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 / /
Filed by a Party other than the Registrant /X/
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
Section 240.14a-11(c) or Section 240.14a-12
NORTH COUNTY BANCORP
--------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
-------------------
(Name of Person (s) Filing Proxy Statement, if other than the Registrant)
Payment Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
2) Aggregate number of securities to which transaction 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:
----------------------------------------------------------------------
NORTH COUNTY BANCORP
444 SOUTH ESCONDIDO BOULEVARD
ESCONDIDO, CALIFORNIA 92025
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 16, 1999
TO THE SHAREHOLDERS OF NORTH COUNTY BANCORP:
NOTICE IS HEREBY GIVEN that pursuant to its Bylaws and the call of its
Board of Directors, the 1999 Annual Meeting of Shareholders (the "Meeting") of
North County Bancorp (the "Company") will be held at North County Bank, 444
South Escondido Boulevard, Escondido, California 92025 on Wednesday, June 16,
1999 at 5:30 p.m., for the purpose of considering and voting upon the following
matters:
1. ELECTION OF DIRECTORS. Electing the following nine (9) persons to
the Board of Directors to serve until the next Annual Meeting of Shareholders
and until their successors are elected and have qualified:
Alan P. Chamberlain Jack Port
G. Bruce Dunn Clarence R. Smith
Ronald K. Goode Raymond V. Stone
James M. Gregg Burnet F. Wohlford
Rodney D. Jones
2. OTHER BUSINESS. Transacting such other business as may properly come
before the Meeting and at any and all adjournments thereof.
The bylaws of the Company provide for the nomination of directors in the
following manner:
"Nominations 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 voting
stock of the Corporation entitled to vote for the election of directors. Notice
of intention to make any nominations, other than by the Board of Directors,
shall be made in writing and shall be received by the President of the
Corporation no more than 60 days prior to any meeting of shareholders called for
the election of directors, and no more than ten days after the date the notice
of such meeting is sent to shareholders pursuant to Section 2.2(d) of these
bylaws; provided, however, that if only 10 days' notice of the meeting is given
to shareholders, such notice of intention to nominate shall be received by the
President of the Corporation not later than the time fixed in the notice of the
meeting for the opening of the meeting. 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 voting 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 voting stock of the
Corporation owned by the notifying shareholder. Nominations not made in
accordance herewith shall be disregarded by the chairman of the meeting, and the
inspectors of election shall then disregard all votes cast for each such
nominee."
Only those shareholders of record at the close of business on April 23,
1999 will be entitled to notice of and to vote at the Meeting.
DATED: May 10, 1999
By Order of the Board of Directors
Burnet F. Wohlford
SECRETARY
NORTH COUNTY BANCORP
444 SOUTH ESCONDIDO BOULEVARD
ESCONDIDO, CALIFORNIA 92025
(760) 743-2200
------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 16, 1999
------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the 1999 Annual Meeting of Shareholders (the "Meeting") of
North County Bancorp (the "Company") to be held at North County Bank, 444 South
Escondido Boulevard, Escondido, California 92025 on Wednesday, June 16, 1999 at
5:30 p.m., and at any and all adjournments thereof. The solicitation of the
Proxy accompanying this Proxy Statement is made by the Board of Directors of the
Company, and the costs of such solicitation will be borne by the Company.
It is expected that this Proxy Statement and accompanying Notice will first
be mailed to shareholders on approximately May 10, 1999.
The matters to be considered and voted upon at the Meeting will be:
1. ELECTION OF DIRECTORS. To elect nine (9) persons to the Board of
Directors to serve until the next Annual Meeting of Shareholders and until their
successors are elected and have qualified.
2. OTHER BUSINESS. Transacting such other business as may properly come
before the Meeting and at any and all adjournments thereof.
A Proxy for use at the Meeting is enclosed. Any shareholder who executes
and delivers such Proxy has the right to revoke it at any time before it is
exercised by delivering to the Secretary or the Assistant Secretary of the
Company an instrument revoking it or a duly executed Proxy bearing a later date,
or by attending the Meeting and voting in person. Subject to such revocation,
all shares represented by a properly executed Proxy received in time for the
Meeting will be voted by the proxy holders whose names are set forth in the
accompanyingProxy (the " Proxy Holders") in accordance with the instructions on
the Proxy. If no instruction is specified with respect to a matter to be acted
upon, the shares represented by the Proxy will be voted in favor of the election
of the nominees for directors set forth herein, and, if any other business is
properly presented at the Meeting, in accordance with the recommendations of a
majority of the Board of Directors.
The expense of preparing, assembling, printing and mailing this Proxy
Statement and the material used in this solicitation of Proxies will be borne by
the Company. It is contemplated that Proxies will be solicited through the mail,
but officers, directors and regular employees of the Company, or its subsidiary,
North County Bank (the "Bank") , may solicit Proxies personally. In that event,
the Company will pay such employees additional remuneration for such services.
Although there is no formal agreement to do so, the Company may reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for their
reasonable expenses in forwarding these proxy materials to shareholders whose
stock in the Company is held of record by such entities. In addition, the
Company may use the services of individuals or companies it does not regularly
employ in connection with this solicitation of Proxies, if Management determines
it advisable.
1
VOTING SECURITIES
There were issued and outstanding 4,882,705 shares of the Company's
Common Stock on April 23, 1999, which has been set as the Record Date for the
purpose of determining the shareholders entitled to notice of and to vote at the
Meeting.
Each holder of Common Stock will be entitled to one vote, in person or
by proxy, for each share of Common Stock standing in his or her name on the
books of the Company as of the Record Date for the Meeting on any matter
submitted to the vote of the shareholders, except that in connection with the
election of directors, the shares are entitled to be voted cumulatively if a
candidate's or candidates' name(s) have been properly placed in nomination prior
to the voting and a shareholder present at the Meeting has given notice of his
or her intention to vote his or her shares cumulatively. If a shareholder has
given such notice, all shareholders may cumulate their votes for candidates in
nomination. Cumulative voting entitles a shareholder to give one nominee as many
votes as is equal to the number of directors to be elected multiplied by the
number of shares owned by such shareholder, or to distribute his or her votes on
the same principle between two or more nominees as he or she deems appropriate.
The nine (9) candidates receiving the highest number of votes will be elected.
If cumulative voting is declared at the Meeting, votes represented by Proxies
delivered pursuant to this Proxy Statement may be cumulated in the discretion of
the Proxy Holders, in accordance with the recommendations of the Board of
Directors.
PRINCIPAL SHAREHOLDERS
The Board of Directors knows of no person who owns beneficially more
than five percent (5%) of the outstanding Common Stock of the Company, except
for Ronald K. Goode, James M. Gregg, and Burnet F. Wohlford, each of whom is a
nominee for director (see "ELECTION OF DIRECTORS" herein), the North County Bank
Employee Stock Ownership Plan (the "ESOP"), Financial Institution Partners, L.P.
and Walter D. Buchanan.
The following table provides certain information, as of April 23, 1999
with respect to the ESOP, Financial Institution Partners, L.P. and Walter D.
Buchanan:
Title Name and Address Amount and Nature of Percent
of Class of Beneficial Owner Beneficial Ownership of Class
- -------- ------------------- -------------------- --------
Common North County Bank 270,894 (1) 5.5%
Stock Employee Stock Ownership Plan
444 South Escondido Boulevard
Escondido, California
Common Financial Institution Partners, L.P. 581,838 11.9%
Stock 1110 Lake Cook Road, Suite 165
Buffalo Grove, Illinois
Common Walter D. Buchanan 480,057 9.8%
Stock 4460 Century Dr., South
Salem, Oregon
- ----------
(1) Janice Carr, Debra Muyhamin and Lori E. Woolf, each of whom is an employee
of the Bank, are co-trustees of the North County Bank Retirement Trust
created to implement the North County Bank ESOP. The Bank and each of these
individuals may therefore be deemed to have shared voting and investment
power with respect to the shares of Common Stock held by the ESOP. Ms.
Carr, Ms. Muyhamin and Ms. Woolf disclaim beneficial ownership of these
shares.
2
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors shall be not
fewer than seven (7) nor more than ten (10) until changed by a bylaw amendment
duly adopted by the vote of the Board of Directors or the vote or written
consent of the Company's shareholders. The Bylaws further provide that the exact
number of directors shall be fixed from time to time, within the foregoing
range, by a bylaw or amendment thereof duly adopted by the vote or written
consent of the Company's shareholders or by the Company's Board of Directors.
The number of directors to be elected at the Meeting has been fixed at nine (9).
The first nine (9) persons named below, all of whom are present members of
the Board of Directors of the Company, will be nominated for election to serve
until the next Annual Meeting of Shareholders and until their successors are
elected and have qualified. Votes will be cast pursuant to the enclosed Proxy in
such a way as to effect the election of said nine (9) nominees, or as many
thereof as possible under applicable voting rules. In the event that any of the
nominees should be unable to serve as a director, it is intended that the Proxy
will be voted for the election of such substitute nominee, if any, as shall be
designated by the Board of Directors. Management has no reason to believe that
any nominee will become unavailable.
The following table sets forth certain information as of April 23, 1999,
with respect to (i) each of the persons to be nominated by the Board of
Directors for election as directors, (ii) each of the Company's executive
officers, and (iii) the directors and executive officers (1) of the Company as a
group:
YEAR FIRST COMMON STOCK
ELECTED OR BENEFICIALLY OWNED PERCENT
NAME AND OFFICES PRINCIPAL OCCUPATION APPOINTED ON OF
HELD WITH COMPANY FOR PAST FIVE YEARS AGE DIRECTOR APRIL 23, 1999 (2) CLASS (3)
----------------- ------------------- --- -------- ------------------ ---------
Alan P. Chamberlain Real Estate Investor and 69 1981 89,432 (4) 1.7%
Director Construction Consultant
G. Bruce Dunn President and Owner, Mission 51 1988 92,218 (4) 1.8%
Director Pools of Escondido, Inc.
Ronald K. Goode (4) President and Owner, R&G Toyota 66 1983 311,452 (4) 6.1%
Director - Volvo, Inc. (San Rafael, CA)
James M. Gregg (5) Chairman of the Board and Chief 67 1981 430,373 (6) 8.4%
Chairman of the Board, Chief Executive Officer, North County
Executive Officer and Director Bank and North County Bancorp
- ----------
(1) As used throughout this Proxy Statement the term "executive officer" means,
the Chairman of the Board and Chief Executive Officer, President and Chief
Operating Officer, Vice President and Chief Financial Officer and Executive
Vice President and Credit Administrator of the Bank.
(2) Shares "beneficially owned" are determined under SEC Rules, and do not
indicate ownership for any other purpose. In general, beneficial ownership
includes shares over which the individual in question has sole or shared
voting and/or investment power. Except as otherwise noted, may include
shares held by such person's spouse (except where legally separated) and
minor children; shares held by any other relative of such person who has
the same home; shares held in "street name" for the benefit of such person;
or shares held in an Individual Retirement Account as to which such person
has voting rights and investment power. In the case of directors Gregg,
Port, and Smith, includes 366,503, 39,961 and 47,386 shares, respectively,
held by a family or retirement trust as to which such director is a
trustee and beneficiary and shares voting and investment power with his
spouse.
(3) The percentages are based on the total number of shares of the Company's
Common Stock outstanding, plus the number of option shares described in the
applicable footnote concerning the stock ownership of the relevant
individual or group.
- ----------
(Footnotes continue on following page)
3
YEAR FIRST COMMON STOCK
ELECTED OR BENEFICIALLY OWNED PERCENT
NAME AND OFFICES PRINCIPAL OCCUPATION APPOINTED ON OF
HELD WITH COMPANY FOR PAST FIVE YEARS AGE DIRECTOR APRIL 23, 1999 (2) CLASS (3)
----------------- ------------------- --- -------- ------------------ ---------
Rodney D. Jones President and Chief Operating 56 1988 128,181 (6) 2.5%
President, Chief Operating Officer Officer, North County Bank and
and Director North County Bancorp
Jack Port Commercial Property Manager 77 1981 103,487 (4) 2.0%
Director and Private Investor
Clarence R. Smith Rancher (formerly President and 66 1988 65,525 (4) 1.3%
Director Chief Executive Officer, ATI
Industries (aircraft parts
manufacturer) (1970 - 1988)
Raymond V. Stone Retired (formerly Civil Engineer 77 1988 36,280 (4) -- (7)
Director and Executive Vice President,
Neste Brudin & Stone - Engineers
and Planners)
Burnet F. Wohlford Self-employed Investor and Rancher 70 1981 91,373 (4) 1.8%
Director and Corporate Secretary
Gary T. Clem Executive Vice President and 58 n/a 33,480 (6) -- (7)
Executive Vice President Credit Administrator, North County
and Credit Administrator Bank
Michael J. Gilligan Executive Vice President and Chief 42 n/a 45,687 (6) -- (7)
Vice President and Financial Officer, North County
Chief Financial Officer Bank; Vice President and Chief
Financial Officer, North County
Bancorp
Directors and Executive Officers 1,427,498 (8) 27.9%
as a Group (11 Persons)
- ----------
(Certain footnotes from previous page)
(4) Includes the following number of shares which this individual has the right
to acquire upon the exercise of stock options which are vested or will vest
within 60 days of April 23, 1999 pursuant to the Company's Stock Option
Plan (see "Stock Option Plans" herein): Messrs. Chamberlain, Dunn, Smith
and Wohlford: 18,139 shares each; Mr. Goode: 13,928 shares; Mr. Port:
18,518 shares; and Mr. Stone: 17,994 shares.
(5) Mr. Goode's business address is 445 East Francisco Boulevard, San Rafael,
California 94901. Mr. Gregg's business address is 444 South Escondido
Boulevard, Escondido, California 92025.
(6) Includes 5,892, 14,192, 45,876 and 40,698 shares allocated to the accounts
of Messrs. Clem, Gilligan, Gregg and Jones, respectively, under the
Company's ESOP and 401(k); and 24,411, 24,319, 17,994 and 56,087 shares
which the same four individuals, respectively, have the right to acquire
within 60 days of April 23, 1999 pursuant to the Company's Stock Option
Plans (see "Stock Option Plans" herein).
(7) Less than 1%.
(8) Does not include 270,894 shares held by Debra Muyhamin, Janice Carr and
Lori E. Woolf as co-trustees of the North County Bank Retirement Trust
created to implement the North County Bank ESOP except to the extent that
such shares have been allocated to the accounts of Executive Officers. (See
"PRINCIPAL SHAREHOLDERS" and footnote 2 to the Summary Compensation Table.)
4
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to rule 16a-3(e) during its most recent fiscal
year and Form 5 and amendments thereto furnished to the Company with respect to
its most recent fiscal year, no director, executive officer or beneficial owner
of more than ten percent (10%) of the outstanding Common Stock of the Company
failed to file any of the reports required by Section 16(a) of the Exchange Act
on a timely basis during 1998 except as follows: Form 4 filed on behalf of the
directors with respect to the stock options granted as described under
"COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS - Director Compensation"
herein were inadvertently filed late. None of such options have been exercised.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors of the Company and the Bank have, among others, a
standing Audit Committee consisting of directors Smith (Chairman), Dunn, Goode,
Port, and Wohlford. The Audit Committee met four (4) times in 1998. The Audit
Committee ensures that the Company is maintaining an adequate system of internal
controls such that here is reasonable assurance that assets are safeguarded and
that financial reports are properly prepared; that there is consistent
application of generally accepted accounting principles; and that there is
compliance with management's policies and procedures. The Audit Committee meets
periodically with the independent auditors, management and the internal auditors
to review their work and confirm they are properly discharging their respective
responsibilities. In addition, the Audit Committee recommends the independent
auditors for appointment by the Board of Directors and makes certain that
independent auditors have the necessary freedom and independence to freely
examine all Company and Bank records.
The Company has no standing nominating committee; however, the procedures
for nominating directors, other than by the Board of Directors itself, are set
forth in the Company's Bylaws and in the Notice of Annual Meeting of
Shareholders.
The Board of Directors of the Bank has a standing Compensation Committee,
consisting of directors Goode (Chairman), Chamberlain, Dunn, Gregg, and Smith,
none of whom serve as an officer of the Company or the Bank except Mr. Gregg,
who is the Company's and Bank's Chairman and Chief Executive Officer. The
Compensation Committee met once in 1998. The primary function of the
Compensation Committee is to approve the employment of officers and to recommend
the compensation for all officers of the Bank. Additionally, the Compensation
Committee recommends salary ranges for graded personnel and approves personnel
policies recommended by senior officers of the Bank. Mr. Gregg does not
participate in Committee deliberations and voting regarding his compensation.
During the fiscal year ended December 31, 1998, the Board of Directors of
the Company held a total of twelve (12) regular meetings and one (1) special
meeting. Each of the persons who were directors of the Company during 1998
attended at least 75% of the aggregate of (i) the total number of such meetings
and (ii) the total number of meetings held by all committees of the Board on
which such directors served during 1998.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following information is furnished with respect to the i) the Chief
Executive Officer of the Company, and ii) the Company's other executive officers
whose total annual salary and bonus paid, accrued or distributed exceeded
$100,000 for the fiscal year ended December 31, 1998 (the "Named Executive
Officers"):
5
SUMMARY COMPENSATION TABLE
Long-term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------- ----------------------- -------
Other All
Annual Restricted Other
Compensa- Stock Options/ LTIP Compensa-
Name and Salary Bonus tion Award(s) SARs Payouts tion
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- -------------------- ---- ------------ -------- -------- ---------- --------- ------- ----------
James M. Gregg 1998 $236,000 (1) $195,750 (6) -- - -- $75,254 (2)
Chairman of the Board 1997 223,000 (1) 156,339 (6) -- 4,725 -- 78,598 (2)
Chief Executive Officer and 1996 199,894 (1) 106,600 (6) -- -- -- 77,556 (2)
Director of the Company
and the Bank
Rodney D. Jones 1998 188,710 (1) 156,339 (6) -- 6,483 -- 57,375 (3)
President, Chief Operating 1997 175,710 (1) 95,023 (6) -- 4,725 -- 48,606 (3)
Officer and Director of the 1996 159,532 (1) 82,300 (6) -- 23,152 -- 24,830 (3)
Company and the Bank
Gary T. Clem 1998 103,700 51,580 (6) -- 2,416 -- 5,618 (4)
Executive Vice President 1997 100,168 39,888 (6) -- 3,675 -- 5,114 (4)
and Credit Administrator 1996 102,102 33,100 (6) -- 13,891 -- 4,421 (4)
of the Bank
Michael J. Gilligan 1998 98,785 49,393 (6) -- 2,269 -- 5,189 (5)
Vice President and Chief 1997 93,636 37,453 (6) -- 3,675 -- 4,402 (5)
Financial Officer of the 1996 93,766 33,400 (6) -- 13,891 -- 4,636 (5)
Company and the Bank
- ----------
(1) Includes director's fees of $18,000, $17,000 and $6,750 for Mr. Gregg, and
$15,000, $14,000 and $6,750 Mr. Jones, for 1998, 1997 and 1996 respectively
(see "Director Compensation" herein).
(2) Consists of (i) Company contributions to Mr. Gregg's account pursuant to
the Company's 401(k) Plan (the "401(k) Plan") in the amounts of $3,148,
$4,750 and $4,620 for the years 1998, 1997 and 1996, respectively; (ii)
Company contributions to Mr. Gregg's account pursuant to the ESOP in the
amounts of $3,825, $5,567 and $4,655 for the years 1998, 1997 and 1996,
respectively and (iii) accruals and mortality costs recognized by the Bank
on behalf of Mr. Gregg in the amounts of $68,281 for each of the years
1998, 1997 and 1996, in connection with Mr. Gregg's Deferred Compensation
Agreement (see "Salary Continuation Plan and Agreements" herein). The
401(k) Plan permits all eligible participants, after six months of service
and attainment of age 21, to contribute up to 15% of their annual salary on
a pre-tax basis (subject to a statutory maximum), which contributions vest
immediately when made. Employer contributions are made in varying
amounts at the discretion of the Board of Directors, and become vested at
the rate of 20% per year beginning after the third year of eligibility.
Participants have investment discretion within certain limitations with
respect to the contributions in their accounts. The ESOP is designed
primarily to invest the Bank's contributions in shares of the Company's
Common Stock. Employees become eligible to participate after one (1) year
of service and attainment of age 21. Employer contributions are made in
varying amounts at the discretion of the Board of Directors (up to a
maximum of 15% of total base salaries of eligible participants), are
allocated primarily based on employee compensation, and become vested over
the same period as the 401(k) Plan contributions. All assets of the ESOP
are held in trust for the exclusive benefit of participants and are
administered by a committee (consisting of three employees of the Bank)
appointed by the directors of the Company.
(3) Consists of (i) Company contributions to Mr. Jones' account pursuant to the
401(k) Plan in the amounts of $3,148, $4,043 and $3,820 for the years
1998, 1997 and 1996, respectively; (ii) Company contributions to Mr.
Jones' account pursuant to the ESOP in the amounts of $3,825, $5,311 and
$4,655 for the years 1998, 1997 and 1996, respectively, and (iii) accruals
and mortality costs recognized by the Bank on behalf of Mr. Jones in the
amounts of $50,402, $39,252 and $16,355 in 1998, 1997 and 1996,
respectively, in connection with Mr. Jones' Salary Continuation Agreement
(See "Salary Continuation Plan and Agreements" herein).
(4) Consists of (i) Company contributions to Mr. Clem's account pursuant to the
401(k) Plan in the amounts of $2,361, $1,647 and $1,200 for the years 1998,
1997 and 1996, respectively; and (ii) Company contributions to Mr. Clem's
account pursuant to the ESOP in the amounts of $3,257, $3,467 and $3,221
for the years 1998, 1997 and 1996, respectively.
(5) Consists of (i) Company contributions to Mr. Gilligan's account pursuant to
the 401(k) Plan in the amounts of $2,264, $1,301 and $1,610 for the years
1998, 1997 and 1996, respectively; and (ii) Company contributions to Mr.
Gilligan's account pursuant to the ESOP in the amounts of $2,925, $3,101
and $3,026 for the years 1998, 1997 and 1996, respectively.
(6) Aggregate amount of perquisites and other personal benefits did not exceed
the lesser of $50,000 or 10% of total salary and bonus reported in
preceding columns.
6
OPTION GRANTS, EXERCISES AND HOLDINGS
The following table is furnished with respect to stock options and
SARs granted during the last completed fiscal year to the Named Executive
Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of Percent of
securities total options/
underlying SARs granted Exercise or Grant date
Options/SARs to employees base price Expiration present
Granted(1)(2) in Fiscal Year ($ Per Share)(2) Date Value (3)
------------------------------ ---------------- ---- ---------
Rodney D. Jones 6,483 35.4% $12.38 1/2/2008 $42,528
Gary T. Clem 2,416 13.2% 12.38 1/2/2008 15,849
Michael J. Gilligan 2,269 12.4% 12.38 1/2/2008 14,885
The following table is furnished with respect to stock options held by the
Named Executive Officers at December 31, 1998 and exercised stock options for
the fiscal year then ended. The Company has no plans pursuant to which stock
appreciation rights may be granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at In-the-Money Options
on Value 1998 Year-End at 1998 Year-End
Exercise Realized Exercisable/Unexercisable (2) Exercisable/Unexercisable (4)
-------- -------- ----------------------------- -----------------------------
James M. Gregg -- -- 17,994 / 12,677 $164,105 /$ 72,106
Rodney D. Jones -- -- 44,716 / 46,990 411,313 / 314,636
Gary T. Clem -- -- 17,314 / 25,023 162,337 / 167,255
Michael J. Gilligan -- -- 17,415 / 24,963 163,322 / 168,104
- ----------
(1) Options vest 20% per year from date of grant until fully vested after five
years. Upon exercise, option holders may surrender shares to pay the option
exercise price and satisfy tax withholding requirements.
(2) Retroactively adjusted for a stock dividends declared since the grant of
the options.
(3) The fair value of each option grant has been estimated on the date of grant
using the following assumptions: a dividend yield of 0.00%,; expected
option life of five years; a risk free rate of return of 5.63%; and, a
volatility factor of 36%.
(4) Market value of underlying securities at year-end minus the exercise price.
7
STOCK OPTION PLANS
The Company has adopted three stock option plans which were approved by the
Company's shareholders in 1983, 1991 and 1997(collectively, the "Plans"). The
Plans are intended to advance the interests of the Company and its subsidiaries
by encouraging stock ownership on the part of participating employees and
directors (employees only in the case of the 1983 Plan), by promoting their
interest in the success of the Company and by encouraging them to remain with
the Company and/or its subsidiaries. The Plans provide for the issuance of both
"incentive" and "non-qualified" stock options to full-time salaried officers and
employees of the Bank and of "non-qualified" stock options to non-employee
directors of the Bank (incentive options and officers and employees only in the
case of the 1983 Plan). All options are granted at an exercise price of not less
than one hundred percent (100%) of the fair market value of the stock on the
date of grant (1). The purchase price of any shares exercised under the Plans
shall be paid in full in cash, cash equivalents or outstanding Common Stock of
the Company. Each option expires not later than ten (10) years from the date the
option was granted. Options are exercisable in installments as provided in
individual stock option agreements; provided, however, that if an optionee fails
to exercise his or her rights under the options within the year such rights
arise, the optionee may accumulate them and exercise the same at any time
thereafter during the term of the option. In addition, in the event of a
"Terminating Event," i.e., a merger or consolidation of the Company as a result
of which the Company will not be the surviving corporation, a sale of
substantially all of the Company's assets, or a change in ownership of at least
25% of the Company's stock (subject to certain exceptions), all outstanding
options under the Plans shall become exercisable in full (subject to certain
notification requirements), and shall terminate if not exercised within a
specified period of time, unless provision is made in connection with the
Terminating Event for assumption of such options, or substitution of new options
covering stock of a successor corporation. Although the 1983 Plan has expired
certain options granted thereunder are still outstanding. As of December 31,
1998, the Company had options outstanding to purchase a total of 97,078,
359,748, and 86,661 shares of its Common Stock under the 1983, 1991 and 1997
Plans, respectively, with average exercise prices of $2.81, $3.10 and $11.91 per
share, respectively (retroactively adjusted for a stock dividend paid on
February 10, 1999) with respect to all such options. At that same date, the fair
market value of the Company's Common Stock was $12.5625.
SALARY CONTINUATION PLAN AND AGREEMENT
The Bank entered into a Salary Continuation Agreement (the "Continuation
Agreement") with Rodney D. Jones effective December 31, 1997, pursuant to which
Mr. Jones will receive benefits in the amount of $70,000 per year for fifteen
(15) years upon retirement at age 65, provided that he remains continuously
employed by the Bank from the effective date of the Continuation Agreement until
age 65. In the event of death prior to retirement, the same benefits will be
paid to Mr. Jones' beneficiary for fifteen years following such death. In the
event of disability prior to retirement or in the event of termination as a
result of a merger or similar transaction, Mr. Jones will receive the same
benefits upon reaching age 65 as if he had remained employed by the Bank. In the
event of termination by the Bank without cause, Mr. Jones will receive that
portion of his benefits upon retirement as were vested at the time of
termination (20% per year of service). All benefits cease in the event of
termination for "cause" or in the event of his voluntary termination of
employment. The cost of making payments under the Continuation Agreement is
accrued for annually by the Bank in amounts determined by the utilization of the
interest method. The Bank will eventually be reimbursed, however, for payments
made under the Continuation Agreement through the proceeds of a life insurance
policy that names the Bank as beneficiary, and for which the Bank recognizes a
monthly mortality cost.
The Bank and the Company entered into a Deferred Compensation and Stock
Purchase Agreement (the "Agreement:) with Mr. Gregg in 1986, which is
substantially similar to Mr. Jones' Continuation Agreement except as described
herein. The annual retirement benefits for Mr. Gregg are $70,000 per year but
for only thirteen (13) years following retirement. Mr. Gregg is fully vested in
his benefits and has already passed the retirement age specified in the
Agreement, so he will receive his full benefits regardless of the circumstances
under which he may leave the employ of the Company. The cost of making payments
under the Agreement was fully accrued for as of December 31, 1998, however,
mortality costs continue to be recognized on the life insurance policy. Upon
death, the proceeds from the insurance policy will be used by the Company to
purchase shares of the Company's stock owned by Mr. Gregg's family trust, at a
purchase price equal to the average sales price of the stock for three months
prior to the time of death. The amounts accrued by the Bank for Mr. Gregg and
Mr. Jones, as well for mortality costs recognized on the life insurance policies
for 1998, 1997 and 1996 are set forth in the Summary Compensation Table above
(see "Executive Compensation" herein).
- ----------
(Footnote on following page)
8
REPORT OF THE COMPENSATION COMMITTEE
COMPENSATION PHILOSOPHY
Compensation for the Company's and the Bank's executive officers, as well
as other middle management officers and business development officers is
comprised of a competitive base salary and offers incentive compensation if
established performance measures are achieved. Incentive compensation may
consist of direct bonus payments to individuals, Company-wide profit sharing
through the ESOP and 401(k), and long-term compensation in the form of stock
options. The Company's philosophy is that incentive compensation based upon
individual and/or group performance will encourage high performance, enhancing
the profitability of the Company, and thus shareholder value, by aligning the
financial interests of the Company's management with those of its shareholders.
The Compensation Committee (the "Committee") has developed compensation
programs which integrate the compensation of the executive officers with the
Company's annual and long-term performance goals. These programs are designed to
recognize achievement and to assist the Company in attracting and retaining
qualified executives. Annual base salaries are generally set at competitive
levels based upon a review of the executive compensation at similar sized
financial institutions (based upon the review of several published executive
salary survey's available) with executive incentive pay based upon the
achievement of annual goals in the areas of profitability, cost control and
productivity, loan volume and growth, credit quality and other relevant
performance criteria. Goals in these areas, tailored to individual executives or
business units, are established at the beginning of each fiscal year. For the
longer term, incentive stock options may be awarded by the Company. As a result
of the emphasis the Company places on tying the executive officers incentive
compensation to the Company's performance, in any particular year the total
compensation of the Company's executives may be more or less than that of the
Company's competitors, depending on the performance of the Company or its
individual business units.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In determining the Chief Executive Officer's compensation for 1998, the
Compensation Committee considered all of the factors discussed above. The Chief
Executive Officer's maximum bonus is determined by a sliding scale formula which
awards a maximum bonus of 100% of base salary at a return on equity of 20.0% or
greater and no bonus at a return on equity of 10.0% or less. Additionally, the
Committee considered various subjective performance criteria, such as the
overall performance of the Company compared to plan, the performance of the
Chief Executive Officer in comparison to specific management objectives and the
Company's performance as compared to its peers in Southern California.
The Committee considered the factors stated above in arriving at the award
of 1998 bonus compensation for the Chief Executive Officer as shown in the
Summary Compensation Table. The bonus compensation for 1998 and 1997 reflects
the improved profitability of the Company, improved asset quality and improved
regulatory evaluations of the Company and the Bank.
COMPENSATION COMMITTEE
Ronald K. Goode, CHAIRMAN
Alan P. Chamberlain
G. Bruce Dunn
James M. Gregg
Clarence R. Smith
- ----------
(Footnote from previous page)
(1) Exercise price per share is equivalent to the market price per share on the
date of grant, as determined by the Board of Directors of the Company,
based upon trades in the Common Stock known to the Company, and opening and
closing prices quoted on the Nasdaq Stock Market concerning the Company's
Common Stock.
9
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph depicting the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock assuming
an investment of $100 on December 31, 1993 with the cumulative total return of
the Nasdaq Stock Market Index and a compiled peer group (1) for the period of
five fiscal years commencing December 31, 1993 and ended December 31, 1998 (2).
This graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this Proxy Statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company incorporates this information by reference, and shall
not otherwise be deemed filed under such acts.
CUMULATIVE TOTAL SHAREHOLDER RETURN OF THE COMPANY
COMPARED WITH PERFORMANCE OF SELECTED INDEXES
[GRAPH]
[LINE GRAPH APPEARS HERE DEPICTING THE DATA SET FORTH BELOW]
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
The Company 100.00 140.00 169.95 356.94 740.74 613.43
Nasdaq 100.00 97.75 138.26 170.01 208.28 293.21
Peer Group 100.00 107.90 145.61 189.07 327.00 292.84
- ----------
(1) Source: SNL Securities, L.P. $250-$500 Million Bank Asset-Size Index.
(2) Assumes $100 invested on December 31, 1992 in the Company's Common Stock
assuming the reinvestment of dividends.
10
DIRECTOR COMPENSATION
Directors of the Company were not paid any fees or other remuneration
during 1998. However, all directors of the Company are also directors of the
Bank. Directors of the Bank were paid fees of $1,250 per meeting for attendance
at monthly and special Bank Board meetings during 1998. In addition,
non-salaried directors receive $100 for attendance at each meeting of a Board
committee of which they are a member except for members of the loan committee
who receive $200 for attendance at each committee meeting. Directors may also
receive an annual retainer of $3,000 or stock options provided they have
attended a minimum of 10 out of 12 regularly scheduled board meetings. In 1998,
directors Gregg, Goode, Port and Stone received $3,000 as a retainer and
directors Jones, Chamberlain, Dunn, Smith and Wohlford were granted stock
options in lieu of a retainer. Each of these directors was granted options to
purchase 727 shares at $12.38 per share which vest 20% per year until fully
vested in five years. Information concerning all stock options granted to and
held by Messrs. Gregg and Jones, who are also Named Executive Officers, are set
forth in the tables on pages 6 and 7 herein.
CERTAIN TRANSACTIONS
Some of the directors, officers and principal stockholders of the Company
and the Bank and the companies with which they are associated have financial
dealings with, are customers of, and have had banking transactions with the Bank
in the ordinary course of the Bank's business since January 1, 1998, and the
Bank expects to have such transactions in the future. All loans and commitments
to lend included in such transactions were made on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons of similar creditworthiness and, in
the opinion of Management of the Bank, did not involve more than a normal risk
of collectibility or present other unfavorable features.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has not yet solicited proposals for an independent
accountant for the current fiscal year and consequently, none has yet been
selected. The Company's financial statements for the fiscal year ended December
31, 1998 were audited by Price Waterhouse, LLP. It is anticipated that a
representative or representatives of Price Waterhouse, LLP will be present at
the meeting, 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.
All professional services rendered by Price Waterhouse, LLP during 1998 were
furnished at customary rates and terms.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present proposals
at shareholder meetings. Any such proposal concerning the Company's 2000 Annual
Meeting of Shareholders must be submitted by a shareholder prior to December 10,
1999 in order to qualify for inclusion in the proxy materials relating to such
meeting. The submission by a shareholder of a proposal does not guarantee that
it will be included in such materials. Shareholder proposals are subject to
certain regulations under the federal securities laws.
The persons named as proxy holders for the 2000 Annual Meeting of
Shareholders will have discretionary authority to vote on any shareholder
proposal which is not included in the Company's proxy materials for the meeting,
unless the Company receives notice of the proposal by February 24, 1999. If
proper notice is received by that date, the proxy holders will not have
discretionary voting authority with respect to the proposal except as provided
in the federal regulations governing shareholder proposals.
11
ANNUAL REPORT TO SHAREHOLDERS
Together with this Proxy Statement, the Company has distributed to each of
its shareholders the Annual Report to Shareholders for the year ended December
31, 1998, including audited consolidated financial statements, but such report
is not incorporated in this proxy and is not deemed to be a part of the proxy
solicitation material.
OTHER MATTERS
Management does not know of any matters to be presented to the Meeting
other than those set forth above. However, if other matters properly come before
the Meeting, it is the intention of the persons named in the accompanying Proxy
to vote said Proxy in accordance with the recommendations of the Board of
Directors, and authority to do so is included in the Proxy.
ANNUAL REPORT ON FORM 10-K
The Company will provide free of charge to any shareholder hereby
solicited, upon written request to Burnet F. Wohlford, Secretary of the Company,
at 444 South Escondido Boulevard, Escondido, California 92025, a copy of the
Company's 1998 Annual Report on Form 10-K including financial statements (but
without exhibits) filed with the Securities and Exchange Commission. If a
shareholder desires copies of the exhibits to the report, they will be provided
upon payment by the shareholder of the cost of furnishing the exhibits.
DATED: May 10, 1999
NORTH COUNTY BANCORP
James M. Gregg
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND RETURN
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING, YOU MAY THEN WITHDRAW YOUR
PROXY. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
12
NORTH COUNTY BANCORP
444 SOUTH ESCONDIDO BOULEVARD
ESCONDIDO, CALIFORNIA 92025
APPENDIX A
NORTH COUNTY BANCORP
The undersigned shareholder(s) of North County Bancorp (the "Company)
hereby nominates, constitutes and appoints Clarence R. Smith, James M. Gregg and
Burnet F. Wohlford , and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all stock of the Company
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
of the Company to be held at North County Bank, 444 South Escondido Boulevard,
Escondido, California 92025 on Wednesday, June 16, 1999 at 5:30 p.m. local time,
and any and all adjournment or adjournments thereof, as fully and with the same
force and effect as the undersigned might or could do if personally present
thereat as directed on the reverse side. The proposals herein have been proposed
by the Company.
The Board of Directors recommends a vote of "Authority Given" for Proposal
1. The proxy confers authority to and shall be voted "Authority Given" for
Proposal 1 unless "Withhold Authority" or other instructions are indicated, in
which case the Proxy shall be voted in accordance with such instructions. IF
MATTERS TO WHICH THE PERSONS MAKING THIS SOLICITATION DO NOT KNOW, A REASONABLE
TIME BEFORE THE SOLICITATION, ARE PRESENTED AT THE MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF A MAJORITY OF THE BOARD OF
DIRECTORS.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND
MAY BE REVOKED PRIOR TO ITS EXERCISE.
(To be signed on reverse side.)
A-1
/ / Please mark your votes as in this example
Authority Withhold Nominees: Alan P. Chamberlain
Given Authority G. Bruce Dunn
1. ELECTION OF DIRECTORS / / / / Ronald K. Goode
James M. Gregg
Authority given, except vote withheld Rodney D. Jones
from the following nominee(s): Jack Port
_____________________________________________________ Clarence R. Smith
_____________________________________________________ Raymond V. Stone
_____________________________________________________ Burnet F. Wohlford
_____________________________________________________
2. To transact such other business as may properly come before the Meeting and
any adjournment or adjournments thereof. Management at present knows of no
other business to be presented by or on behalf of the Company or its Board
of Directors at the Meeting.
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 THE NOMINEES.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD USING THE ENCLOSED ENVELOPE.
- --------------------------- ------------------------------- ---------------
(Please Print Name) (Signature of Shareholder) (Date)
- --------------------------- ------------------------------- ---------------
(Please Print Name) (Signature of Shareholder) (Date)
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
A-2