NORTHERN EMPIRE BANCSHARES
801 Fourth Street
Santa Rosa, California 95404
(707) 579-2265
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 18, 1999
To the Shareholders of Northern Empire Bancshares:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Northern Empire Bancshares will be held at Sonoma National Bank, 801
Fourth Street, Santa Rosa, California, on May 18, 1999, at 5:00 P.M. for
the following purposes:
1. Electing directors to serve for the ensuing year.
2. Transacting such other business as may properly come before the
meeting or any adjournment thereof.
The close of business on April 1, 1999, is the record date for the
determination of shareholders entitled to notice of and to vote at the
meeting or any adjournment thereof.
Nominees for director are named in the enclosed proxy statement.
Whether or not you plan to attend the meeting, you may vote by
completing, signing, and returning the enclosed proxy card promptly.
You may revoke your proxy at any time prior to the time it is voted.
By Order of the Board of Directors
James B. Keegan, Jr.
President
April 15, 1999
(Approximate mailing date of proxy materials)
Place and Time of Annual Meeting
Sonoma National Bank
801 Fourth Street
Santa Rosa, California 95404
May 18, 1999, 5:00 P.M.
PROXY STATEMENT
NORTHERN EMPIRE BANCSHARES
Annual Meeting of Shareholders
May 18, 1999
INTRODUCTION
These proxy materials are furnished in connection with the solicitation
of proxies by the Board of Directors of Northern Empire Bancshares
("Corporation"), a California corporation, for use at the Annual Meeting
of Shareholders to be held on May 18, 1999, at 5:00 p.m., at Sonoma
National Bank, 801 Fourth Street, Santa Rosa, California, and any
adjournment thereof. These proxy materials were mailed to shareholders
on or about April 15, 1999.
PURPOSE OF THE MEETING
The meeting is to be held for the purposes of:
1. Electing seven (7) directors (the entire Board of Directors) to
serve until the next annual meeting of shareholders and until their
successors are elected and have qualified.
2. Acting upon such other business as may properly come before the
meeting or any adjournments thereof.
GENERAL PROXY STATEMENT INFORMATION
Revocability of Proxies
Any shareholder giving the enclosed proxy has the right to revoke it at
any time before it is exercised by filing with the Corporation's
Secretary, Robert V. Pauley, a written notice of revocation or by
presenting at the meeting a duly executed proxy bearing a later date. A
shareholder may also revoke the proxy by attending the meeting and
electing to vote in person, before any vote is taken.
Solicitation of Proxies
This proxy solicitation is made by the Board of Directors of the
Corporation, and the cost of the solicitation is being borne by the
Corporation. Solicitation is being made by this Proxy Statement and may
also be made by employees of the Corporation who may communicate with
shareholders or their representatives in person, by telephone or by
additional mailings in connection with proxies. While there are no
present plans to do so, the Corporation may utilize the services of
non-employees in connection with the solicitation of proxies if
management determines that this is appropriate.
Outstanding Securities and Voting Rights
As of April 1, 1999, the Corporation has one class of equity securities
issued and outstanding, consisting of 3,335,244 shares of common stock,
no par value. Such shares are held by approximately 325 shareholders of
record. All of the shares are voting shares and entitled to vote at the
annual meeting.
Only those shareholders of record of the Corporation's common stock as
of the record date, April 1, 1999, will be entitled to notice of and to
vote in person or by proxy at the meeting or any adjournment thereof,
unless a new record date is set for an adjourned meeting.
On April 6, 1999, the Board of Directors of the Corporation declared a
5% stock dividend, which is payable after the record date for the
determination of the shares entitled to vote at this meeting.
Therefore, the shares issued as a result of the 5% stock dividend cannot
be voted at the meeting. The stock dividend is payable on June 7, 1999
to the shareholders of record of the Corporation as of May 18, 1999.
Each share of common stock is entitled to one vote at the annual
meeting, except with respect to the election of the directors. In
elections for directors, California law provides that a shareholder, or
the shareholder's proxy, may cumulate votes, that is, each shareholder
has a number of votes equal to the number of shares owned by the
shareholder, multiplied by the number of directors to be elected, and he
or she may cumulate such votes for a single candidate, or distribute
such votes among as many candidates as he or she 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 the intention to cumulate votes. See
"Nomination of Directors", herein. If any one shareholder has given
such notice, all shareholders may cumulate their votes for the
nomination. The proxy holders are given, under the terms of the proxy,
discretionary authority to cumulate votes represented by shares for
which they are named proxy.
If a shareholder withholds authority to vote for directors on the
enclosed proxy, or attends the meeting, elects to vote in person, but
abstains from voting in the election of directors, that shareholder's
shares will not be counted in determining the candidates receiving the
highest number of votes. For shares held in street name, if the record
holder is a brokerage firm and the beneficial owner does not inform the
record holder how to vote the shares, the record holder will sign and
return a proxy with respect to the shares and vote in favor of the
recommendations of management of the Corporation with respect to routine
matters. For shares held in street name where the record holder is a
bank, the record holder will not return a proxy if the beneficial owner
does not inform the record holder how to vote the shares. If a
shareholder signs and returns a proxy marked as abstaining on a
particular matter or if a broker or other street name holder indicates
on a signed and returned proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter ("broker
non-votes"), those shares will not be considered as voting with respect
to that matter. In such cases of abstention, however, the shares will
be treated as shares that are present and entitled to vote for purposes
of determining the presence of a quorum.
In the election of directors, the seven (7) candidates receiving the
highest number of votes will be elected.
If the enclosed proxy is completed in the appropriate spaces, signed,
dated and returned, the proxy will be voted as specified in the proxy.
If no specification is made, it will be voted FOR the election of
directors nominated by the Board and on such other matters as may come
before the meeting at the discretion of the proxy holders.
Management of the Corporation is not aware of any other matters to come
before the meeting and recommends that the shareholders vote FOR the
election of the directors nominated by the Board.
Security Ownership of Certain Beneficial Owners and Management
Other than as set forth below, the Corporation knows of no person who is
the beneficial owner of more than 5.0% of the Corporation's outstanding
shares as of February 28, 1999.
The following sets forth the numbers of shares of common stock
beneficially owned by each director of the Corporation and the Bank and
by the directors and officers (including vice presidents and above) of
the Corporation and the Bank as a group, as of February 28, 1999. The
numbers of shares beneficially owned include the numbers of shares which
each person has the right to acquire upon exercise of stock options
granted pursuant to the Corporation's Stock Option Plan. The percentages
of shares owned beneficially are calculated, pursuant to SEC Rule
13d-3(d) (1), based on the number of shares presently outstanding plus
the number of shares which the person or group has the right to acquire.
Shares
Name Address Beneficially Owned Pct
- -------------------- -------------------- ------------------ ---
Clement C. Carinalli 520 Mendocino Ave.,
Santa Rosa, CA 95401 147,012 (1) 4.4%
Patrick R. Gallaher 6637 Oakmont Dr.,
Santa Rosa, CA 95409 97,343 (2) 2.9
William P. Gallaher 9066 Brooks Rd. South,
Windsor, CA 95492 66,670 (3) 2.0
William E. Geary 37 Old Courthouse Sq.,
Santa Rosa, CA 95404 108,156 (4) 3.2
Dennis R. Hunter 2455 Bennett Valley Rd.,
Santa Rosa, CA 95404 255,588 (5) 7.7
James B. Keegan, Jr. 1355 North Dutton Ave.,
Santa Rosa, CA 95404 99,516 (6) 3.0
Deborah A. Meekins 801 Fourth Street,
Santa Rosa, CA 95404 45,256 (7) 1.4
Robert V. Pauley 120 "D" Street,
Santa Rosa, CA 95404 177,850 (8) 5.3
All other officers
as a group(17 people) 39,940 (9) 1.2
--------- -----
Directors and Officers
as a group(25 persons) 1,037,331 31.1%
========= =====
(1) Including 17,034 shares which Mr. Carinalli has the right to
purchase upon exercise of outstanding options and 49,902 shares
held by members of his immediate family residing at his home.
(2) Including 14,115 shares held in Mr. P. Gallaher's IRA and 200
shares owned by a child living at home.
(3) Including 15,310 shares which Mr. W. Gallaher has the right to
purchase upon exercise of outstanding options, 18,506 shares held
in Mr. W. Gallaher's IRA and 10,200 shares which Mr. W. Gallaher
has the right to acquire.
(4) Including 16,220 shares which Mr. Geary has the right to purchase
upon exercise of outstanding options, 38,150 shares held in Mr.
Geary's profit sharing plan, 16,326 shares held in employee pension
and profit sharing plan of Geary, Shea & O'Donnell and 8,292 shares
held in a trust account for which Mr. Geary serves as trustee but
does not have a beneficial interest.
(5) Including 75,000 shares held in the name of Kathrine Hunter, as to
which Mr. Hunter has voting rights, 20,000 shares owned with Lois
Rust and 160,588 shares held in trust accounts for which Mr. Hunter
serves as trustee but does not have a beneficial interest.
(6) Including 71,853 shares held by Keegan & Coppin Company, Inc.,
7,540 shares held by the Keegan & Coppin Profit Sharing Plan and
7,242 held in trust accounts for which Mr. Keegan is trustee or
held in accounts for the benefit of his minor children.
(7) Including 18,388 shares which Ms. Meekins has the right to purchase
upon exercise of outstanding options.
(8) Including 20,420 shares which Mr. Pauley has the right to purchase
upon exercise of outstanding options and 18,230 shares held by Mrs.
Pauley.
(9) Including 10,666 shares which officers have the right to purchase
upon exercise of outstanding options.
ELECTION OF DIRECTORS
Nominees to the Board of Directors
- ----------------------------------
Each of the directors is to be elected to serve for the ensuing year and
until his successor is elected and has qualified. The nominees for
director as proposed by the Board are as follows:
Name and Positions with the Principal Occupation
Corporation and the Bank Age During the Past 5 Years
- --------------------------- --- -----------------------
Clement C. Carinalli
Director of the Corporation Retired CPA, local businessman,
and the Bank 53 rancher and real estate investor.
Patrick R. Gallaher,
Chief Accounting Officer of Certified Public Accountant and
the Corporation and Director local businessman; major
of the Corporation and the Bank 53 shareholder in Oakmont
Developers, a Santa Rosa
development company.
William P. Gallaher,
Director of the Corporation Real Estate developer and
and the Bank 48 investor; President of Oakmont
Developers; President of Gallaher
Construction Company.
William E. Geary,
Director of the Corporation Senior Partner in Geary, Shea
and the Bank 70 & O'Donnell, a Santa Rosa law
firm.
Dennis R. Hunter,
Chairman of the Board of the Real estate investor and
Corporation and Vice Chairman developer in Santa Rosa;
of the Board of the Bank 56 principal in Investment
Development Fund, a venture
capital fund.
James B. Keegan, Jr.,
President & Director of the Partner in Keegan & Coppin
Corporation and Chairman of Company, a Santa Rosa real
the Board of the Bank 50 estate brokerage and development
firm, since 1976.
Robert V. "Buzz" Pauley,
Secretary/Treasurer of the Owner of Pauley Exports, Ltd.,
Corporation and an exporter of California
Director of the Bank 54 food and beverage products to
the Pacific Rim; commercial
properties manager; trader of
futures and options contracts in
Chicago and other international
market exchanges.
William E. Geary, Dennis R. Hunter, James B. Keegan, Jr. and Robert V.
Pauley have served as directors of the Corporation since its initial
organization in 1982. Patrick R. Gallaher has been a director of the
Corporation since May 1992. William P. Gallaher has been a director of
the Corporation since June 1994. Clement C. Carinalli had previously
served on the Board for 10 years when he was reappointed to the Board in
May 1996. William P. Gallaher and Patrick R. Gallaher are brothers
The proxy holders designated by the Board of Directors intend to vote
all proxies held by them in favor of the election of the above-named
nominees as directors, unless authority to vote for directors is
withheld. If any of the nominees should be unable or decline to serve,
which is not anticipated, discretionary authority is reserved for the
proxy holders to vote for a substitute, to be designated by the present
Board of Directors.
In the event that additional persons are nominated as directors, the
proxy holders intend to vote all the proxies received by them in such
manner in accordance with cumulative voting as will assure the election
of as many of the nominees listed above as possible and, in that event,
the specific nominees to be voted for will be determined by the proxy
holders in their sole discretion.
Nomination 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. This provision
is intended to provide advance notice to management of any attempt to
effect an election contest or a change in control of the Board of
Directors. Specifically, the Bylaws provide that nominations for
directors, other than those made by or on behalf of existing management,
must be made in writing and mailed or delivered to the President of the
Corporation, not less than 14 nor more than 50 days prior to any meeting
of shareholders called for the election of directors, except that if
less than 21 days notice of the meeting is given, such nomination must
be mailed or delivered to the President of the Corporation by the close
of business on the 7th day following the date on which the notice was
mailed. The written nomination must include the following information,
to the extent known by the nominating shareholder:
(a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee;
(c) the total number of shares of common stock of the Corporation
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 common stock of the Corporation owned
by the nominating shareholder.
The Bylaws provide that nominations not made in accordance with the
above procedure may, in his discretion, be disregarded by the Chairman
of the meeting and, upon his instructions, the inspectors of election
shall disregard all votes cast for each such nominee.
Committees and Meetings of the Board
The Board of Directors of the Corporation does not have standing audit,
compensation or nominating committees. The functions of the audit and
compensation committees are performed by the Audit and Personnel
Committees of the Bank, respectively. The Audit Committee of the Bank
is composed of Clement C. Carinalli, James B. Keegan, Jr., Patrick R.
Gallaher and Robert V. Pauley. The Audit Committee met three times in
1998 for the purpose of reviewing the scope of and planning for the
annual audit and the results of internal operations audits of the Bank,
and the Bank's compliance with consumer laws, regulatory agency reports
and securities reports.
The Personnel Committee of the Bank is composed of William E. Geary and
Robert V. Pauley. The Personnel Committee met twice in 1998. The
purpose of the committee is for setting compensation levels of senior
officers and directors, reviewing and approving bonus plans and
payments, reviewing and approving employee benefit plans, and reviewing
and approving the Bank's personnel policy.
The Corporation's Board of Directors held a total of six meetings in
1998, including regular and special meetings. The Board of Directors of
the Bank held a total of thirteen meetings in 1998, including regular
and special meetings. No nominee for director of the Corporation, while
serving as a director, attended fewer than 75% of the total number of
meetings, of the Boards and of the committees of which he was a member.
Transactions With Directors and Officers
The Corporation leased the main premises of the Bank from Clement C.
Carinalli, a director of the Corporation and the Bank, and Ann Marie
Carinalli. The Corporation subleases the premises to the Bank. During
1996, the building was sold and Mr. and Mrs Carinalli assigned the lease
obligation to the new owners. The monthly lease payment was $16,596 per
month in 1998. The total rental expenses on this lease for the year
ended December 31, 1998 was $200,000.
The Corporation leased the Oakmont Branch premises from Oakmont
Investments of which Patrick Gallaher, a director of the Corporation and
Bank, is a partner. During 1997, Oakmont Investments sold the building
and assigned the lease obligation to the new owner. The monthly rental
for the Oakmont Branch was $8,619 at December 31, 1998. Total rental
expense on this lease for the year ended December 31, 1998 was $103,000.
The Bank leased facilities for the loan department and some
administrative offices from Mr. James Ratto, a major shareholder of the
Corporation. The monthly rent was $12,875 per month at December 31,
1998. Total rental expense on this lease for the year ended December 31,
1998 was $116,000.
The Bank has had in the ordinary course of business, and expects to have
in the future, banking transactions with its directors, officers and
their associates, including transactions with corporations of which such
persons are directors, officers or controlling shareholders. The
transactions involving loans have been and will be entered into with
such persons in the ordinary course of business, on substantially the
same terms, including interest rates and collateral, as those prevailing
at the time for comparable transactions with other persons, and on terms
not involving more than the normal risk of collectibility or presenting
other unfavorable features. At December 31, 1998, loans by the Bank to
directors, officers and their associates totaled approximately
$6,331,000, constituting 2.8% of total loans, 34.4% of the Bank's
shareholder's equity and 34.0% of the consolidated shareholders' equity
of the Corporation.
Loans to insiders, such as officers, directors, and certain other
persons are subject to the limitations and requirements of the Financial
Institutions Regulatory and Interest Rate Control Act of 1978 and
regulations thereunder.
Directors of the Bank and Executive Officers of the Bank
Information regarding the directors and the executive officers of the
Bank is reported in the Corporation's Annual Report on Form 10-KSB. A
shareholder may obtain a copy of the Annual Report on Form 10-KSB by
writing to Deborah A. Meekins, Northern Empire Bancshares, 801 Fourth
Street, Santa Rosa, CA 95404, or calling Ms. Meekins at (707)579-2265.
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid to or accrued
for the executive officers of the Bank whose cash compensation exceeded
$100,000, for services rendered for the periods indicated. The
executive officers of the Corporation, including the President, do not
receive compensation for their services as such. The President of the
Corporation, James B. Keegan, Jr., serves as the Chairman of the Board
of the Bank and receives $2,000 per month from the Bank for his services
in that capacity. All other executive officers of the Corporation are
considered outside directors of the Bank and, as such, they receive
directors' fees. See, "Compensation of Directors," below.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
(dollars in thousands) Long Term
Annual Compensation Compensation
------------------- Options
Name and Principal Position Year Salary Bonus (No. of Shares) All Other (1)
---- ------ ----- ------------- ---------
<S> <C> <C> <C> <C> <C>
Deborah A. Meekins, 1996 $133 $81 $39
President and Chief Executive 1997 141 110 51
Officer and Director of the Bank 1998 149 132 84,000 46
David F. Titus, 1996 96 54 34
Executive Vice President and 1997 100 73 46
Senior Loan Officer of the Bank 1998 107 88 15,000 37
JoAnn Barton,
Senior Vice President and 1996 80 10 0
Senior Operations Officer 1997 84 14 1
of the Bank 1998 90 17 5,000 1
Jane Baker,
Senior Vice President and 1996 79 10 0
Chief Financial Officer 1997 84 14 1
of the Bank 1998 90 17 5,000 1
<F/N>
(1) Includes contribution by the Bank for the benefit of the named
officer pursuant to the Bank's 401(k) plan and expenses incurred with
respect to the Salary Continuation Agreement for the named officer, as
described below.
</TABLE>
Salary Continuation Agreements
During 1993, the Bank entered into deferred compensation agreements with
Deborah A. Meekins, President & Chief Executive Officer, and David F.
Titus, Executive Vice President & Senior Loan Officer. Under these
agreements, the Bank is obligated to provide for them or their
beneficiaries, during a period of 15 years after the employee's death,
disability, or retirement, annual benefits ranging from $75,000 to
$100,000. Benefits are also provided to the officer if he/she resigns
following a change in control or if he/she voluntarily resigns after
June 1, 1995. The estimated present value of future benefits to be paid
is being accrued over the period from the effective date of the
agreements until their expected retirement dates. The accrued expense
is included in Other Liabilities in the financial statements. The Bank
is the beneficiary of life insurance policies that have been purchased
as a method of financing the benefits under the agreements. At December
31, 1998, the cash surrender value of these policies was $920,000, which
is included in other assets.
Stock Option Plan
Neither the Corporation nor the Bank award restricted stock or have long
term incentive plans, other than the Corporation's Stock Option Plan.
No stock options were granted to officers in 1997 or 1996, since the
stock option plan expired on February 26, 1994. Stock options granted
under the Stock Option Plan remain outstanding even though the Plan has
terminated.
The Corporation's Board of Directors adopted a new stock option plan
which was approved by the shareholders at the May 19, 1998 shareholders
meeting. Options totaling 757,500 have been granted under this plan to
all directors of the Corporation and forty-one officers and employees of
the Bank. 148,500 of the options were granted to officers and employees
of the Bank, including the following senior officers:
Aggregated Year-End Option Values
December 31, 1998
----------------------------------------------------
Number of Unexercised
Securities Underlying Options Value of
(No. of Shares)(1) Unexercised Options (2)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ----------- ------------------------- -------------------------
Deborah A. Meekins 24,688 / 84,000 $269,804 / ($75,750)
David F. Titus 2,548 / 15,000 $26,678 / ($3,750)
JoAnn Barton 4,974 / 5,000 $53,496 / ($1,250)
Jane Baker 2,128 / 5,000 $22,238 / ($1,250)
(1) Adjusted for stock dividends issued since date of the option grant.
(2) Calculated based on the difference between the fair market value
of the stock and the exercise price of the options, as of December
31, 1998.
Directors Fees
Outside Directors of the Bank (including directors who serve as
executive officers of the Corporation) receive director fees as follows:
$1,500 for each monthly board meeting attended, $500 per executive and
$250 per all other committee meetings attended. The Chairman of the
Board of the Bank receives a fee of $2,000 per month in addition to the
committee fees described above. The Corporation does not pay director's
fees at this time, and does not plan to in the near future.
Outside directors also were eligible to receive options under the
Corporation's Stock Option Plan. See "Item 11, Security Ownership of
Certain Beneficial Owners and Management." During 1998, stock options
for 17,895 shares were exercised by directors, realizing a value of
approximately $452,000. Outside directors held on December 31, 1998
options for 703,516 shares, which options had an estimated value of
$441,000 based on the difference between the fair market value of the
stock as of that date and the exercise price of the options.
During 1994, 1995 and 1996, the Corporation entered into deferred
compensation agreements with Patrick R. Gallaher, William P. Gallaher,
William Geary, and James B. Keegan, Jr. Under each of these agreements,
the Corporation is obligated to provide for the director or his
beneficiaries, during a period of between 10 to 15 years after the
director's death, disability or retirement, annual benefits ranging from
$13,000 to $55,000. The estimated present value of future benefits to
be paid is being accrued over the period from the effective date of the
agreements until the expected retirement dates. The Corporation is
beneficiary of life insurance policies that have been purchased as a
method of financing the benefits. At December 31, 1998, the cash
surrender value of these policies was $1,072,000, which is included in
other assets.
INDEPENDENT PUBLIC ACCOUNTANTS
The Corporation engaged PricewaterhouseCoopers L.L.P. to serve as the
independent public accountant for the Corporation for 1997 and 1998. It
is expected that Pricewaterhouse Coopers L.L.P. will continue to serve
as independent accountants for 1999. Representatives of Pricewaterhouse
Coopers L.L.P. will not be present at the annual meeting.
OTHER BUSINESS
If any other matters come before the meeting, not referred to in this
Proxy Statement, including matters incident to the conduct of the
meeting, the proxy holders will vote the shares represented by proxies
in accordance with their best judgment. Management is not aware of any
other business to come before the meeting and, as of the date of the
preparation of this Proxy Statement, no shareholder has submitted to
management any nomination or other proposal to be acted upon at the
meeting.
The Date of This Proxy Statement is April 15, 1999
