<PAGE>
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 Commission Only (as permitted by Rule
14a-6(e)(2) )
[X] Definitive Proxy Statement
[ ] Definitive Additional Material
[ ] 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 other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
----------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
5) Total fee paid:
----------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
----------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------------
3) Filing Party:
----------------------------------------------------------------------------
4) Date Filed:
----------------------------------------------------------------------------
<PAGE>
NOTICE OF 1998 ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE>
NORTH COUNTY BANCORP
444 SOUTH ESCONDIDO BOULEVARD
ESCONDIDO, CALIFORNIA 92025
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
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 1998 Annual Meeting of Shareholders (the "Meeting") of
North County Bancorp (the "Company") will be held at the California Center for
the Arts, Escondido, 340 North Escondido Boulevard, Escondido, California 92025
on Wednesday, May 20, 1998 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
13, 1998 will be entitled to notice of and to vote at the Meeting.
DATED: April 20, 1998
By Order of the Board of Directors
Burnet F. Wohlford
ASSISTANT SECRETARY
<PAGE>
NORTH COUNTY BANCORP
444 SOUTH ESCONDIDO BOULEVARD
ESCONDIDO, CALIFORNIA 92025
(760) 743-2200
--------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
--------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies for use at the 1998 Annual Meeting of Shareholders (the "Meeting") of
North County Bancorp (the "Company") to be held at the California Center for the
Arts, Escondido, 340 North Escondido Boulevard, Escondido, California 92025 on
Wednesday, May 20, 1998 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 April 20, 1998.
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 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
1
<PAGE>
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.
VOTING SECURITIES
There were issued and outstanding 4,637,307 shares of the Company's
Common Stock on April 13, 1998, 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 ("ESOP"), Financial Institution
Partners, L.P. and Walter D. Buchanan.
The following table provides certain information, as of April 13,
1998, with respect to the Bank's ESOP, Financial Institution Partners, L.P. and
Walter D. Buchanan:
<TABLE>
<CAPTION>
Title Name and Address Amount and Nature of Percent
of Class of Beneficial Owner Beneficial Ownership of Class
- -------- -------------------- -------------------- --------
<S> <C> <C> <C>
Common North County Bank 254,476(1) 5.5%
Stock Employee Stock Ownership Plan
444 South Escondido Boulevard
Escondido, California
Common Financial Institution Partners, L.P. 554,131 11.9%
Stock 1110 Lake Cook Road, Suite 165
Buffalo Grove, Illinois
Common Walter D. Buchanan 373,283 8.0%
Stock 4460 Century Dr., South
Salem, Oregon
</TABLE>
(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
<PAGE>
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 amendment of
the Company's Articles of Incorporation or by a bylaw amendment duly adopted by
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 13,
1998, 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:
<TABLE>
<CAPTION>
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 13, 1998 (2) CLASS (3)
----------------- --------------------- --- ---------- ------------------ ---------
<S> <C> <C> <C> <C> <C>
Alan P. Chamberlain Real Estate Investor and 68 1981 87,537 (4) 1.8%
Director Construction Consultant
G. Bruce Dunn President and Owner, Mission Pools 50 1988 85,240 (4) 1.8%
Director of Escondido, Inc.
Ronald K. Goode (4) President and Owner, R&G Toyota 65 1983 294,610 (4) 6.1%
Director - Volvo, Inc. (San Rafael)
James M. Gregg (5) Chairman of the Board and Chief 66 1981 407,065 (2),(6) 8.4%
Chairman of the Board, Chief Executive Officer, North County
Executive Officer and Director Bank and North County Bancorp
</TABLE>
- -------------------------------------
(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; 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 341,010, 38,058 and 30,387 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
<PAGE>
<TABLE>
<CAPTION>
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 13, 1998 (2) CLASS (3)
----------------- --------------------- --- ---------- ------------------ ---------
<S> <C> <C> <C> <C> <C>
Rodney D. Jones President and Chief Operating 55 1988 104,026 (6) 2.2%
President, Chief Operating Officer, North County Bank and
Officer North County Bancorp
and Director
Jack Port Commercial Property Manager and 76 1981 96,045 (2),(4) 2.0%
Director Private Investor
Clarence R. Smith Rancher (formerly President and 65 1988 61,818 (2),(4) 1.3%
Director Chief Executive Officer, ATI
Industries (aircraft parts
manufacturer) (1970 - 1988)
Raymond V. Stone Retired (formerly Civil Engineer 76 1988 32,105 (4) --(7)
Director and Executive Vice President, Neste
Brudin & Stone - Engineers and
Planners)
Burnet F. Wohlford Self-employed Investor and 69 1981 84,437 (4) 1.8%
Director and Corporate Secretary Rancher
Gary T. Clem Executive Vice President and Credit 57 n/a 24,924 (6) --(7)
Executive Vice President Administrator, North County Bank
and Credit Administrator
Michael J. Gilligan Executive Vice President and Chief 41 n/a 39,964 (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 1,317,767 (8) 27.3%
as a Group (11 Persons)
</TABLE>
- --------------------------------------
(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 13, 1998 pursuant to the Company's
1991 Stock Option Plan (see "Stock Option Plans" herein): Messrs.
Chamberlain, Dunn, Smith, Stone and Wohlford: 14,690 shares each; Mr.
Goode: 11,254 shares; and Mr. Port: 15,122 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 5,322, 13,255, 43,325, and 15,915 shares allocated to the
accounts of Messrs. Clem, Gilligan, Gregg and Jones, respectively,
under the Company's ESOP; and 16,489, 16,596, 14,690 and 39,913 shares
which the same four individuals, respectively, have the right to
acquire within 60 days of April 13, 1998 pursuant to the Company's
Stock Option Plans (see "Stock Option Plans" herein).
(7) Less than 1%.
(8) Does not include 254,476 shares held by Debbie 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
<PAGE>
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 1997.
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 three (3) times in 1997. The
purpose of the Audit Committee is to meet with the outside auditors in order to
fulfill the legal and technical requirements necessary to adequately protect the
directors, shareholders, employees and depositors of the Bank and/or the
Company. In addition, it is the responsibility of the Audit Committee to
recommend to the Board of Directors the selection of independent accountants and
to make certain that the independent accountants have the necessary freedom and
independence to freely examine all Bank and Company records. The Audit Committee
is responsible for reviewing the general scope of audit services and the results
of the annual audit. It also approves all non-audit services to be performed by
the independent auditors.
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 which met two (2) times in 1997. 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.
During the fiscal year ended December 31, 1997, the Board of Directors
of the Company held a total of twelve (12) regular meetings and no special
meetings. Each of the persons who were directors of the Company during 1997
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 1997.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
Executive officers of the Company and the Bank are elected on an
annual basis by the respective Boards of Directors and serve at the discretion
of such Boards. No executive officer of the Company received cash compensation
during the year ended December 31, 1997, except in his capacity as an executive
officer of the Bank, and except for director's fees paid by the Bank to members
of its Board of Directors.
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 $100,000 for the fiscal year ended December 31, 1997 (the "Named
Executive Officers"):
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
---------------------------
Annual Compensation Awards Payouts
--------------------------- ---------- -------
Other All
Annual Restricted Other
Compensa- Stock Options/ LTIP Compensa-
Name and Salary Bonus tion Award(s) SARs Payouts tion
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
------------------ --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James M. Gregg 1997 $222,500(1) $ 121,048 (6) -- 4,725 -- $78,598 (2)
Chairman of the Board 1996 200,350(1) 106,600 (6) -- -- -- 77,556 (2)
Chief Executive Officer and 1995 183,950 -- (6) -- -- -- 78,477 (2)
Director of the Company
and the Bank
Rodney D. Jones 1997 178,210(1) 95,023 (6) -- 4,725 -- 48,606 (3)
President, Chief Operating 1996 160,011(1) 82,300 (6) -- 23,152 -- 24,830 (3)
Officer and Director of the 1995 147,368 -- (6) -- -- -- 3,564 (3)
Company and the Bank
Gary T. Clem 1997 99,720 39,888 (6) -- 3,675 -- 5,114 (4)
Executive Vice President 1995 96,816 33,100 (6) -- 13,891 -- 4,421 (4)
and Credit Administrator 1995 90,492 -- (6) -- -- -- 1,200 (4)
of the Bank
Michael J. Gilligan 1997 93,636 37,453 (6) -- 3,675 -- 4,402 (5)
Vice President and Chief 1996 90,936 33,400 (6) -- 13,891 -- 4,636 (5)
Financial Officer of the 1995 83,259 -- (6) -- -- -- 1,566 (5)
Company and the Bank
</TABLE>
(1) Includes director's fees of $16,500 and $6,750 for Mr. Gregg, and
$16,500 and $6,750 Mr. Jones, for 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
$4,750, $4,620, and $4,620 for the years 1997, 1996 and 1995,
respectively; (ii) Company contributions to Mr. Gregg's account
pursuant to the Bank's ESOP in the amounts of $5,567, $4,655 and $ -0-
for the years 1997, 1996 and 1995, respectively and (iii) accruals and
monthly premiums paid by the Bank on behalf of Mr. Gregg in the amounts
of $68,281, $68,281 and $73,857 for the years in 1997, 1996 and 1995,
respectively, 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 Company's 401(k) Plan (the "401(k) Plan") in the amounts of $4,043,
$3,820 and $3,564 for the years 1997, 1996 and 1995, respectively; (ii)
Company contributions to Mr. Jones' account pursuant to the Bank's ESOP
in the amounts of $5,311, $4,655 and $ -0- for the years 1997, 1996 and
1995, respectively, and (iii) accruals and monthly premiums paid by the
Bank on behalf of Mr. Jones in the amounts of $39,252 and $16,355 in
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 Company's 401(k) Plan (the "401(k) Plan") in the amounts of $1.647,
$1,200 and $1,200 for the years 1997, 1996 and 1995, respectively; and
(ii) Company contributions to Mr. Clem's account pursuant to the Bank's
ESOP in the amounts of $3,467, $3,221 and $ -0- for the years 1997,
1996 and 1995, respectively.
(5) Consists of (i) Company contributions to Mr. Gilligan's account
pursuant to the Company's 401(k) Plan (the "401(k) Plan") in the
amounts of $1.301, $1,610 and $1,566 for the years 1997, 1996 and 1995,
respectively; and (ii) Company contributions to Mr. Gilligan's account
pursuant to the Bank's ESOP in the amounts of $3,101, $3,026 and $ -0-
for the years 1997, 1996 and 1995, respectively.
(6) Aggregate amount of perquisites and other personal benefits did not
exceed the lesser of $50,000 or 10% of total salary and bonus
reported in preceding columns.
6
<PAGE>
OPTION GRANTS, EXERCISES AND HOLDINGS
The following table is furnished with respect to stock options and
SARs granted during the last completed fiscal year to the Named Executive
Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percent of
securities total options/
underlying SARs granted Exercise or Grant date
Options/SARs to employees base price Expiration present
granted (1) (2) in fiscal year (3) ($ per share)(2) date value (4)
--------------- ------------------ ---------------- ---- ---------
<S> <C> <C> <C> <C> <C>
James M. Gregg 4,725 7.3% $12.38 12/17/2007 $5.34
Rodney D. Jones 4,725 7.3% 12.38 12/17/2007 5.34
Gary T. Clem 3,675 5.6% 12.38 12/17/2007 5.34
Michael J. Gilligan 3,675 5.6% 12.38 12/17/2007 5.34
</TABLE>
The following table is furnished with respect to stock options
held by the Named Executive Officers at December 31, 1997 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
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Options at In-the-Money Options
on Value 1997 Year-End at 1997 Year-End
Exercise Realized Exercisable/Unexercisable (2) Exercisable/Unexercisable (5)
-------- -------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
James M. Gregg -- -- 14,690 / 14,521 $166,732 / 121,296
Rodney D. Jones -- -- 37,264 / 43,900 426,124 / 443,967
Gary T. Clem -- -- 14,444 / 23,573 167,764 / 229,323
Michael J. Gilligan -- -- 14,533 / 23,662 168,834 / 230,392
</TABLE>
(1) Options vest 20% after three years from date of grant and 20% per year
thereafter until fully vested after seven 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 dividend paid on January 30, 1998.
(3) In 1997, options for 48,297 shares were granted to all employees, other
than executive officers.
(4) 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 seven years; a risk free rate of return of
5.83%; and, a volatility factor of 27%.
(5) Market value of underlying securities at year-end minus the exercise
price.
7
<PAGE>
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, 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, 1997, the Company
had options outstanding to purchase a total of 92,451, 342,610, and 65,097
shares of its Common Stock under the 1983, 1991 and 1997 Plans, respectively,
with average exercise prices of $2.50, $3.25 and $12.38 per share, respectively
(retroactively adjusted for a stock dividend paid on January 30, 1998) with
respect to all such options.
SALARY CONTINUATION PLAN AND AGREEMENT
The Bank entered into a Salary Continuation Agreement (the
"Continuation Agreement") with Rodney D. Jones effective December 31, 1996,
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 pays monthly
premiums. The amounts accrued by the Bank for Mr. Jones, as well as the amounts
paid in premiums for the life insurance policy for 1997 and 1996 are set forth
in the Summary Compensation Table above (see "Executive Compensation" herein).
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 is still being accrued for, and the premiums on the life
insurance policy still being paid by the Bank. 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 market
value of such shares at the time of death. The amounts accrued by the Bank for
Mr. Gregg, as well as the amounts paid in premiums for the life insurance policy
for 1997, 1996 and 1995 are set forth in the Summary Compensation Table above
(see "Executive Compensation" herein).
8
<PAGE>
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 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 1997,
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 1997 bonus compensation for the Chief Executive Officer as shown in the
Summary Compensation Table. The bonus compensation for 1997 and 1996 reflects
the improved profitability of the Company, improved asset quality and improved
regulatory evaluations of the Bank.
COMPENSATION COMMITTEE
Ronald K. Goode, Chairman
Alan P. Chamberlain
G. Bruce Dunn
James M. Gregg
Clarence R. Smith
(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
<PAGE>
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 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, 1992 and
ended December 31, 1997 (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]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
The Company 100.00 76.92 107.69 130.73 274.57 569.80
Nasdaq 100.00 114.80 112.21 158.70 195.19 239.53
Peer Group 100.00 131.14 141.49 190.95 247.94 428.83
</TABLE>
- -----------------
(1) Source: SNL Securities, L.P. $250-$500 Million Bank Asset-Size Index.
(2) Assumes $100 invested on December 31, 1991 in the Company's Common
Stock assuming the reinvestment of dividends.
10
<PAGE>
DIRECTOR COMPENSATION
Directors of the Company were not paid any fees or other
remuneration during 1997. However, all directors of the Company are also
directors of the Bank. From January 1997 through March 1997, directors of the
Bank were paid fees of $750 per meeting for attendance at monthly and special
Bank Board meetings. From April 1997 through December 1997, directors of the
Bank were paid fees of $1,250 per meeting for attendance at monthly and
special Bank Board meetings. 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 also receive an annual
retainer of $3,000 provided they have attended a minimum of 10 out of 12
regularly scheduled board meetings. None of the non-employee directors was
granted or exercised any stock options during 1997. As of December 31, 1997,
the non-employee directors held total outstanding stock options covering the
following number of shares, all at an exercise price of $3.17 per share:
Messrs. Chamberlain, Dunn, Smith and Stone: 24,486 shares each; Mr. Goode:
18,761 shares; Mr. Port: 25,208 shares and Mr. Wohlford: 24,488 shares. All
of such options were 60% vested as of December 31, 1997, and will continue to
become cumulatively exercisable at a rate of 20% per year until fully vested.
Information concerning 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 during 1997, 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, 1997 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 1997 were
furnished at customary rates and terms.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present
proposals at shareholder meetings. Any such proposals to be included in the
Proxy Statement for the Company's 1999 Annual Meeting of Shareholders must be
submitted by a shareholder prior to December 18, 1998 in a form that complies
with applicable regulations.
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, 1997, 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.
11
<PAGE>
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 1997 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: April 20, 1998
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.
NORTH COUNTY BANCORP
444 SOUTH ESCONDIDO BOULEVARD
ESCONDIDO, CALIFORNIA 92025
<PAGE>
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 the California Center for the Arts, Escondido, 340
North Escondido Boulevard, Escondido, California 92025 on Wednesday, May 20,
1998 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.)
<PAGE>
/ / Please mark your votes as in this example
Authority Withhold Nominees: Alan P. Chamberlain
1. ELECTION Given Authority G. Bruce Dunn
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
