Registration Statement No. 33-60566
As filed with the Securities and Exchange Commission on March 27, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
POST EFFECTIVE AMENDMENT NO. 4 TO
FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
NORTHERN EMPIRE BANCSHARES
(Exact name of registrant as specified in its charter)
California 94-2830529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
801 Fourth Street
Santa Rosa, California 95404
(707) 579-2265
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Deborah A. Meekins with copies to:
President and Chief Executive Officer
Sonoma National Bank Lyman G. Lea
801 Fourth Street Joan L. Grant
Santa Rosa, California 95404 c/o Haines, Brydon & Lea
(707) 579-2265 235 Pine Street, Suite 1300
(Name, address, including zip code, and San Francisco, California 94104
telephone number, including area code, Telephone: (415) 981-1050
of agent for service)
Approximate date of commencement of the proposed sale to the public:
N/A-Offering has commenced.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [x]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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PROSPECTUS
NORTHERN EMPIRE BANCSHARES
801 Fourth Street
Santa Rosa, California 95404
(707) 579-2265
96,568 Shares (1) of Common Stock, no par value
offered pursuant to the
NORTHERN EMPIRE BANCSHARES STOCK OPTION PLAN
This prospectus covers 96,568 shares of common stock, no par value, of
Northern Empire Bancshares (the "Corporation") which have been offered, are
being offered or may from time to time be offered pursuant to the Northern
Empire Bancshares Stock Option Plan, as amended (the "Plan"). Each option is
subject to the terms, conditions and restrictions set forth in the Plan and the
option agreement between the individual optionee and the Corporation. Options
have been granted to directors and employees of Northern Empire Bancshares
and/or its subsidiary, Sonoma National Bank of Santa Rosa, California (the
"Bank").
THIS PROSPECTUS MUST BE ACCOMPANIED BY A COPY OF THE CORPORATION'S LATEST ANNUAL
REPORT ON FORM 10-KSB. THAT REPORT PROVIDES INFORMATION REGARDING THE
CORPORATION, THE COMMON STOCK AND THE MARKET FOR THE COMMON STOCK, AND THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF THE CORPORATION, AND INCLUDES
FINANCIAL STATEMENTS FOR THE CORPORATION. OPTIONEES SHOULD REVIEW THAT REPORT,
ALONG WITH THIS PROSPECTUS, CAREFULLY, BEFORE DETERMINING WHETHER TO EXERCISE
THEIR OPTIONS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED IN CONNECTION WITH THE RESALE BY OPTIONEES OF
COMMON STOCK OF THE CORPORATION ACQUIRED PURSUANT TO THE PLAN.
THE SECURITIES OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE "RISK
FACTORS".
No person has been authorized to give any information or to make any
representations in connection with the offer contained in this Prospectus which
are not expressed herein, and, if given or made, such other information or
representations must not be relied upon as having been authorized. This
Prospectus does not constitute an offer of any securities other than those to
which it relates or an offer in any jurisdiction where such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that the
information herein is correct as of any time subsequent to its date.
<TABLE>
<CAPTION>
Underwriting Proceeds to
discounts and issuer or
Price to public(2) commissions(3) other persons
<S> <C> <C> <C>
Per share $6.01 -0- $6.01
Total $579,961 -0- $579,961
<FN>
(1) Options to purchase 96,568 shares are outstanding under the Plan. The
number of shares underlying outstanding options are adjusted by the
Board of Directors to reflect stock dividends declared. All numbers of
shares and option exercise prices throughout this prospectus have been
adjusted for stock dividends.
(2) Under the Plan, the exercise price of each option equals the fair
market value of the Corporation's common stock on the date the option
is granted. The exercise price for each option is specified in the
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Option Agreement for such option. The actual exercise prices range from
$4.10 to $7.01 per share, with $6.01 per share being the average
exercise price.
(3) This offering is being made pursuant to the Plan and is not
underwritten. However, the Corporation is bearing certain expenses in
connection with this registration, which are currently estimated to be
$6,000 per year, consisting of legal, accounting and registration fees.
(End of Footnotes)
</FN>
</TABLE>
The Date of this Prospectus is April , 1997.
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AVAILABLE INFORMATION
The Corporation files annual, quarterly and current reports and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference room located at 450 Fifth
Street, N.W. Room 1024, Washington, D.C. 20549, and at the public reference
facilities in the Commission's regional offices located at: 7 World Trade
Center, 13th Floor, New York, New York 10048; and at Northwest Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may request
copies of these documents, upon payment of a duplicating fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. The Corporation's SEC filings are also
available to the public on the SEC Internet site (http://www.sec.gov.).
The Corporation has filed with the Commission a Registration Statement under the
Securities Act of 1933 with respect to the securities being offered by this
Prospectus. This Prospectus does not contain all the information set forth in
the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. In addition, certain
documents filed by the Corporation with the Commission have been incorporated in
this Prospectus by reference. For further information with respect to the
Corporation and the securities offered hereby, reference is made to the
Registration Statement, including the exhibits thereto.
INCORPORATION BY REFERENCE
The Corporation's Annual Report on Form 10-KSB filed pursuant to Section 13 of
the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1996
is hereby incorporated by reference into this Prospectus.
Any statement contained in a document incorporated by reference herein shall be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein, or in any amendment or supplement hereto, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
On request the Corporation will furnish, without charge, to each person to whom
this Prospectus is delivered, copies of any document incorporated by reference
in this Prospectus (not including exhibits, unless such exhibits are
specifically incorporated by reference into the information that the Prospectus
incorporates). Oral or written requests for copies should be directed to Deborah
A. Meekins, President and Chief Executive Officer, Sonoma National Bank, 801
Fourth Street, Santa Rosa, California 95404, Telephone: (707) 579-2265.
ANNUAL REPORTS TO SECURITY HOLDERS
The Corporation provides and will continue to provide its shareholders with an
annual report not later than 120 days after the close of its fiscal year. Such
report contains a consolidated balance sheet as of the end of the fiscal year
and an income statement and statement of cash flow for such fiscal year. The
annual report contains financial information that has been examined and reported
upon, with an opinion expressed by, independent certified public accountants.
The Corporation also provides its shareholders with other periodic reports
containing unaudited financial information. The Form 10-KSB annual report of the
Corporation will be available to shareholders within 90 days after the end of
its fiscal year.
FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" as defined in section 27A of
the Securities Act of 1993, as amended, and section 21E of the Securities
Exchange Act of 1934, as amended, which includes statements such as projections,
plans and objectives and assumptions about the future, and such forward looking
statements are subject to the safe harbor created by these sections. Many
factors could cause the actual results, amounts or events to differ materially
from those the Corporation expects to achieve or occur, such as changes in
competition, market interest rates, economic conditions and regulations.
Although the Corporation has based its plans and projections on certain
assumptions, there can be no assurances that its assumptions will be correct, or
that its plans and projections can be achieved.
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PROSPECTUS SUMMARY
The following summary sets forth, in an abbreviated manner, information selected
from this Prospectus and is qualified in its entirety by the information in the
remainder of this prospectus. Optionees are urged to read the entire Prospectus
carefully before deciding to exercise a stock option.
The Corporation
Northern Empire Bancshares is a bank holding company headquartered in Santa
Rosa, California and parent of Sonoma National Bank (the "Bank") of Santa Rosa,
California. The Bank was organized as a national banking association on March
27, 1984, and commenced operations on January 25, 1985. It currently has three
banking offices: the main office is located at 801 Fourth Street, in the central
business district of Santa Rosa, a branch office is located in the Oakmont area
of Santa Rosa, approximately 5 miles east of the main office, and a branch
office is located in the Windsor Safeway Supermarket, approximately 5 miles
north of the main office. The Bank engages in the general commercial banking
business. It accepts checking and savings deposits, offers money market deposit
accounts and certificates of deposit, makes secured and unsecured commercial and
other installment and term loans, real estate loans and SBA loans and offers
other customary banking services. See, "The Corporation, Business of the Bank."
The Bank's primary market area and the source of most of its loan and deposit
business is Sonoma County, California.
The Corporation had total assets of $224,793,000 as of December 31, 1996,
including net loans of $165,681,000. Total deposits at December 31, 1996 were
$209,235,000 and shareholders' equity was $14,338,000. The Corporation reported
net income of $2,306,000 for the year ended December 31, 1996, as compared to
income of $1,720,000 for the year ended December 31, 1995. See, "Management's
Discussion and Analysis of Financial Condition or Plan of Operation."
The Offering
The Offering Northern Empire Bancshares Stock Option Plan
Securities Offered Pursuant
to Plan 96,568 shares of common stock, no par value
Eligible Participants Directors and employees of the Corporation
and/or any of its subsidiaries
Exercise Price The exercise price of an option is
specified in the optionee's Option
Agreement. Under the Plan, the exercise
price may not be less than the fair market
value of the Corporation's common stock on
the date the option was granted.
Exercise of Options Written notice must be given to
the Corporation stating the number of shares
with respect to which the option is being
exercised, and the date the shares should be
delivered (which must be at least 15, but
not more than 30, days from the date of the
notice).
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RISK FACTORS
Lack of Dividends. In the ten years since it commenced business, the Corporation
has paid cash dividends to its shareholders in 1995, 1994, 1993, 1992, and 1991,
paid a 5% stock dividend in 1996, 1995 and 1994, has declared a 5% stock
dividend in February 1997 and has had one stock split in 1989. There can be no
assurance that dividends will be declared in the foreseeable future. The
Corporation's ability to pay dividends is subject to the limitations of the
California General Corporation Law. At present, the Corporation's primary source
of income is dividends from its subsidiary, the Bank and the ability of the Bank
to pay dividends to the Corporation is subject to legal limitations.
Competition, Economic Conditions and Government Regulation. The Corporation and
the Bank operate in an increasingly competitive financial and banking
environment and compete with a number of other commercial banks, savings and
loan associations, money market funds, credit unions and other financial
institutions, many of which have substantially greater financial resources.
There is no assurance that the Corporation will continue to be able to compete
successfully.
The Bank is significantly affected by general economic and political conditions,
and by governmental monetary and fiscal policies. Conditions such as inflation,
recession, unemployment, interest rates, short money supply, scarce natural
resources, and other factors are beyond the Corporation's control and may
adversely affect its profitability. These changes could negatively impact the
Bank's profitability and growth of its loan portfolio.
The Corporation is subject to extensive governmental supervision, regulation and
control, and there can be no assurance that future legislation or government
policy will not adversely affect the banking industry or the operations of the
Corporation in particular.
Lack of Trading Market. There is currently a limited trading market for the
Corporation's common stock. The number of shares traded as reported by Hoefer &
Arnet, a market maker for the Corporation, in the months of October, November
and December 1996 was 25,600, 93,400 and 46,000 shares, respectively, equaling
1.8%, 6.4% and 3.1% of the Corporation's outstanding common stock. It is not
possible to predict the trading volume that will occur at any time in the
future.
Capital Adequacy. The Corporation and the Bank are both considered
"well-capitalized" under federal capital adequacy guidelines at this time. As a
result, the Corporation and the Bank benefit in various ways, including a low
deposit insurance premium, exemptions from some regulatory restrictions such as
the brokered deposit restrictions and increased ability to engage in new
activities. However, if the Corporation grows more quickly than its retained
earnings grow, or if it suffers losses, so that its capital to asset ratios
decline, the Corporation and the Bank will lose these benefits unless they can
raise capital. Although the Corporation believes that it could raise capital if
necessary, there can be no assurances that it would not affect the market for
the common stock, or that the Corporation would not incur significant costs in
such a transaction.
SBA Lending Programs. A substantial part of the Bank's loan business consists of
loans guaranteed in part under one of the Small Business Administration's (SBA)
loan programs. These programs are subject to revisions based upon political
conditions. Also, a number of other lenders, including banks and other types of
business lenders, compete with the Bank for this business. Many other lenders
are Preferred Lenders like the Bank. There can be no assurance that the Bank
will continue to make a substantial number and amount of SBA loans, or that such
loan business will continue to be profitable.
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DESCRIPTION OF THE PLAN
General Plan Information
The Northern Empire Bancshares Stock Option Plan (the "Plan") was adopted by the
Board of Directors of the Corporation on February 26, 1984, and approved by the
shareholders at the 1985 annual shareholders' meeting. Amendment No. 1 to the
Plan, which increased the number of shares for which options could be granted to
311,380 from 244,014 and amended other restrictions and provisions in the Plan
to comply with the requirement for "incentive stock options" under the Tax
Reform Act of 1986, was adopted by the Board of Directors on May 16, 1989 and
approved by the shareholders at the 1989 annual shareholders' meeting. Amendment
No. 2 to the Plan, which permits the Board of Directors to extend the options of
employees or directors upon termination of employment or service as a directors
for up to six (6) months following such termination, was approved by the Board
on October 16, 1990. The approval of the shareholders was not required for
Amendment No. 2.
The purpose of the Plan was to provide a means whereby directors and employees
of the Corporation and/or the Bank may be given an opportunity to purchase
shares of the Corporation's common stock. The Plan was intended to advance the
interests of the Corporation and the Bank by encouraging stock ownership on the
part of key employees, by enabling the Corporation and the Bank to secure and
retain the services of highly qualified persons as directors and employees, by
providing such directors and employees with an additional incentive to make
every effort to enhance the success of the Corporation and the Bank and by
providing a means whereby directors may be compensated for significant
contributions to the success of the Corporation and the Bank.
The Plan provided for the grant of both non-qualified options and options
which are intended to qualify as "incentive stock options" as defined in
Section 422 of the Internal Revenue Code (the "Code"). See, "Federal Tax
Consequences."
Term of the Plan and Amendments
Options could be granted under the Plan until February 26, 1994. The Plan could
have been modified, amended or terminated earlier by the vote of the holders of
a majority of the Corporation's outstanding common shares or by the
Corporation's Board of Directors. However, without the approval of the
shareholders as provided above, the Board could not have (a) increase (other
than pursuant to the adjustment provisions referred to below) the maximum number
of shares as to which options may be granted under the Plan; (b) decrease the
minimum exercise price provided by the Plan; (c) extend the term of the Plan or
the maximum term of the options granted under it; (d) decrease, directly or
indirectly (by cancellation and substitution of options or otherwise), the
exercise price applicable to any option granted under the Plan; or (e) withdraw
the administration of the Plan from the Board or a committee of the Board.
Administration
The Plan is administered by the Corporation's Board of Directors. The Board had
the authority to determine the individual employees and directors who will
receive options, the number of shares to be covered by such options and the
timing of the grants, and to interpret the Plan. In making any determination as
to participants to whom options may be granted and the number of shares to be
covered by such options, the Board took into account the duties of the
respective participants, their present and potential contributions to the
success of the Corporation and the Bank, and such other factors as the Board
deemed relevant in connection with accomplishing the purposes of the Plan.
The individual directors are elected by the shareholders of the Corporation at
each annual shareholders' meeting. At each such meeting the directors are
elected for the following year and until their successors are elected and
qualified. A director of a California corporation may be removed by the vote of
the shareholders, by the Board if the director is declared of unsound mind by a
court or convicted of a felony or by a Superior Court action requested in a suit
brought by shareholders holding at least 10% of the outstanding stock, in the
case of fraudulent or dishonest acts or gross abuse of authority or discretion.
Also, because the Corporation is a bank holding company, directors may be
removed by the Federal Reserve Board in the event of certain misconduct.
Eligibility
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Options could be granted under the Plan to any director and/or employee of the
Corporation or its subsidiaries. As to options granted as "incentive stock
options", the aggregate fair market value (determined as of the date an option
is granted) of the shares as to which such options first become exercisable by
an optionee) may not exceed $100,000 during any calendar year.
At February 26, 1994, approximately 70 directors and employees were eligible to
receive options under the Plan, and 23 such eligible individuals had been
granted options.
Nothing in the Plan confers on any director or employee any right to continue in
the employment of the Corporation or affects the terms and provisions of any
agreement between an employee and the Corporation. Furthermore, options granted
under the Plan confer no rights as a shareholder of the Corporation until
validly exercised.
Number of Shares Available
Subject to certain adjustment provisions described below, the Plan provides that
options may be granted to participants by the Corporation from time to time
until February 26, 1994 for an aggregate of 333,498 shares of the Corporation's
common stock (as adjusted for stock dividends and the like). Certain information
regarding the common stock is provided below under "Description of Common
Stock."
At March 4, 1997, 233,430 shares of common stock had been purchased pursuant to
the exercise of options granted under the Plan, and 96,568 shares were subject
to options granted under the Plan. When the Plan expired on February 26, 1994,
there were 200 shares available under the Plan for options that had not been
granted and since then 3,300 options for shares have expired. Options may no
longer be granted under the Plan. The 5% stock dividends declared in 1997 and 5%
stock dividends distributed in 1996, 1995 and 1994 resulted in 22,118 additional
shares subject to option.
Term of Options and Determination of Exercise Price
The option price to be paid upon exercise of an option may not be less than the
fair market value of the shares of the Corporation's common stock on the date
the option was granted. The fair market value of the Corporation's common stock
could be established by the Board by use of any reasonable valuation method,
taking into consideration prices at which shares of the Corporation have
recently traded, the number of shares traded and other relevant factors as
determined by the Board.
The Plan also provides that no option may be granted to any participant who owns
stock possessing more than 10% of the total combined voting power of the
Corporation, unless the exercise price of such option is at least 110% of the
fair market value of the Corporation's common stock on the date the option is
granted, and no "incentive stock option" may be granted to any such participant
unless the exercise term of such option does not exceed five years.
Each option granted under the Plan must expire not more than 10 years from the
date the option is granted.
Assignment of Option Rights
No incentive stock option is assignable or transferable except by will or the
laws of descent and distribution. Options that are not incentive stock options
may be assigned by the optionee to a member of the optionee's immediate family
and may thereafter be exercised by such transferee or assignee to the extent
exercisable by the optionee immediately prior to such transfer or assignment.
During the lifetime of an optionee, an option is exercisable only by him or her,
except in the case of a non-incentive stock option, which can be exercised by
such transferees as are permitted above. In the event of any attachment,
execution or similar process on an option, the Corporation will notify the
optionee and allow the optionee a reasonable time (but not to exceed 60 days) to
obtain a release of the option from such process. If the optionee does not
obtain a release, the Corporation may terminate the option.
Exercise Of Options
Each option may be exercised upon the terms and conditions provided by the Stock
Option Agreement by which the option was granted.
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Options may be exercised by written notice to the Corporation stating the number
of shares with respect to which the option is being exercised, and the time of
delivery thereof, which shall be not less than 15 and not more than 30 days
after the notice is given. At the time specified in the notice, the Corporation
shall deliver to the optionee a certificate for such shares and the optionee
shall deliver payment in full, in cash or by certified or official bank check,
for the shares. The Corporation may delay the time of delivery as required for
it with reasonable diligence to comply with any applicable legal requirements.
If the optionee fails to accept delivery of or pay for all or part of the number
of shares for which the option is being exercised, the right to exercise the
option shall be terminated.
Termination of Employment or Service as a Director
Except as stated below with respect to termination of employment or service as a
director "for cause," in the event that an optionee's employment or service as a
director is terminated by failure to be re-elected or otherwise, his or her
option shall terminate immediately; provided, however, that the optionee shall
have the right to exercise the option within three months from the date of such
termination to the extent he or she was entitled to exercise the same
immediately prior to termination, with certain exceptions in the case of
disability or death. The Board of Directors may extend the three month exercise
period for up to three additional months, such that an optionee may have up to
six months following termination to exercise an option.
If an employee-optionee's employment is terminated for cause, including willful
breach of duty by the employee or habitual neglect of duty, the right to
exercise any option shall immediately and automatically terminate; provided,
however, that the Board may, in its sole and absolute discretion, prior to the
expiration of thirty days after the date of said termination, reinstate the
option as set forth below.
If a director-optionee's service as a director is terminated pursuant to Section
302 of the California General Corporation Law (with respect to removal for
cause), pursuant to Section 304 of the California General Corporation Law (with
respect to removal by shareholders' suit in case of fraudulent or dishonest acts
or gross abuse of authority or discretion with reference to the Corporation), or
if the Comptroller of the Currency or other supervisory authority shall exercise
its cease and desist power to remove a director from office, the right to
exercise any option shall immediately and automatically terminate; provided,
however, that the Board may, in its sole and absolute discretion, prior to the
expiration of thirty days after the date of said termination, reinstate such
option as set forth below.
If the Board determines that an optionee's option is to be reinstated as
provided above, written notice of such determination shall be sent to the
optionee, at his or her last known address. Upon receipt of such written notice,
the optionee shall have the right to exercise the option, to the extent that he
or she was entitled to exercise the same immediately prior to termination, at
any time during the period from receipt of such written notice to a day three
months from the date of termination.
Additional Terms
In the event that the outstanding shares of common stock of the Corporation are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Corporation or of another corporation,
by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split, combination of shares, dividend payable in common
stock, acquisition, or the like, appropriate adjustment will be made by the
Board in the number and kind of shares for the purchase of which options may be
granted under the Plan. In these cases, the Board will also make appropriate
adjustment in the number and kind of shares as to which outstanding options will
be exercisable, so that any participant's proportionate interest in the
Corporation by reason of rights under any unexercised portions of such option
shall be maintained. Such adjustment in outstanding options will be made without
change in the total price applicable to the unexercised portion of the option
and with a corresponding adjustment in the option price per share.
In the event of a dissolution or liquidation of the Corporation or a merger,
consolidation, acquisition or other reorganization in which the Corporation is
not the surviving or resulting corporation, the Board of Directors has the power
to cause the termination of every outstanding option; provided, however, that in
all events the optionee will have the right, immediately prior to such
dissolution, liquidation, merger, consolidation, acquisition or other
reorganization in which the Corporation is not the surviving or resulting
corporation, to exercise his or her option and purchase shares subject thereto,
to the extent of any unexercised portion of the option, without regard to any
installment provision in the option agreement, provided that in all events the
option is otherwise exercisable in accordance with the terms and conditions of
the Plan.
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Additional Information
For additional information about the Plan and the administrators of the
Plan, participants should contact Deborah A. Meekins, President and Chief
Executive Officer, Sonoma National Bank, 801 Fourth Street, Santa Rosa,
California, 95404, telephone: (707) 579-2265
Miscellaneous
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 or qualified under Section 401(a) of the Code.
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FEDERAL TAX CONSEQUENCES
The Plan provides for the grant of both non-qualified options and options which
are intended to qualify as "incentive stock options" as defined in Section 422
of the Code. The Code provides that no income is recognized from the grant of an
incentive stock option or, as long as certain requirements are met, from the
exercise of an incentive stock option by the optionee. If the requirements are
not met, ordinary income will be recognized at the time of exercise. On the sale
of stock acquired through the exercise of an option, long-term or short-term
capital gain will be recognized, depending upon how long the stock was held.
Under the current tax laws, capital gains are presently taxed at rates that are
slightly less than ordinary income rates. The employer is not allowed a business
expense deduction with respect to an incentive stock option unless income is
recognized by the optionee.
Generally, the grant of an option which does not qualify as an incentive stock
option (a "non-qualified option") does not constitute ordinary income to the
optionee, unless the option has a readily ascertainable fair market value. When
a non-qualified option is exercised, the optionee recognizes income in an amount
equal to the difference between the option price and the value of the stock at
the time of exercise. The employer is allowed a business expense deduction equal
to the amount included in the optionee's income in the employer's corresponding
tax year.
In the event of a merger or acquisition involving the Corporation or the Bank in
which the Corporation or the Bank is not the surviving corporation, the vesting
of outstanding options is accelerated under the Plan. The acceleration of
vesting may be considered a "parachute payment" to the participant by the
Corporation. If the value of a participant's options to which the acceleration
applies exceeds three times that participant's annual base salary, as determined
under the Code, that participant will be subject to an excise tax on the amount
that is considered an "excess parachute payment."
Because of the complexities of the Internal Revenue Code, it is recommended that
an optionee obtain tax counseling from his or her tax advisor in connection with
the exercise of an option granted under the Plan and the sale of any common
stock acquired upon the exercise of an option. In particular, an optionee who
has substantial income is advised to obtain tax counseling, since the exercise
of an incentive stock option may constitute a tax preference item for purposes
of computing the alternative minimum tax.
RESALE OF COMMON STOCK
Each option agreement contains an agreement by the optionee that he or she will
promptly notify the Corporation in writing of any sale, transfer, or other
disposition of any shares acquired upon the exercise of an option, if the sale,
transfer or other disposition occurs within two years from the date the option
was granted or within one year from the date of exercise.
Resale of shares acquired on the exercise of a stock options must be made in
compliance with applicable Federal and state securities laws, including the
antifraud provisions and the prohibitions against trading on inside information.
Employees who are not "affiliates" of the Corporation, as defined in the
Securities and Exchange Commission's Rule 405 under the Securities Act of 1933
(the "1933 Act") and who acquire shares of common stock through the exercise of
options granted under the Plan, may reoffer and resell such shares without
further registration and without limitation as to holding period or number of
shares to be sold.
Affiliates of the Corporation, as defined in Rule 405, are limited in their
ability to sell stock of the Corporation. Affiliates are generally defined to be
persons who, directly or indirectly, control the management and policies of the
Corporation or are controlled or under common control with the Corporation or
other affiliates. Such persons generally include all executive officers,
directors, holders of 10% or more of the Corporation's common stock, and those
persons' affiliates, as defined by law or regulations. Affiliates may reoffer or
resell shares of the Corporation's common stock acquired by them through the
exercise of options granted under the Plan pursuant to either Rule 144
promulgated under the 1933 Act or an effective reoffer prospectus in accordance
with the rules and regulations of the 1933 Act.
There are a number of requirements applicable to resales by affiliates under
Rule 144. Sales must be conducted through a broker or market maker and a report
of sale must be filed with the Securities and Exchange Commission ("SEC"). The
number of shares that an affiliate may sell under Rule 144, plus all other sales
within the last three months, is limited to the greater of (i) one percent of
the corporation's
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outstanding shares or (ii) the average weekly volume of trading in the
Corporation's stock during the four weeks immediately preceding the sale, as
reported on NASDAQ.
The alternative to Rule 144 is to register the offer with the SEC, pursuant to a
reoffer prospectus. The SEC's rules and regulations require that the affiliate
desiring to reoffer or resell such securities be named in the reoffer prospectus
and state the number of shares he or she desires to have registered.
USE OF PROCEEDS
This offering was made for the purpose of providing incentive compensation to
directors and officers of the Corporation and the Bank. The Corporation intends
to use the proceeds from the offering, if any, for general corporate purposes.
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DESCRIPTION OF COMMON STOCK
Authorized Shares - General
The authorized capital stock of the Corporation consists of 20,000,000 shares of
common stock, no par value, and 10,000,000 shares of preferred stock, no par
value. Each share of common stock has the same rights, preferences and
privileges as every other share of common stock. The common stock has no
conversion or redemption rights or sinking funds provisions. Subject to the
preferences of any shares of preferred stock that may be issued in the future,
holders of the common stock are entitled to participate in such dividends as may
be declared by the Board out of funds legally available therefor and, in the
event of liquidation, dissolution or winding up of the Corporation, are entitled
to share ratably in all assets remaining after the payment of liabilities.
Shares of the common stock are not subject to assessment under the applicable
law.
The transfer agent and registrar for the common stock is ChaseMellon
Shareholders Services, L.L.C., San Francisco.
Voting Rights
Each share of common stock is entitled to one vote on any issue requiring a vote
and holders of the common stock have the right to cumulate votes in elections of
directors, as described below.
California law provides that a shareholder of a California corporation, or his
proxy, may cumulate votes in elections for directors, that is, each shareholder
has a number of votes equal to the number of shares owned by him, multiplied by
the number of directors to be elected, and he may cumulate such votes for a
single candidate or distribute such votes among as many candidates as he deems
appropriate. However, a shareholder may cumulate votes only for a candidate or
candidates whose names have been properly placed in nomination prior to the
voting and only if the shareholder has given notice at the meeting, prior to the
voting, of his intention to cumulate his votes. If any one shareholder has given
such notice, all shareholders may cumulate votes for candidates in nomination.
The Corporation's Articles of Incorporation generally may be amended at any
regular or special meeting of the shareholders by the affirmative vote of the
holders of a majority of the stock of the Corporation, unless the vote of the
holders of a greater amount of stock is required by law.
Nominations of Directors
The Corporation's Bylaws provide that nominations for directors by shareholders
may be made, provided that certain informational requirements concerning the
identities of the nominating shareholder and the nominee are complied with in
advance of the meeting. The written nomination must include the following
information: (a) the name and address of each proposed nominee, (b) the
principal occupation of each proposed nominee, (c) the total number of voting
shares that will be voted for each proposed nominee, (d) the name and residence
address of the nominating shareholder, and (e) the number of shares of voting
stock of the corporation owned by the nominating shareholder. This provision is
intended to provide advance notice to management of any effort to effect an
election contest or a change in control of the Board of Directors.
Directors' Duty of Care and Liability
The Corporation's Articles of Incorporation eliminate the personal liability of
directors to the Corporation and its stockholders for monetary damages to the
extent permitted by California law. The articles do not eliminate the duty of
care; only liability for monetary damage awards based upon a breach of that
duty. Under the articles, a director is not personally liable for monetary
damages for an action based on a claim that he did not meet this standard of
care.
A director does remain personally liable for: (i) intentional misconduct or
culpable violation of law; (ii) acts or omissions believed by the director to be
contrary to the best interests of the Corporation or its
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shareholders, or that involve the absence of good faith on the part of the
director; (iii) any transaction from which a director derived improper personal
benefit; (iv) acts or omissions that show reckless disregard for the director's
duty to the Corporation or its shareholders where the director, in the ordinary
course of performing a director's duties, should be aware of a risk of serious
injury to the Corporation; (v) acts or omissions that constitute an unexcused
pattern of inattention that amounts to an abdication of the director's duty to
the Corporation or its shareholders; (vi) transactions between the Corporation
and a director in which a director has a material financial interest; and (vii)
liability for improper dividends or other distributions, loans, or guarantees.
The Corporation may limit a director's liability only with regard to derivative
actions, i.e., actions brought by shareholders on behalf of the Corporation, and
not to claims brought by outside parties or to claims by shareholders that are
not on behalf of the Corporation. The articles do not interfere with a
shareholder's ability to pursue other remedies, such as those provided by
federal securities laws, or equitable remedies, such as injunctive relief.
Dividends
The dividend policy of the Corporation is subject to the discretion of the Board
of Directors and depends upon a number of factors, including earnings, financial
condition, cash needs and general business conditions. In addition, the Board of
Directors may declare dividends only out of funds legally available therefor.
California General Corporation Law provides that a corporation may make a
distribution if its retained earnings at least equal the amount of the proposed
distribution. In the event that sufficient retained earnings are not available
for the proposed distribution, a corporation may nevertheless make a
distribution if, immediately after giving effect to the proposed distribution,
it meets both the "quantitative solvency" and the "liquidity" tests, as set
forth in the law. In general, the quantitative solvency test requires that the
sum of the assets of the corporation equal at least 1-1/4 times its liabilities.
The liquidity test generally requires that a corporation have current assets at
least equal to current liabilities or, if the average of earnings of the
corporation before taxes on income and before interest expense for the two
preceding fiscal years was less than the average of the interest expense of the
corporation for such fiscal years, current assets must equal at least 1-1/4
times current liabilities.
The Corporation's primary source of income is the receipt of dividends from its
subsidiary bank. The Bank's ability to pay dividends is subject to the
restrictions of the national banking laws and, under certain circumstances, the
approval of the Comptroller of the Currency.
A national bank may not pay dividends from its capital. All dividends must be
paid out of net profits then on hand, after deducting for expenses, including
losses and bad debts. A national bank is also prohibited from declaring a
dividend until its surplus fund equals the amount of capital stock or, if the
surplus fund does not equal the amount of capital stock, until one-tenth of the
bank's net profits for the preceding half year, in the case of quarterly or
semiannual dividends, or the preceding two consecutive half-year periods, in the
case of an annual dividend, are transferred to the surplus fund each time
dividends are declared.
The approval of the Comptroller is required if the total of all dividends
declared by a bank in any calendar year will exceed the total of its net profits
of that year combined with its retained net profits of the two preceding years,
less any required transfers to surplus or a fund for the retirement of any
preferred stock which may be outstanding. Moreover, the Comptroller may prohibit
the payment of dividends which would constitute an unsafe and unsound banking
practice.
Issuance of Additional Shares
The Corporation has authorized capital stock consisting of 20,000,000 common
shares and 10,000,000 shares of preferred stock. Such shares have been
authorized in order that the Corporation may, in the future, raise additional
capital for growth purposes or to respond to regulatory capital requirements.
While the Corporation has no present plans to do so, such shares may be offered
without the approval of the then shareholders of the Corporation. Authorized but
unissued shares are sometimes used in connection with responses to attempts to
acquire control of a corporation. Although the Board of Directors is not aware
of and does not anticipate any attempt to acquire control of the Corporation,
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authorized but unissued shares can be used to respond to such attempts by
selling shares to a party who supports existing management or in order to
increase the number of shares outstanding, which would both increase the amount
of consideration necessary to effect a change in control of the Corporation and
dilute the percentage ownership and voting rights of an acquiror that had
already acquired some portion of the Corporation's outstanding stock.
Serial Preferred Shares
The Corporation's Articles of Incorporation authorize its Board of Directors to
fix one or more series of preferred stock and to determine the dividend rights
(including sinking fund provisions for the purchase or redemption of such
shares), conversion rights, voting rights, if any, preferences upon liquidation,
dissolution or winding up, and the number and designation of shares constituting
any such series. If and when shares of serial preferred stock are issued, such
stock may or may not have voting or conversion rights, and the holders of such
stock may have dividend, liquidation, redemption or other rights that are senior
to those of the holders of the Corporation's Common Stock. While the Corporation
has no present plans to issue any preferred shares, such shares may be issued in
the future without obtaining the approval of the holders of the Common Stock.
Preemptive Rights
Holders of the common stock of the Corporation do not have preemptive rights,
that is, any rights to subscribe for additional shares or other securities which
the Corporation may issue in the future. Therefore, future shares of the
Corporation's common stock or other securities may be offered to the investing
public or to shareholders, at the discretion of the Corporation's Board of
Directors, and such securities may have rights that are senior to those of the
holders of Common Stock.
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INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The State of California adopted legislation, effective September 27, 1987, (the
"Legislation"), which amended the California General Corporation Law to permit
limitation of liability of directors and indemnification of directors, officers
and other agents to a greater extent than permitted under prior California law.
The Legislation permits a California corporation to include a provision in its
articles of incorporation allowing the corporation to include in its bylaws, and
in agreements between the corporation and its directors, officers and other
agents, provisions expanding the scope of indemnification beyond that
specifically provided under California law.
In response to the Legislation, the Board of Directors and shareholders
previously approved amendments to the Corporation's Articles of Incorporation
and the Board of Directors approved amendments to the Corporation's Bylaws,
which limit the personal liability of directors for monetary damages for a
breach of such directors' fiduciary duty of care and allow the Corporation to
expand the scope of its indemnification of directors, officers and other agents
to the fullest extent permitted by California law. The Corporation and the Bank
have entered into Indemnification Agreements with the directors of the
Corporation and the Bank (the "Indemnification Agreements").
Indemnification Under State Statutes and Bylaws
The Corporation is subject to the California General Corporation Law, which
provides a detailed statutory framework covering indemnification of any officer,
director or other agent of a corporation who is made or threatened to be made a
party to any legal proceeding by reason of his or her service on behalf of the
corporation. Such law provides that indemnification against expenses actually
and reasonably incurred in connection with any such proceeding shall be made to
any such person who has been successful "on the merits" in the defense of any
such proceeding, but does not require indemnification in any other circumstance.
The law provides that a corporation may indemnify any agent of the corporation,
including officers and directors, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in a third party
proceeding against such person by reason of his or her services on behalf of the
corporation, provided the person acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the corporation. The law
further provides that in derivative suits a corporation may indemnify such a
person against expenses incurred in such a proceeding, provided such person
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the corporation and its shareholders. Indemnification is not
available in derivative actions (i) for amounts paid or expenses incurred in
connection with a matter that is settled or otherwise disposed of without court
approval or (ii) with respect to matters for which the agent shall have been
adjudged to be liable to the corporation unless the court shall determine that
such person is entitled to indemnification.
The law permits the advancing of expenses incurred in defending any proceeding
against a corporate agent by reason of his or her service on behalf of the
corporation upon the giving of a promise to repay any such sums in the event it
is later determined that such person is not entitled to be indemnified. Finally,
the California General Corporation Law, as amended by the Legislation, provides
that the indemnification provided by the statute is not exclusive of other
rights to which those seeking indemnification may be entitled, by bylaw,
agreement or otherwise, to the extent additional rights are authorized in a
corporation's articles of incorporation. The law further permits a corporation
to procure insurance on behalf of its directors, officers and agents against any
liability incurred by any such individual, even if a corporation would not
otherwise have the power under applicable law to indemnify the director, officer
or agent for such expenses. The Articles and Bylaws of the Corporation implement
the applicable statutory framework to provide for indemnification of directors,
officers and other corporate agents.
Indemnification Agreements
The Indemnification Agreements provide to the directors the maximum
indemnification allowed under applicable law and under the Corporation's
Articles of Incorporation and Bylaws. The Indemnification Agreements provide
indemnification which expands the scope of indemnification provided by Section
317 of the California General Corporation Law (the "Statute"). It has not yet
been determined, however, to what extent the indemnification expressly permitted
by Statute may be expanded, and therefore the validity and scope of
indemnification provided by the Indemnification Agreements may be subject to
future judicial
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interpretation.
The Indemnification Agreements set forth a number of procedural and substantive
matters which are not addressed or are addressed in less detail in the Statute,
including the following:
1. The Indemnification Agreements establish a standard of conduct
that the person to be indemnified must have acted "in a
manner such person did not believe to be contrary to the best
interests of the corporation."
2. The Indemnification Agreements establish the presumption that
the indemnified party has met the applicable standard of
conduct required for indemnification. In addition, an
arbitrator may make the determination that indemnification is
proper in any arbitration proceeding in which such
determination is pending.
3. The Indemnification Agreements provide that litigation
expenses shall be advanced to an indemnified party at his
request provided that he undertakes to repay the amount
advanced if it is ultimately determined that he is not
entitled to indemnification for such expenses.
4. The Indemnification Agreements explicitly provide that in a
derivative suit the indemnified
party will be entitled to indemnification against amounts
paid in settlement, to the fullest
extent permitted by law, where the indemnified party meets the
applicable standard of
conduct. The enforceability of the provisions in the
Indemnification Agreements providing for
settlement payments in derivative suits has not been
judicially interpreted by the courts and
may be subject to public policy limitations. The Board of
Directors has not sought a legal
opinion as to the enforceability of these provisions because
of the lack of judicial
interpretation of the Legislation to date.
5. In the event the Corporation does not pay a requested
indemnification amount, the
Indemnification Agreements allow the indemnified party to
contest this determination by
petitioning a court to make an independent determination of
whether such party is entitled to
indemnification under the Indemnification Agreements.
In the event of such a contest, the
burden of providing that the indemnified party did not meet
the applicable standard of conduct
will be on the Corporation. If the Corporation fails to
establish that the applicable standard of
conduct has not been met, the indemnified party will be
entitled to indemnification, which will
include reimbursement for expenses incurred by the
indemnified party in such contest in
establishing the right to indemnification.
6. The Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event that an
indemnified party is not entitled to full indemnification
under the terms of the Indemnification Agreements.
7. The Indemnification Agreements automatically incorporate
future changes in the laws which increase the protection
available to the indemnitee. Such changes will apply to the
Corporation without further shareholder approval and may
further impair shareholders' rights or subject the
corporation's assets to risk of loss in the event of large
indemnification claims. Each Indemnification Agreement
constitutes a binding, legal obligation of the Corporation,
and may not be amended without the consent of the individual
who is protected by such indemnification Agreement.
8. The Indemnification Agreements explicitly provide that actions
by an indemnified party serving at the request of the
Corporation as a director, officer or agent of an employee
benefit plan, corporation, partnership, joint venture or other
enterprise, owned or controlled by the Corporation, shall be
covered by the indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1993 (the "Act") may be permitted to directors, officers and controlling persons
of the Corporation pursuant to the foregoing provisions, or otherwise, the
Corporation has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
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LEGAL MATTERS
Certain legal matters in connection with the shares of common stock offered
pursuant to the Plan have been passed upon for the Corporation by Haines, Brydon
& Lea, A Law Corporation, 235 Pine Street, Suite 1300, San Francisco, California
94104.
EXPERTS
The consolidated financial statements for the fiscal year ended December 31,
1996 and 1995, included in this registration statement, have been included
herein in reliance on Coopers & Lybrand L.L.P., independent accountants, given
on the authority of such firm as experts in accounting and auditing.
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<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
The SEC filing fee for filing this Registration Statement was
approximately $600. Legal fees incurred in connection with this offering are
estimated to be $4,000, accounting fees are estimated to be $2,000 and no
transfer agent fees are expected.
Item 15. Indemnification of Directors and Officers.
The statutory and other arrangements for indemnification of directors of the
Registrant are described in full in the prospectus under the heading
"Indemnification for Securities Act Liabilities." Indemnification of officers
and other controlling persons may be made under the provisions of the
Registrant's Articles, Bylaws and Indemnification Agreements or pursuant to
California law.
Article SEVEN of the Registrant's Articles of Incorporation provides that the
Registrant is authorized to indemnify its directors, officers, employees and
other agents as follows:
SEVEN: INDEMNIFICATION OF AGENTS
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the Corporations Code) through bylaw
provisions, agreements with the agents, vote of shareholders or
disinterested directors, or otherwise, in excess of the indemnification
otherwise permitted by Section 317 of the Corporations Code, subject
only to the applicable limits on such excess indemnification set forth
in Section 204 of the Corporations Code with respect to breach of duty
to the Corporation and its shareholders.
Article VI of the Registrant's Bylaws provides for indemnification of directors,
officers, employees and other "agents" of the corporation as follows:
ARTICLE VI
Indemnification
Section 1. Extent of Indemnification. The Corporation shall have the
power to indemnify agents (as defined in Section 317 of the California
Corporations Code), including directors, officers and employees, in
accordance with the provisions of Section 317 or as otherwise permitted
under the Corporation's Articles of Incorporation.
Section 2. Expense Advancement. Expenses incurred in defending any
proceeding may be advanced by the Corporation prior to the final
disposition of such proceeding upon receipt of an undertaking by or on
behalf of the agent to repay such amount unless it shall be determined
ultimately that the agent is entitled to be identified.
Section 3. Insurance The Corporation may purchase and maintain
insurance on behalf of any agent of the Corporation against any
liability asserted against or incurred by the agent in such capacity or
arising out of the agent's status as such whether or not the
Corporation would have the power to indemnify the agent against such
liability under the provisions of Section 317 of the California
Corporations Code.
The provisions of the California General Corporation Law relating to
indemnification of directors, officers, employees and other agents of a
corporation, as presently in effect, are set forth in Sections 204 and 317,
copies of which are included in this Registration Statement as Exhibit 28.1.
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Item 16. Exhibits.
4 Stock Option Plan, including amendments to date, and forms of
Stock Option Agreements (incorporated by reference from
Exhibit 10.1 of the Registrant's Registration Statement of
Form S-2, SEC File No. 33-51906, on September 11, 1992)
5 Opinion of Haines, Brydon & Lea, a law corporation
(previously filed)
23.1 Consent of Haines, Brydon & Lea, a law corporation
(previously filed)
23.2 Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (previously filed)
24.1 Supplemental Power of Attorney (previously filed)
24.2 Supplemental Power of Attorney
99 Sections 204 and 317 of the California General Corporation
Law, with respect to
indemnification (previously filed)
99.1 Amended section 317 of the California General Corporation Law,
with respect to indemnification
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Item 17. Undertakings.
The undersigned Registrant hereby undertakes (1) to file, during any
period in which it offers or sells securities, a post-effective amendment to
this Registration Statement to (i) include any prospectus required by section 10
(a) (3) of the Securities Act of 1933; (ii) reflect in the prospectus any facts
or events which, individually or together, represent a fundamental change in the
information in the registration statement; and (iii) include any additional or
changed material information on the plan of distribution (2) for determining
liability under the Securities Act of 1933, to treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering;
and (3) file a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of this offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 18. Financial Statements and Schedules.
Not Applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on March 27,
1997.
NORTHERN EMPIRE BANCSHARES
*
By___________________________________
James B. Keegan, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacity and on the
dates indicated:
* Date: March 27, 1997
Dennis R. Hunter
Chairman of the Board of Directors
* Date: March 27, 1997
James B. Keegan, Jr.
President/Director
* Date: March 27, 1997
Patrick R. Gallaher,
Chief Accounting Officer/Director
* Date: March 27, 1997
Robert V. Pauley,
Secretary and Treasurer/Director
* Date: Marck 27, 1997
William P. Gallaher,
Director
Date: March 26, 1997
/s/Clement C. Carinalli
Clement C. Carinalli
Director
* Date: March 27, 1997
William E. Geary,
Director
- -------------------------------------
* By Joan L. Grant, Attorney-in-Fact
Power of Attorney filed
<PAGE>
Exhibit Index
23.2 Consent of Coopers & Lybrand L.L.P.
24.2 Supplemental Power of Attorney
99.1 Amended Section 314 of the California General Corporations Law, with
respect to indemnification
Coopers & Lybrand L.L.P.
a professional service firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-2 (File No.
33-60566) of our report dated January 31, 1997 (except for Note 15, as to which
the date is February 19, 1997), on our audits of the
consolidated financial statements of Northern Empire Bancshares which is
included in its Annual Report on form 10-KSB for the year ended December 31,
1996. We also consent to the reference to our firm under the caption "Experts."
/s/Coopers & Lybrand L.L.P.
San Francisco, California
March 26, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International,
a limited liability association incorporated in Switzerland.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Lyman G. Lea and Joan L. Grant, and each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitutes or substitute, may lawfully
do or cause to be done by virtue hereof.
SIGNATURE TITLE DATE
/s/Clement C. Carinalli Director March 26, 1997
Clement C. Carinalli
EXHIBIT 24.2
EXHIBIT 99.1
Section 317 of the California Corporations Code, with respect to
indemnification, as amended through January 1, 1997
ss. 317. Indemnification of agent of corporation as party to threatened, pending
or completed action; Liability insurance; Inapplicability of provisions to
proceeding against trustee, investment manager, etc
(a) For the purposes of this section, "agent" means any person who is or was a
director, officer, employee or other agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of the predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative; and
"expenses" includes without limitation attorneys' fees and any expenses of
establishing a right to indemnification under subdivision (d) or paragraph (4)
of subdivision (e).
(b) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any proceeding (other than an action by
or in the right of the corporation to procure a judgment in its favor) by reason
of the fact that the person is or was an agent of the corporation, against
expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of the person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
(c) A corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action by or in the right of the corporation to procure a judgment in its favor
by reason of the fact that the person is or was an agent of the corporation,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of the action if the person acted in good faith,
in a manner the person believed to be in the best interests of the corporation
and its shareholders. No indemnification shall be made under this subdivision
for any of the following: (1) In respect of any claim, issue or matter as to
which the person shall have been adjudged to be liable to the corporation in the
performance of that person's duty to the corporation and its shareholders,
unless and only to the extent that the court in which the proceeding is or was
pending shall determine upon application that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for
expenses and then only to the extent that the court shall determine. (2) Of
amounts paid in settling or otherwise disposing of a pending action without
court approval. (3) Of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
(d) To the extent that an agent of a corporation has been successful on the
merits in defense of any proceeding referred to in subdivision (b) or (c) or in
defense of any claim, issue, or matter therein, the agent shall be indemnified
against expenses actually and reasonably incurred by the agent in connection
therewith.
<PAGE>
(e) Except as provided in subdivision (d), any indemnification under this
section shall be made by the corporation only if authorized in the specific
case, upon a determination that indemnification of the agent is
proper in the circumstances because the agent has met the applicable standard of
conduct set forth in subdivision (b) or (c), by any of the following: (1) A
majority vote of a quorum consisting of directors who are not parties to such
proceeding.
(2) If such a quorum of directors is not obtainable, by independent legal
counsel in a written opinion.
(3) Approval of the shareholders (Section 153), with the shares owned by the
person to be indemnified not being entitled to vote thereon.
(4) The court in which the proceeding is or was pending upon application made by
the corporation or the agent or the attorney or other person rendering services
in connection with the defense, whether or not the application by the agent,
attorney or other person is opposed by the corporation.
(f) Expenses incurred in defending any proceeding may be advanced by the
corporation prior to the final disposition of the proceeding upon receipt of an
undertaking by or on behalf of the agent to repay that amount if it shall be
determined ultimately that the agent is not entitled to be indemnified as
authorized in this section. The provisions of subdivision (a) of Section 315 do
not apply to advances made pursuant to this subdivision.
(g) The indemnification authorized by this section shall not be deemed exclusive
of any additional rights to indemnification for breach of duty to the
corporation and its shareholders while acting in the capacity of a director or
officer of the corporation to the extent the additional rights to
indemnification are authorized in an article provision adopted pursuant to
paragraph (11) of subdivision (a) of Section 204. The indemnification provided
by this section for acts, omissions, or transactions while acting in the
capacity of, or while serving as, a director or officer of the corporation but
not involving breach of duty to the corporation and its shareholders shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, to the extent the
additional rights to indemnification are authorized in the articles of the
corporation. An article provision authorizing indemnification "in excess of that
otherwise permitted by Section 317" or "to the fullest extent permissible under
California law" or the substantial equivalent thereof shall be construed to be
both a provision for additional indemnification for breach of duty to the
corporation and its shareholders as referred to in, and with the limitations
required by, paragraph (11) of subdivision (a) of Section 204 and a provision
for additional indemnification as referred to in the second sentence of this
subdivision. The rights to indemnity hereunder shall continue as to a person who
has ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of the person. Nothing
contained in this section shall affect any right to indemnification to which
persons other than the directors and officers may be entitled by contract or
otherwise.
(h) No indemnification or advance shall be made under this section, except as
provided in subdivision (d) or paragraph (4) of subdivision (e), in any
circumstance where it appears:
(1) That it would be inconsistent with a provision of the articles, bylaws, a
resolution of the shareholders, or an agreement in effect at the time of the
accrual of the alleged cause of action asserted in the proceeding in which the
expenses were incurred or other amounts were paid, which prohibits or otherwise
limits indemnification.
(2) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.
(i) A corporation shall have power to purchase and maintain insurance on behalf
of any agent of the corporation against any liability asserted against or
incurred by the agent in that capacity or arising out of the agent's status as
such whether or not the corporation would have the power to indemnify the agent
against that liability under this section. The fact that a corporation owns all
or a portion of the shares of the company issuing a policy of insurance shall
not render this subdivision inapplicable if either of the following conditions
are satisfied: (1) if the articles authorize indemnification in excess of that
authorized in this section and the insurance provided by this subdivision is
limited as indemnification is required to be limited by paragraph (11) of
subdivision (a) of Section 204; or (2) (A) the company issuing the insurance
policy is organized, licensed, and operated in a manner that complies with the
insurance laws and regulations applicable to its jurisdiction of organization,
(B) the company issuing the policy provides procedures for processing claims
that do not permit that company to be subject to the direct control of the
corporation that purchased that policy, and (C) the policy issued provides for
some manner of risk sharing between the issuer and purchaser of the policy, on
one hand, and some unaffiliated person or persons, on the other, such as by
providing for more than one unaffiliated owner of the company issuing the policy
or by providing that a portion of the coverage furnished will be obtained from
some unaffiliated insurer or reinsurer.
(j) This section does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in that
person's capacity as such, even though the person may also be an agent as
defined in subdivision (a) of the employer corporation. A corporation shall have
power to indemnify such a trustee, investment manager, or other fiduciary to the
extent permitted by subdivision (f) of Section 207.
