination of employment. The benefit is payable either monthly over 10 years or in a lump sum equal to the actuarially adjusted present value of the right to receive those monthly payments. Vesting is accelerated upon the disability of the participant or a change of control of the Company. The retirement benefits are funded from accruals to a benefit account during the participant's employment. The amount of the accrual is determined annually. The estimated annual benefit payable (assuming full vesting) to Messrs. Bangert, Lorenz, Dalton, Ostertag and Ms. Andrich at their normal retirement age would be $266,000, $185,000, $149,000, $105,000, and $111,000, respectively.
Associated with the SERP benefit is a death benefit for each Executive's designated beneficiaries. Beneficiaries designated by an Executive are entitled to a split dollar share of the death proceeds from the life insurance policies on each Executive, which vary depending on the Executive's employment status with CoBiz at the time of death, and eligibility to receive SERP payments.
The Company has entered into employment agreements with Lyne B. Andrich, Steven Bangert, Richard J. Dalton, Jonathan C. Lorenz and Robert B. Ostertag. Each such agreement is terminable at will by the Company or the employee and provides for annual salary and eligibility for a bonus and stock option grants. The agreements also provide certain fringe benefits including an automobile allowance or the use of a Company automobile, as well as an allowance for membership dues at a country, health or social club. Each such agreement provides that, during the term of the agreement and for one year thereafter, the employee is prohibited from soliciting any employees or customers of the Company or the Bank. In the event that the Company terminates the employment agreement for reasons other than "for cause" or constructively discharges the employee (for example, by materially decreasing his or her responsibilities or his or her compensation) or the employee's employment is terminated because of disability or death, the Company is required to pay the employee one full year of salary (including bonus) and maintain all other benefits for one full year after termination. Each Named Executive Officer's employment agreement requires the Company to make a lump sum payment to the employee in an amount equal to a multiple of the employee's annual compensation in the event that his or her employment is terminated within two years of the occurrence of certain types of changes of control of the Company or the Bank. Messrs. Bangert, Dalton, Lorenz, Ostertag and Ms. Andrich would have received lump-sum severance payments of $2,009,280, $755,000, $1,390,000, $456,000 and $540,000, respectively, upon a termination of employment after such a change in control based on 2005 compensation.
The Compensation Committee of the board of directors is composed entirely of independent directors. This committee is responsible for establishing, implementing and monitoring all compensation policies of the Company. The committee is also responsible for evaluating the performance of the CEO and recommending appropriate compensation levels. The CEO evaluates the performance of the other Named Executive Officers and recommends individual compensation levels to the Compensation Committee for its approval.
The general philosophy of the Compensation Committee is to provide executive compensation designed to enhance shareholder value. To this end, the Compensation Committee designs compensation plans and incentives to link the financial interest of its executive officers to the interests of its shareholders and to encourage support of the Company's long-term goals. The Company and its subsidiaries are engaged in a highly competitive industry. In order to succeed, the Company must be able to attract and maintain qualified executives. To achieve this objective, the Company's Compensation Committee has structured the current compensation plan to include a combination of base salary and bonus to reward short-term performance, supplemental executive retirement benefits and the grant of stock options, both of which vest based on a years-of-service requirement, to encourage long-term performance. The Committee believes this compensation structure enables the Company to attract, retain and motivate key executives.
In setting base compensation, the Compensation Committee considers the overall performance of each executive by reviewing the nature and scope of the executive officer's responsibilities as well as his or her effectiveness in supporting the Company's long-term goals. Periodic surveys are taken of compensation levels and benefit programs offered by other community banks, bank holding companies and other industries in our market area, which provide the Compensation Committee information on
which to evaluate salary and compensation programs. The Committee retained an independent outside executive compensation consultant during 2004 to evaluate the appropriateness of the Company's compensation structure, including its use of equity-based compensation, retirement benefits and board of director fees. Based upon the independent consultant's recommendation, the Company adopted a supplemental executive retirement plan for certain executive officers in 2004.
The Compensation Committee maintains a philosophy that a significant element of compensation of executive officers must be directly and materially linked to operating performance. The compensation plans provided to the executive officers are designed to accomplish that goal. In particular, cash bonuses are heavily dependent on the Company meeting or exceeding budgeted net income objectives, as well as shareholder returns and asset quality standards. The incentive bonus plan for executive officers consists of various objective and subjective criteria related to areas for which each executive has responsibility as well as for Company-wide performance. In 2005, the performance measurements were based on various factors including: the Company meeting its net income objectives; the individual operating units' income contributions, non-interest income growth, control of non-interest expenses and asset quality; referrals between business lines; and growth objectives for total loans, total deposits and total assets.
The 2005 salary level of the Company's CEO, Mr. Bangert, was established consistent with this compensation policy. In its evaluation, the Committee considered the Company's overall performance, record of increase in shareholder value and success in meeting strategic objectives and his personal leadership and accomplishments. These factors were considered in conjunction with the Company's financial results for fiscal 2005 in relation to the Company's established business plan and achieving certain annual performance goals, including but not limited to, earnings per share growth, return on equity, asset growth and asset quality metrics. As a result of this review, Mr. Bangert's salary was increased by 5% to $453,600. In addition, Mr. Bangert was awarded a cash performance bonus of $216,000. He was also granted 7,000 non-qualified stock options in 2005.
The Company's stock incentive plans are an important component of the Company's compensation program for executive officers and other employees. The plans are intended to advance the interests of the Company and its shareholders by encouraging and enabling executive officers and other employees to acquire and retain a proprietary interest in the Company. Through stock option grants, the long-range interests of management and employees are aligned with those of shareholders as the optionees accumulate meaningful stakes in the Company. The Compensation Committee makes all decisions concerning the granting of stock options to executive officers. These decisions are made on a subjective basis and generally do not bear a specific relationship to any particular measure of the Company's performance. The Compensation Committee believes that the stock option program is a valuable tool in recruiting, retaining and motivating employees, including executive officers.
The Company maintains a 401(k) retirement savings plan available to all eligible employees, including executive officers. Under the plan, the Company typically matches a portion of employee contributions. For 2005, employee contributions were matched up to a maximum of 6% of compensation. At December 31, 2005, all employer contributions made on behalf of executive officers were vested in accordance with the vesting schedule of the plan, generally five years from commencement of employment, on the basis of the officers' past service with the Company.
The Compensation Committee believes that the base salary compensation provided to the executive officers of the Company, including the Named Executive Officers, is appropriate and reasonable in light of such executives' duties, performance and responsibilities and that the contingent forms of compensation provided through bonuses and stock options provide additional continuing incentives to executives in appropriate circumstances and are consistent with the benefits derived by shareholders of the Company.
This report is submitted by the members of the Compensation Committee:
N. Rothman, Chairman
Each director who is not an employee receives the following:
In addition, during 2005 each director who was not an officer of the Company received options to purchase 1,000 shares of common stock for $20.75 per share. Furthermore, any director who is not an employee of the Company who also served on the Bank's board of directors received an option to purchase an additional 500 shares of common stock for $20.75 per share and was paid an annual retainer fee of $6,000 and $1,000 for each meeting of the Bank's Board they attended. Directors of the Company who are employees do not receive additional compensation for their services as directors or committee members.
The company also sponsors an annual three-day planning retreat for our directors and their spouses and pays all expenses associated with the retreat, including airfare, lodging and meals, as well as entertainment and sight-seeing activities for the directors' spouses during meeting sessions. The company is unable to quantify the incremental cost of expenses incurred for the benefit of our directors' spouses, but estimates the aggregate of such costs was less than $10,000 in 2005.
The following table compares the cumulative total return on a hypothetical investment of $100 in CoBiz common stock on December 31, 2000 and the closing prices on December 31, 2001, 2002, 2003, 2004 and 2005, with the hypothetical cumulative total return on the Russell 2000 Index and the Nasdaq Bank Index for the comparable period.
The following table summarizes the aggregate fees billed to the Company by Deloitte & Touche LLP:
The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the Company's independent auditor. The Audit Committee has established a policy requiring its pre-approval of all audit and permissible non-audit services provided by the independent auditor in order to ensure that the provision of such services does not impair the independence of the independent auditor. The policy provides for the general pre-approval of specific types of audit, audit-related, tax and other services, gives guidance to management regarding the specific services that are eligible for general pre-approval and provides specific cost limits for each such service on an annual basis. The policy also provides that specific pre-approval of services to be provided by the independent auditor will be required if such services have not been generally pre-approved by the Audit Committee or if such services exceed specific de minimis limits.
The policy provides that the Audit Committee may delegate pre-approval authority to one or more of its members. Any member or members of the Audit Committee to whom such authority is delegated is required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The policy prohibits the Audit Committee from delegating its responsibilities to pre-approve services to be performed by the independent auditor to management of the Company.
The policy contains a de minimis provision that operates to provide retroactive approval for permissible non-audit services under certain circumstances. The provision allows for the pre-approval requirement to be waived if all of the following criteria are met:
During 2005, fees for continuing education training totaling $625 were approved under the de minimis provision.
In accordance with its written charter, a copy of which is available on the Company's website (www.cobizinc.com), the Audit Committee assists the Board of Directors in its oversight role over the Company's financial accounting and reporting process, the Company's system of internal control over financial reporting established by management and the external audit process.
Management is responsible for the financial reporting process, the preparation of consolidated financial statements in accordance with generally accepted accounting principles, the system of internal controls, including internal control over financial reporting, and procedures designed to ensure compliance with accounting standards and applicable laws and regulations. The Company's independent registered public accounting firm (the "independent auditor") is responsible for the audit of the consolidated financial statements and internal control over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes and procedures. The Audit Committee reviews and reports to the Board of Directors regarding the performance of the internal audit function and independent auditor, the integrity of the financial statements, management's efforts to maintain a system of internal control over financial reporting, and compliance with legal and regulatory requirements.
The Audit Committee has reviewed and discussed the audited financial statements included in the Company's 2005 Annual Report and Form 10-K with management. The Audit Committee separately met with each of the internal and independent auditors, with and without management, to discuss the results of their examinations and their observations and recommendations regarding the Company's internal controls. The Audit Committee discussed with the Company's independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended by SAS No. 90, Audit Committee Communications.
The Audit Committee has received from the independent auditors, as required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committee, a written disclosure, indicating all relationships, if any, between the independent auditor and its related entities and the Company and its related entities which, in the auditor's professional judgment, reasonably may be thought to bear on the auditor's independence, and a letter from the independent auditor confirming that, in its professional judgment, it is independent of the Company. The Audit Committee discussed with the independent auditor any relationship that may have an impact on its objectivity and independence and satisfied itself as to the auditor's independence.
Based upon the review, discussion, disclosures and materials described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the 2005 Annual Report on Form 10-K.
This report is submitted by the Audit Committee.
B. Burgamy, Chairman
The following table sets forth, as of February 28, 2006, certain information regarding beneficial ownership of the common stock by (i) each shareholder known by the Company to be the beneficial owner of more than 5% of the outstanding common stock, (ii) each director of the Company, (iii) each Named Executive Officer and (iv) all of the Company's directors and executive officers as a group. Unless otherwise indicated, the Company believes that the shareholders listed below have sole investment and voting power with respect to their shares based on information furnished to the Company by such owners.
Our executive officers, key employees, directors and principal shareholders, members of their immediate families and businesses in which they hold controlling interests are our customers, and it is anticipated that such parties will continue to be our customers in the future. All outstanding loans and extensions of credit by us to these parties were made in the ordinary course of business in accordance with applicable laws and regulations and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unaffiliated persons, and, in our opinion, do not involve more than the normal risk of collectibility or contain other features unfavorable to us. At December 31, 2005, the aggregate balance of our loans and advances under existing lines of credit to these parties was approximately $5,606,000, or 0.4% of our total loans and leases.
We lease our downtown Denver banking facility and executive and administrative offices from Kesef, LLC ("Kesef"), an entity in which Mr. Makovsky owns 20%. Messrs. Bangert, Lorenz, Ross and Rothman (through Namtor) each previously owned a 16% interest in Kesef, but sold their interests in 2002. Kesef purchased the building in January 1998. The initial term of this lease is ten years, with an option to renew for an additional ten-year term at the current market rates. In addition, Shames-Makovsky Realty Company, an entity of which Mr. Makovsky is the majority owner and managing general partner, acts as the property management firm for our facility located in Surprise, Arizona, and receives compensation directly from the owning entity for its services. Shames-Makovsky Realty Company has also been engaged by the owners of our Northeast Denver location to act as their property manager. Rent payments for these related party leases for the year ended December 31, 2005 were $1,789,000.
For information on certain other relationships and transactions between the Company and certain officers, directors and principal shareholders, see "Committees of the Board of DirectorsCompensation Committee Interlocks and Insider Participation" above.
Section 16(a) of the Securities Exchange Act requires executive officers and directors and persons who beneficially own more than 10% of the outstanding common stock to file initial reports of ownership on Form 3 and reports of changes in ownership on Forms 4 and 5 with the SEC. Executive
officers, directors, and greater than 10% beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file.
Based solely on a review of the copies of such forms furnished to the Company, each of the Company's directors, officers and beneficial owners of more than 10% of the outstanding common stock have filed all forms required by Section 16 of the Exchange Act in fiscal 2005, except as follows:
Included with this Proxy Statement is the Company's 2005 Annual Report to Shareholders, which includes its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as filed with the SEC.
Any shareholder of the Company who desires to make his or her thoughts known to an individual director of the Company, the Board or a committee of the Board may do so by mail to: Board of Directors, c/o CoBiz Inc., Corporate Secretary, 821 17th Street, Denver, Colorado 80202. The Secretary will forward all shareholder communications, other than communications that are not properly directed or are frivolous, to the individual director of the Company, the Board or a committee of the Board, as requested in the communication. This policy is intended to apply only to communications from shareholders in their capacities as such. Communications to the Company from one of its officers, employees or agents will only be forwarded to a director, the Board or a committee of the Board if the communication is made solely in the person's capacity as a shareholder. The policy does not apply to shareholder proposals submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, which will be handled in accordance with applicable SEC rules.
The Governance and Nominating Committee will consider individuals recommended by the shareholders of the Company to serve on the Board. Shareholders who wish to recommend individuals for consideration by the Governance and Nominating Committee may do so by submitting a written recommendation to: Director Nominations, c/o CoBiz Inc., Corporate Secretary, 821 17th Street, Denver, Colorado 80202. Submissions must include:
Submissions must be accompanied by a written consent of the individual recommended to stand for election if nominated by the Board and to serve if elected by the shareholders of the Company.
The Nominating Committee believes that candidates for director should have the following minimum qualifications:;bu each candidate should be of the highest ethical character and share the values of the Company as reflected in its Code of Conduct and Ethics;
Shareholder proposals submitted for inclusion in the Company's proxy statement for the Annual Meeting of Shareholders in the year 2007 must be received by the Secretary of the Company not later than December 14, 2006.
If the Company does not receive notice of a matter or proposal to be considered for the 2007 Annual Meeting of Shareholders (whether or not the proponent thereof intends to include such matter or proposal in the proxy statement for such annual meeting) on or before February 27, 2007, then the persons appointed by the Board of Directors to act as proxies for such annual meeting will be allowed to use their discretionary voting authority with respect to any such matter or proposal raised at such annual meeting.
The Board of Directors knows of no matters other than those that are described in this Proxy Statement that may be brought before the meeting. However, if any other matters are properly brought before the Annual Meeting, persons named in the enclosed proxy or their substitutes will vote in accordance with their best judgment on such matters.
Whether or not you plan to attend the Annual Meeting, please mark, sign, date and promptly return the enclosed proxy in the enclosed return envelope.
UPON WRITTEN REQUEST OF A BENEFICIAL OWNER OF COMMON STOCK ENTITLED TO VOTE AT THIS SHAREHOLDERS MEETING WHO DID NOT RECEIVE A COPY OF THE ENCLOSED ANNUAL REPORT TO SHAREHOLDERS, THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005, ACCOMPANIED BY A LIST BRIEFLY DESCRIBING ALL THE EXHIBITS THERETO AND NOT CONTAINED THEREIN. THE COMPANY WILL FURNISH A COPY OF ANY EXHIBIT UPON THE ADDITIONAL REQUEST OF SUCH PERSON AND THE PAYMENT OF A FEE OF $0.25 PER PAGE. ADDRESS ANY SUCH REQUESTS TO MARY PERROTT SMITH, CORPORATE SECRETARY, COBIZ INC., 821 17TH STREET, DENVER, CO 80202. THE REQUEST MUST CONTAIN A GOOD FAITH REPRESENTATION THAT, AS OF THE RECORD DATE FOR THE MEETING, THE PERSON MAKING THE REQUEST WAS A BENEFICIAL OWNER OF SECURITIES ENTITLED TO VOTE AT THE MEETING.
Revised and approved January 19, 2006
Audit Committee Charter
This Charter shall govern the composition, oversight responsibility, authority and specific duties of the Audit Committee ("the Committee"), of the Board of Directors ("the Board") of CoBiz Inc. and CoBiz Bank, N.A. (collectively, "the Company").
The Committee will be comprised of three or more outside directors as determined by the Board. Each member of the Committee must be an "independent director" who is able to read and understand fundamental financial statements, including a balance sheet, income statement, and cash flow statement, and no member of the Committee may have participated in the preparation of the financial statements of the Company or any then current subsidiary of the Company during the past three years. In addition, at least one member of the Committee will be a "financial expert" as that term is defined by the Securities and Exchange Commission ("the SEC").
No person will be an "independent director" if that person (i) is an officer or employee of the Company or any of its subsidiaries, (ii) accepts directly or indirectly any consulting, advisory or other compensatory fee from the Company or any subsidiary thereof (other than fixed amounts of compensation under a retirement plan or deferred compensation arrangement for prior service with the Company, provided that such compensation is not contingent in any way on continued service), (iii) is an "affiliated person" (within the meaning of Rule 10A-3 under the Securities Exchange Act of 1934) of the Company or any of its subsidiaries, or (iv) has any other relationship to the Company or any of its subsidiaries, which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Without limiting the generality of the foregoing, no person will be considered independent who has any of the relationships specifically enumerated in Rule 4200(a)(15) of the Marketplace Rules ("the listing standards") of the Nasdaq Stock Market Inc. ("Nasdaq"). For purposes of this Charter, an "affiliated person" shall include, without limitation, a beneficial owner of more than 10% of any class of the Company's voting equity securities.
The members of the Committee will be nominated by a nominating committee consisting solely of independent directors and elected annually at the organizational meeting of the full Board held in May and will be listed in the annual report to shareholders. The Committee will elect one of the members of the Committee as Committee Chair by a majority vote.
The Committee is a part of the Board. Its primary function is to oversee the accounting and financial reporting processes of the Company and the internal and external audit of the Company's financial statements. The Committee will also oversee the implementation of the system of internal control over financial reporting that management has established. Without limiting the generality of the foregoing, the Committee is directly responsible for the appointment, compensation, retention and oversight of the work of any registered public accounting firm engaged by the Company (including the resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services, and each such registered public accounting firm will report directly to the Committee. In addition, the
Committee provides an avenue for communication between internal audit, the independent accountants, financial management and the Board. The Committee should have a clear understanding with the independent accountants that they must maintain an open and transparent relationship with the Committee, and that the ultimate accountability of the independent accountants is to the Committee. The Committee will make regular reports to the Board concerning its activities.
While the Committee has the responsibilities and powers set forth in this Charter, management is responsible for designing and implementing the financial reporting process, preparing consolidated financial statements in accordance with generally accepted accounting principles and designing and implementing the system of internal controls and procedures to ensure compliance with the accounting standards and applicable laws and regulations. The independent accountants are responsible for planning and conducting the annual audit of the Company's consolidated financial statements and for performing other audit, review and attest services for which they are retained. The Committee's responsibility is to oversee these processes and procedures. Except as otherwise expressly required by law or this Charter, the members of the Committee do not have to be experts in the fields of accounting or auditing or in evaluating auditor independence. The Committee may rely, without independent verification, on the information and reports provided to it by management and the independent accountants unless it believes that such information or report is inaccurate, incomplete or otherwise unreliable. As the Committee may deem appropriate, the Committee may obtain and rely upon expert advice as to applicable rules of the SEC, the listing standards of Nasdaq, Statements on Auditing Standards and other accounting, legal and regulatory provisions. The Committee's role is not to provide an independent basis to determine that management has maintained appropriate accounting and reporting procedures or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable law and regulations, but rather to oversee the process in which those determinations are made by the independent accountants.
The Committee shall have all necessary authority to perform its responsibilities under this Charter, including, without limitation, the authority to investigate any matter or activity involving financial accounting, financial reporting or the internal controls of the Company. The Committee will have the authority to retain independent counsel and other advisers as it determines necessary to carry out its duties. All employees will be directed to cooperate in any investigation or inquiry as requested by the Committee.
The Committee will have authority to authorize, in its capacity as a committee of the board of directors, any appropriate funding, as determined by the Committee, for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company, (ii) compensation to any counsel or other advisor retained by the Committee and (iii) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
The Committee is to meet at least four times annually and as many additional times as the Committee deems necessary. Content of the agenda for each meeting should be cleared by the Committee Chair. The Committee is to meet in separate sessions with the chief financial officer, independent accountants and internal auditors at least once each year and at other times when considered appropriate.
Committee members will strive to be present at all meetings. As necessary or desirable, the Committee Chair may request that members of management and representatives of the independent accountants and internal audit be present at Committee meetings.
In carrying out its oversight responsibilities, the Committee will:
of each of the first three quarters of the year that they have nothing to report to the Committee, if that is the case.
This Charter is intended to comply with all applicable requirements of the Securities Exchange Act of 1934, the rules of the SEC and the listing standards of Nasdaq and shall be interpreted and applied to give effect to that intent. The Company may avail itself of any exception to such requirements, whether or not set forth in this Charter and, while any such exception is available, the Committee shall be deemed in compliance with the requirement of this Charter to which the exception relates.
The undersigned, having duly received the Notice of Annual Meeting and Proxy Statement dated April 13, 2006, hereby appoints Steven Bangert and Jonathan C. Lorenz proxies (each with the power to act alone and with the power of substitution and revocation) to represent the undersigned and to vote, as designated below, all shares of Common Stock of CoBiz Inc. that the undersigned is entitled to vote at the Annual Meeting of Shareholders of CoBiz Inc. to be held on May 18, 2006 at the Magnolia Ballroom, 817 17th Street, Denver, Colorado 80202 at 8:00 a.m., M.D.T., and any adjournment thereof.
This Proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this Proxy will be voted FOR items 1 and 2.
PLEASE SIGN, DATE AND MAIL THIS PROXY IN THE ENCLOSED ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE U.S.