<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
MONARCH SERVICES, INC.
----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or registration statement no.:
(3) Filing party:
(4) Date Filed:
<PAGE>
MONARCH SERVICES, INC.
4517 Harford Road
Baltimore, Maryland 21214
xxxxxxxxx xx, 2000
Dear Stockholder:
Your Company cordially invites you to attend the 2000 Annual
Meeting of Stockholders which will be held at 11:00 A.M. on ??????
xx, 2000, at the Center Club, Legg Mason Building, 100 Light Street,
Baltimore, Maryland.
The Notice of Annual Meeting and Proxy Statement accompanying
this letter describes the business to be transacted at the Annual
Meeting. A copy of the Annual Report to Stockholders is also
enclosed herewith.
Whether you plan to attend or not, we urge you to sign, date
and return the enclosed proxy card in the postage-paid envelope
provided, in order that as many shares as possible may be
represented at the Annual Meeting. Returning your proxy does
not deprive you of your right to attend the Annual Meeting and
vote your shares in person.
A majority of the outstanding shares of Common Stock must be
represented at the Annual Meeting in order to transact business,
and accordingly, the vote of every stockholder is important. Your
cooperation in returning your executed proxy promptly will be
appreciated.
Sincerely,
/s/ JACKSON Y. DOTT
Jackson Y. Dott,
President
<PAGE>
MONARCH SERVICES, INC.
4517 Harford Road
Baltimore, Maryland 21214
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
October xx, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders
(the "Annual Meeting") of Monarch Services, Inc., a Delaware corpor-
ation (the "Company"), will be held at 11:00 A.M. local time on
October xx, 2000, at the Center Club, Legg Mason Building, 100 Light
Street, Baltimore, Maryland for the following purposes:
1. To elect five directors to hold office until their successors are
duly elected and qualified;
2. To ratify the appointment of Stegman & Company as the
Company's independent accountants for the fiscal year ending
April 30, 2001;
3. To approve a proposal to reincorporate the Company from the state of
Delaware to the state of Maryland;
4. To approve a proposal to adopt the Monarch Services, Inc. 2000
Omnibus Stock Plan;
5. To consider any other matter which may properly come before the
Annual Meeting.
All the above matters are more fully described in the
accompanying Proxy Statement.
The board of directors has fixed the close of business on
September xx, 2000 as the record date for the determination of the
stockholders entitled to notice of, and to vote at, the Annual
Meeting or any adjournment thereof, and only record holders
of Common Stock at the close of business on that day are entitled
to notice of and to vote at the Annual Meeting.
Each stockholder is cordially invited to attend the Annual
Meeting in person. To assure representation at the Annual Meeting,
however, stockholders are urged to date, sign and return the
enclosed proxy card as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the
Annual Meeting may vote in person even if he or she has previously
returned a proxy card.
By Order of the Board of Directors,
Steven M. Szekely,
Secretary
Baltimore, Maryland
xxxxxxxxx xx, 2000
<PAGE>
MONARCH SERVICES, INC.
4517 HARFORD ROAD
BALTIMORE, MARYLAND 21214
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
October xx, 2000
GENERAL INFORMATION CONCERNING THE SOLICITATION
This proxy statement is furnished in connection with the solicitation
of proxies on behalf of the board of directors of
Monarch Services, Inc. (the "Company") to be voted at the
Company's 2000 Annual Meeting of Stockholders to be held at the
Center Club, Legg Mason Building, 100 Light Street, Baltimore,
Maryland on October xx, 2000 at 11:00 a.m., prevailing local time,
and any adjournments and postponements thereof (the "Annual
Meeting"). A stockholder may revoke his proxy at any time prior
to its use by executing another proxy bearing a later date or
by notifying the Secretary of the Company in writing. Copies
of this Proxy Statement, the attached Notice of 2000 Annual Meeting
of Stockholders, and the enclosed form of proxy were first mailed
to the Company's stockholders on or about September xx, 2000. The
Company's principal executive offices are located at 4517 Harford
Road, Baltimore, Maryland 21214 and its telephone number is
(410) 254-9200.
The Proposals At the Annual Meeting, the Company's stock-
holders will consider and vote upon: the election of
five directors to hold office until their successors are elected and
qualify; a proposal to approve and ratify the appointment of Stegman &
Company as the Company's independent accountants for the fiscal year
ending April 30, 2001; a proposal to reincorporate the Company from the
state of Delaware to the state of Maryland; and a proposal to adopt the
Monarch Services, Inc. 2000 Omnibus Stock Plan.
Approval by the Board The Company's board of directors has
unanimously approved, and recommends that the Company's stock-
holders approve, the election of the nominated directors, the ratification
of the appointment of Stegman & Company as the Company's independent
accountants, the reincorporation of the Company from Delaware to Maryland
and the adoption of the Monarch Services, Inc. 2000 Omnibus Stock Plan.
<PAGE>
Voting of Proxies; Revocability of Proxy A proxy card in the
accompanying form, which is properly executed, duly returned to the
Secretary of the Company and not revoked prior to exercise, will be
voted in accordance with the instructions indicated in the proxy
card. If no instructions are given with respect to any matter
specified in the Notice of Annual Meeting to be acted upon at the
Annual Meeting, the proxies named therein will vote the shares
represented thereby in favor of the election of the nominated directors, the
ratification of the appointment of Stegman & Company as the Company's
independent accountants, the reincorporation of the Company from Delaware to
Maryland and the adoption of the Monarch Services, Inc. 2000 Omnibus Stock Plan.
Each stockholder who has executed a proxy and returned it to the Secretary of
the Company may revoke the proxy by notice in writing
to the Secretary of the Company, or by attending the Annual Meeting
in person and requesting the return of the proxy, in either case at
any time prior to the voting of the proxy. Presence at the Annual
Meeting does not itself revoke the proxy. In addition, any later
dated proxies returned on a timely basis will revoke proxies
submitted prior thereto. A stockholder who attends the Annual
Meeting in person, may, if he or she wishes, vote by ballot at
the Annual Meeting, thereby canceling any proxy previously given
by such stockholder.
Solicitation of Proxies Proxies are being solicited by and on
behalf of the Company. Accordingly, the costs of preparing,
assembling and mailing the proxy materials will be borne by the
Company. In addition to solicitation by the use of mails,
proxies may be solicited by directors, officers and employees
of the Company in person or by telephone, facsimile transmission
or other means of communication. Such directors, officers and
employees of the Company will not be additionally compensated,
but will be reimbursed for out-of-pocket expenses in connection
with such solicitation. Arrangements will also be made with
brokers and dealers, custodians, nominees and fiduciaries to
assist the Company in the solicitation of proxies, including
for forwarding of proxy materials to beneficial owners of
common stock of the Company, $0.25 par value per share (the
"Common Stock"), held of record by such persons, and the Company
will reimburse such brokers, dealers, custodians, nominees and
fiduciaries for reasonable expenses incurred in connection
therewith but will not otherwise compensate such persons. The
Company does not currently intend to retain outside proxy
solicitors to solicit proxies by use of the mails, in person,
by telephone, by facsimile transmission or by other means of
communication; however, the Company reserves the right to retain
outside proxy solicitors if necessary. The costs of outside
proxy solicitors, if retained, will be borne by the Company.
<PAGE>
Record Date The board of directors has fixed the close of
business on September xx, 2000 as the record date (the "Record
Date") for the determination of the stockholders entitled to
notice of, and to vote at, the Annual Meeting.
Ownership Of Voting Securities Only stockholders of record of outstanding Common
Stock of the Company at the close of business on September xx, 2000 are entitled
to notice of and to vote at the Annual Meeting. On August XX, 2000, 1,619,820
shares of Common Stock were outstanding.
PROPOSAL ONE: ELECTION OF DIRECTORS
The board of directors has fixed the number of directors at
five. Mr. A. Eric Dott, Mr. Jackson Y. Dott, Mr. David F. Gonano,
Mrs. Helen Delich Bentley and Mr. Kenneth C. Holt have been
nominated for a term to expire at the next annual meeting and until
their successors are elected and qualified. See also, "PROPOSAL THREE:
REINCORPORATION PROPOSAL--Maryland Unsolicited Takeovers Act--Classified Board
Of Directors."
Each of the nominees is a member of the present board of directors. Proxies
solicited hereby cannot be voted for a greater number of persons than the number
of nominees named. If at the time of the Annual Meeting
any of the nominees should be unable or decline to serve, the
discretionary authority provided in the proxy may be exercised to
vote for a substitute or substitutes. The board of directors has
no reason to believe that any substitute nominee or nominees will
be required.
Vote Required
The election of each director requires a plurality of the votes present at
the Annual Meeting and entitled to vote.
The board of directors recommends that stockholders vote FOR
the election of each of the nominees. Unless contrary instructions
are given, the persons named in the accompanying proxy will vote all
proxies in favor of the nominees listed above.
Directors And Officers
The address of each of the directors and officers of the
Company is c/o Monarch Services, Inc., 4517 Harford Road, Baltimore,
MD 21214.
<PAGE>
Name, Age, Director Principal Occupation(s) and
Since Business Experience During
Past 5 Years
---------------------------------------------------------------------
A. Eric Dott, Age 73 1970 Chairman of the Board of the
Company since 1990. Mr. Dott
is the father of Jackson Y.
Dott, President of the Company.
Jackson Y. Dott, Age 42 1987 President, Treasurer and Chief
Executive Officer of the
Company since 1990. Mr. Dott
is the son of A. Eric Dott,
Chairman of the Company.
David F. Gonano, Age 53 1996 Certified Public Accountant,
Managing Director of American
Express Tax & Business
Services, Personal Financial
Specialist.
Helen Delich Bentley, Age 76 1995 President of Helen Bentley and
Associates, Inc. since 1995;
Consultant for the Port of
Baltimore since 1995; Member
of the U.S. House of Represent-
tives from 1985-1995.
Kenneth C. Holt Age 49 2000 Senior Vice President of Morgan
Stanley Dean Witter, Financial
Advisor.
Steven M. Szekely, Age 76 N/A Executive Vice President of
the Company since 1979 and
Secretary of the Company since
1990.
Marshall Chadwell, Age 60 N/A Chief Financial Officer of the
Company since 1996; Controller
of Company since 1995.
<PAGE>
Committees Of The Board and Attendance
The board of directors met four times during the last fiscal
year. The board has a standing Audit Committee and Compensation
Committee. The Audit Committee and Compensation Committee consist
of David F. Gonano, Helen Delich Bentley and Kenneth C. Holt. The
Audit Committee met with the Company's independent accountants
once during the last fiscal year.
The Audit Committee recommends engagement of the Company's independent
accountants, reviews the arrangements and scope of the audit and the performance
of the independent accountants, reviews the financial statements, considers
comments made by the independent accountants with
respect to the Company's system of internal accounting control
and reviews non-audit services provided by the Company's
independent accountants. The Compensation Committee did not meet during the
year. The Compensation Committee approves the salary of the Company's President
and consults with management, as requested, to set general levels of
compensation within the Company. The board of directors
has not established a nominating committee. The functions
customarily attributable to a nominating committee are performed
by the board of directors as a whole. The board of directors
will not consider nominees submitted by the Company's stockholders.
No director attended less than 75% of the aggregate number of
meetings of the board of directors and any board committee on
which such director served.
Executive Compensation
Summary Compensation Table
The following table sets forth the compensation paid or
allocated to the chief executive officer and each other executive officer whose
salary and bonus exceeded $100,000 for services rendered to
the Company in all capacities during the fiscal years ended April 30,
1998, 1999 and 2000. Compensation paid to each other executive
officer of the Company did not exceed $100,000 in any such
year.
Annual Long-Term
Compensation Compensation
Awards
Securities
Name and Principal Position Year Salary Bonus Underlying
($) ($) Options
------------------------------------------------------------------------
Jackson Y. Dott 2000 77,300 - 40,000(1)
<PAGE>
Chief Executive Officer 1999 59,800 25,000 -
1998 59,800 - 40,000(2)
----------------------------
(1) This option will expire on March 3, 2005.
(2) This option expired without exercise on September 30, 1998.
Option Grants In Last Fiscal Year
(Individual Grants)
Number of Percent of
Securities Total
Underlying Options
Options Granted to
Granted Employees in Exercise or Expiration Date
Name (#) Fiscal Year Base Price
(%) ($/Sh)
Jackson Y. Dott 40,000 33.33 3.94 3/3/05
Twenty-five percent of the stock option grants above shall vest on each of the
following four anniversaries of March 3, 2000.
Aggregated Option Exercises In Last Fiscal Year And FY-End Option Values
Shares
Acquired Number of Securities Value Of Unexercised
on Value Underlying Unexercised In-The-Money Options
Name Exercise Realized Options at FY-End at FY-End
(#) ($) (#) ($)
Exercisab Unexercisab Exercisab Unexercisab
le le le le
Jackson -0- -0- 40,000 -0- -0- -0-*
Y. Dott
* Based on closing price of Common Stock on the Nasdaq SmallCap Stock Market
on April 30, 2000 of $3.44.
Director Compensation
The Company's Directors have not received any cash compensation
for their services as Directors for the past year. Each of Messrs. A. Dott, J.
Dott and Gonano and Ms. Bentley received options to purchase 40,000 shares of
common stock during the fiscal year.
Principal Stockholders
The following table sets forth certain information regarding
<PAGE>
beneficial ownership of the Common Stock as of August 15, 2000
by (i) each person that is known by the Company to beneficially own
or exercise voting or dispositive control over 5% or more of the
outstanding shares of Common Stock; (ii) each director; and (iii)
all directors and executive officers as a group. Except as otherwise indicated
in the footnotes to the table, the persons named below have sole voting and
disposition power with respect to the shares beneficially owned
by such persons. In general, a person is deemed to be a "beneficial
owner" of a security if that person has or shares the power to vote
or direct the voting of such security, or the power to dispose or
direct the disposition of such security. A person is also deemed
to be the beneficial owner of any securities of which the person has
the right to acquire beneficial ownership within 60 days. Unless otherwise
indicated, the address of each stockholder set forth below is c/o Monarch
Services, Inc., 4517 Harford Road, Baltimore, MD 21214.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
Jackson Y. Dott 427,529(1) 26.4%
A. Eric Dott 177,490(2) 11.0%
Helen Delich Bentley 3,080 *
David F. Gonano -0- *
Kenneth C. Holt -0- *
Anthony J. Sutton (3) 151,200 9.3%
1135 West Fourth Street
Winston-Salem, NC 27101
Swampoodle L.P. (4) 82,000 5.1%
814 Woodside Parkway
Silver Spring, MD 20910
All Directors and Executive 608,099 37.5%
Officers as a group
(5 persons)
__________________________________________
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Includes 3,000 shares of Common Stock held by Mr. J. Dott's daughter over
which Mr. Dott exercises the power to vote and dispose.
<PAGE>
(2) Includes 4,000 shares held by Mr. A. Dott's grandchildren over which Mr.
Dott exercises the power to vote and dispose.
(3) Based solely upon the Schedule 13D filed with the Securities and Exchange
Commission.
(4) Based solely upon the Schedule 13D filed with the Securities and Exchange
Commission. The General Partner of Swampoodle L.P. is Swampoodle Holdings, Inc.
("Holdings"). The directors and executive officers of Holdings are Michael R.
Drayne (director, president and treasurer) and Maria Drayne (director, vice
president and secretary).
Certain Relationships And Related Transactions
Mr. A. Eric Dott is the joint owner with his wife of certain
real property located in Baltimore, Maryland comprising approximately
32,000 square feet and utilized as offices and plant by the Company
under a lease expiring in June 2007. The lease calls for an annual net
rental of $136,368 through June 2001 and adjusted annually each
following year based upon any increase in the Consumer Price Index (the
"Index") which is calculated by comparing the Index from the first
full calendar month of the preceding lease year with the Index in
effect as of the last full calendar month of the preceding lease
year. The management of the Company believes that the terms of its
lease with the Dotts are comparable to those which would be
obtainable in leases with non-affiliated parties.
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Act") requires that the Company's directors and
executive officers, and persons who own more than 10% of the
Company's outstanding Common Stock, file with the Securities
and Exchange Commission (the "SEC") initial reports of owner-
ship and reports of change in ownership of the Common Stock of
the Company. The same persons are also required by SEC
regulation to furnish the Company with copies of all Section
16(a) forms that they file.
To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company, all
required filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, were filed in fiscal year
2000.
PROPOSAL TWO: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
Subject to ratification by the stockholders and on the recomm-
endation of the Audit Committee, the board of directors has appointed
Stegman & Company as independent accountants to audit the financial
statements for the year ending April 30, 2001. Representatives of
Stegman & Company are expected to be present at the Annual Meeting,
will have the opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
The board of directors recommends that stockholders vote FOR
ratification of Stegman & Company as independent accountants. Unless contrary
instructions are given, the persons named in the accompanying proxy will vote
all proxies in favor of ratification of appointment of independent accountants.
PROPOSAL THREE: REINCORPORATION PROPOSAL
The board of directors of the Company has unanimously approved, subject to
stockholder approval, a proposal to change the Company's state of incorporation
from Delaware to Maryland by means of a merger (the "Merger") of the Company
with and into Monarch Services, Inc., a Maryland corporation ("Monarch
Maryland"), a newly formed, wholly-owned subsidiary of the Company (the
"Reincorporation Proposal"). The principal office of Monarch Maryland is the
same as that of the Company, 4517 Harford Road, Baltimore, Maryland 21214,
telephone (410) 254-9200. Monarch Maryland will be the surviving corporation,
the effect of which will be a change in the law applicable to the Company's
corporate affairs from the Delaware General Corporation Law ("Delaware Law") to
the Maryland General Corporation Law ("Maryland Law"), including certain
differences in stockholder rights. See"--Comparison of Stockholder Rights."
The following discussion summarizes certain aspects of the Reincorporation
Proposal, including certain material differences between Delaware Law and
Maryland Law. This summary is not intended to be a complete description of the
Reincorporation Proposal or the differences between stockholder rights under
Delaware Law or Maryland Law, and is qualified in its entirety by reference to
(i) the Plan of Reorganization and Agreement of Merger dated [ ], 2000 between
the Company and Monarch Maryland (the "Merger Agreement") attached hereto at
Annex I, (ii) the Articles of Incorporation of Monarch Maryland (the "New
Charter") attached hereto at Annex II, and (iii) the Bylaws of Monarch Maryland
(the "New Bylaws") attached hereto at Annex III. Copies of the Company's
Certificate of Incorporation (the "Present Charter") and Bylaws (the "Present
Bylaws") are available for inspection at the Company's executive office, and
copies will be provided to stockholders upon request.
<PAGE>
The Company's board of directors has unanimously approved the
Reincorporation Proposal and, for the reasons discussed below, believes that the
best interests of the Company and its stockholders will be served by changing
the Company's state of incorporation from Delaware to Maryland. The Company's
stockholders are being asked to approve the Reincorporation Proposal (including
the adoption of the Merger Agreement and the approval of the New Charter and the
New Bylaws) at the Annual Meeting. The board of directors unanimously
recommends that the Company's stockholders approve the Reincorporation Proposal.
Approval of the Reincorporation Proposal by the Company's stockholders will
constitute adoption of the Merger Agreement and approval of the Merger, the New
Charter and the New Bylaws. Pursuant to the terms of the Merger Agreement, the
New Charter and New Bylaws will replace the Present Charter and Present Bylaws
as the charter documents affecting corporate governance and stockholders'
rights. See "--Comparison of Stockholder Rights." Accordingly, stockholders are
urged to read carefully this Proxy Statement and the Annexes attached hereto.
Principal Features of the Reincorporation Proposal
At the Effective Date of the Merger (as defined in the Merger Agreement),
the separate existence of the Company will cease and Monarch Maryland, as the
surviving corporation, will succeed to all business, properties, assets and
liabilities of the Company. Each share of Common Stock of the Company issued
and outstanding immediately prior to the Effective Date will by virtue of the
Merger be converted into one share of common stock, par value $.001 per share,
of Monarch Maryland ("Monarch Maryland Common Stock"). At the Effective Date,
certificates which immediately prior to the Effective Date represented shares of
Common Stock of the Company will be deemed for all purposes to represent the
same number of shares of Monarch Maryland Common Stock. It will not be
necessary for stockholders of the Company to exchange their existing stock
certificates for stock certificates of Monarch Maryland. However, when
outstanding certificates representing shares of Common Stock of the Company are
presented for transfer after the Merger, new certificates representing shares of
Monarch Maryland Common Stock will be issued. New certificates will also be
issued upon the request of any stockholder, subject to normal requirements as to
proper endorsement, signature, guarantee, if required, and payment of applicable
taxes, if any.
Following consummation of the Merger, Monarch Maryland's Common Stock will
be listed for trading on the Nasdaq SmallCap Stock Market, the market on which
the Common Stock of the Company is currently listed for trading. Monarch
Maryland's Common Stock will be listed under the symbol "MAHI", the Company's
current symbol. Delivery of existing stock certificates
<PAGE>
representing Common Stock of the Company will constitute "good delivery" of
shares of Monarch Maryland in transactions subsequent to the Effective Date of
the Merger.
Approval of the Reincorporation Proposal will effect a change in the legal
domicile of the Company and certain other changes of a legal nature, as
described in this Proxy Statement. Reincorporation of the Company will not, in
and of itself, result in any change in the name, business, management, location
of the principal executive offices, assets, liabilities or stockholders' equity
(except with respect to the change in par value) of the Company. The number of
directors comprising the board of directors of Monarch Maryland will be five
initially, each of whom is currently a director of the Company. The chief
executive officer of Monarch Maryland is currently serving as the chief
executive officer of the Company. Stockholders should note that approval of the
Reincorporation Proposal will constitute ratification of all of the currently
serving directors of Monarch Maryland. See "--Comparison of Stockholder Rights-
-Board of Directors."
Pursuant to the terms of the Merger Agreement, each option to purchase
Common Stock of the Company outstanding immediately prior to the Effective Date
of the Merger under the Company's 2000 Omnibus Stock Plan will become an option
to purchase Monarch Maryland Common Stock, subject to the terms and conditions
as set forth in the 2000 Omnibus Stock Plan and the applicable grant agreement.
All other employee benefit plans and other agreements and arrangements of the
Company will be continued by Monarch Maryland upon the same terms and subject to
the same conditions. Approval of the Reincorporation Proposal will constitute
approval by the stockholders of the Company of Monarch Maryland's assumption of
the 2000 Omnibus Stock Plan and the other employee benefit plans and
arrangements of the Company.
Upon approval of the Reincorporation Proposal by the Company's
stockholders, the proposed reorganization will be consummated at such time as
the boards of directors of the Company and Monarch Maryland determine is
advisable. The Merger Agreement provides, however, that the Merger may be
abandoned by the board of directors of either the Company or Monarch Maryland
prior to the Effective Date, either before or after stockholder approval.
In addition, the Merger Agreement may be amended prior to the Effective
Date, either before or after stockholder approval; provided, however, that the
Merger Agreement may not be amended after stockholder approval if such amendment
would (i) alter or change the amount or kind of shares or other consideration to
be received by stockholders in the Merger, (ii) alter or change any term of the
New Charter, (iii) alter or
<PAGE>
change any of the terms and conditions of the Merger Agreement if such
alteration or change would adversely affect the stockholders, or (iv) otherwise
violate applicable law. The Company's board of directors has made no
determination as to any circumstances which may prompt a decision to abandon the
proposed reincorporation or amend the Merger Agreement.
Purpose for Reincorporation Proposal
The primary purpose for reincorporating in Maryland is that the franchise
tax and related fees that the Company pays as a Delaware corporation are
significantly higher than the comparable fees for a Maryland corporation.
Management of the Company estimates that reincorporation in Maryland will save
the Company approximately $3,000 annually in franchise taxes. Additionally,
after considering the advantages and disadvantages of the Reincorporation
Proposal, including the differences between Delaware Law and Maryland Law, the
board of directors has concluded that the benefits of being incorporated in
Maryland outweigh the benefits of remaining a Delaware corporation, including
the continuing expense of Delaware's annual franchise tax.
In light of the foregoing, the board of directors of the Company believes
that the best interests of the Company and its stockholders will be served by
changing the Company's state of incorporation from Delaware to Maryland. See "-
-Comparison of Stockholder Rights," "--Possible Disadvantages of the
Reincorporation Proposal" and "--Potential Disadvantages Of Anti-takeover
Provisions and Election to be Subject to MUTA."
Comparison of Stockholder Rights
Upon consummation of the Merger, the Company will be governed by Maryland
Law and by the New Charter and Bylaws. Although it is impracticable to compare
all of the aspects in which Maryland Law and Delaware Law differ, the following
is a summary of certain significant differences between the provisions of these
laws and the Present and New Charters and Bylaws. The following discussion is
not intended to be a complete statement of the differences affecting the rights
of stockholders, but rather summarizes material differences and certain
important similarities. The discussion is qualified in its entirety by
reference to the New Charter, the New Bylaws and the Maryland Unsolicited
Takeovers Act, Title 3, Subtitle 8 of Maryland Law ("MUTA") which are attached
as Annexes II, III and IV, respectively, to this Proxy Statement, and the
Present Charter and Present Bylaws, copies of which are available for inspection
at the Company's executive office or will be provided to stockholders upon
request.
<PAGE>
Capital Stock
The Company's authorized capital stock consists of 3,000,000 shares of
Common Stock, par value $.25 per share ("Common Stock") and 100,000 shares of
preferred stock, par value $.01 per share ("Preferred Stock"). No shares of
Preferred Stock of the Company have been issued. As of August 30, 2000,
1,619,820 shares of Common Stock are issued and outstanding. Under the New
Charter, Monarch Maryland's authorized capital stock consists of 10,000,000
shares of Common Stock and no Preferred Stock.
The Present Charter authorizes the board of directors to issue
Preferred Stock from time to time in one or more series subject to applicable
provisions of law, and the board of directors is authorized to fix the
designations, powers, preferences and relative participating, optional and other
special rights of such shares, including voting rights (which could be multiple
or as a separate class) and conversion rights. The Company also has a
substantial number of authorized but unissued shares of Common Stock available
for issuance. The authorized but unissued shares of Common Stock are available
for general corporate purposes, including but not limited to possible issuance
as stock dividends or stock splits, in future mergers or acquisitions, under a
cash dividend reinvestment and stock purchase plan, in a future underwritten or
other public offering, under a stockholder rights plan or under a stock based
employee plan. The authorized but unissued shares of Preferred Stock are
similarly available for issuance in future mergers or acquisitions, in a future
underwritten public offering or private placement or for other general corporate
purposes. Except as required by law or as otherwise required to approve the
transaction in which the additional authorized shares of Common Stock or
authorized shares of Preferred Stock would be issued, no stockholder approval is
required for the issuance of these shares. Accordingly, the board of directors
of the Company, without stockholder approval, can issue Preferred Stock with
voting and conversion rights which could adversely affect the voting power of
the existing holders of Common Stock.
The New Charter authorizes the board of directors to authorize the
issuance from time to time of shares of the Company's stock of any class and
securities convertible into shares of the Company's stock, of any class or
classes, for such consideration as the board of directors may deem advisable.
The board of directors also has the power to classify or reclassify any unissued
stock, by setting or changing the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
terms or conditions of redemption of such stock.
<PAGE>
Monarch Maryland, as the surviving corporation, will have a substantial number
of authorized but unissued shares of Common Stock available for issuance. The
authorized but unissued shares of Common Stock are available for general
corporate purposes, including but not limited to possible issuance as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment and stock purchase plan, in a future underwritten or other
public offering, under a stockholder rights plan or under a stock based employee
plan. Except as required by law or as otherwise required to approve the
transaction in which the additional authorized shares of Common Stock or other
class of stock would be issued, no stockholder approval is required for the
issuance of these shares. Accordingly, the board of directors, without
stockholder approval, can issue shares with voting and conversion rights which
could adversely affect the voting power of the existing holders of Common Stock.
Payments of Dividends
The ability of the Company to pay dividends on its capital stock is limited
by certain restrictions imposed on Delaware corporations generally. Under
Delaware Law, dividends may be declared and paid out of capital surplus, or, in
case there is no capital surplus, out of the corporation's net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
After the Merger, the ability of Monarch Maryland to pay dividends on its
capital stock will be limited by certain restrictions imposed on Maryland
corporations generally. Under Maryland Law, distributions may be declared and
paid unless, after giving effect to the distribution (i) the corporation would
not be able to pay its debts as they become due in the usual course of business,
or (ii) the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the distributions, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights on dissolution are
superior to those receiving the distribution.
Board of Directors
Under the Present Charter and Bylaws, the board of directors of the Company is
limited to a total of 15 members and each member is elected to a one-year term
and until their successors are duly chosen and qualified. The New Charter
designates 5 directors to be elected to a one year term and until their
successors are duly chosen and qualified. Such number of directors may be
increased or decreased pursuant to the New Bylaws, but shall not be less than
three or the number of stockholders. See also, "--
<PAGE>
Maryland Unsolicited Takeovers Act--Size of the Board of Directors; Vacancies."
Information about the current directors of the Company is set forth under
Proposal I. By voting in favor of the Reincorporation Proposal, the Company's
stockholders will be deemed to have approved of such persons as directors of
Monarch Maryland without further action and without changes in their terms
except as set forth under the caption"--Maryland Unsolicited Takeovers Act--
Classified Board of Directors."
Board Vacancies
Under the Present Bylaws and New Bylaws vacancies occurring on the board of
directors may be filled by a majority vote of the remaining directors, although
less than a quorum, or by a sole remaining director. Directors so elected serve
until the next annual meeting of stockholders and until a successor is elected
and qualifies. See also, "--Maryland Unsolicited Takeovers Act--Size of the
Board of Directors; Vacancies."
Limitations on Liability; Indemnification
The Present Charter contains a provision that eliminates or limits a
director's personal liability for monetary damages to the corporation or its
stockholders for any breach of fiduciary duty as a director, other than (a) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) for a willful or
negligent violation of the requirements of Delaware Law pertaining to the
payment of dividends or stock purchase or redemption for a period of six years,
(d) for any transaction from which the director derived an improper personal
benefit.
The New Charter contains a provision that eliminates or limits a director's
personal liability for monetary damages to the extent otherwise required by
Maryland Law. Under Maryland Law, this would exclude liability to the extent
(i) it is proved that the person actually received an improper benefit or profit
in money, property, or services, (ii) that a judgement or other final
adjudication adverse to the person is entered on a finding that the person's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action, or (iii) it is against a director or
officer of a banking institution, credit union, savings and loan, or subsidiary
thereof.
The indemnification provisions contained in the Present and New Bylaws, as
governed by Delaware Law and Maryland Law, respectively, are
<PAGE>
similar. Both provisions generally allow for indemnification of officers and
directors to the fullest extent permitted by law. In general, Maryland Law and
Delaware Law permit a corporation to provide complete indemnification for
settlements, judgments and expenses actually and reasonably incurred - in
proceedings other than derivative actions (i.e., actions brought against such
persons by or on behalf of the corporation), subject to certain statutory
limitations.
Under Delaware Law indemnification is permitted if the indemnitee acted in
good faith and in a manner the person reasonably believed to be in the
corporation's best interest, and in a criminal proceeding, had no reasonable
cause to believe that the conduct was unlawful. Under Maryland Law,
indemnification is permitted unless the individual acted in bad faith or with
active and deliberate dishonesty, actually received an improper personal benefit
in money, property or services, or in the case of a criminal proceeding had
reasonable cause to believe that the conduct was unlawful.
Maryland Law also generally permits indemnification for amounts paid in
settlement (including expenses) of derivative suits, whereas the Delaware Law
permits indemnification of expenses only. Maryland Law and Delaware Law both,
however, prohibit such indemnification if the proposed indemnitee is adjudged
liable to the corporation, except upon application to a court which determines
that such person is reasonably entitled to such indemnification. The rights to
indemnification and to the advancement of expenses are not exclusive of any
other right which any person may have or hereafter acquire under any statute,
the New Charter, the New Bylaws, agreement, vote of stockholders or directors,
or otherwise.
Notice of Stockholder Nominations and Proposals
The Present Bylaws require compliance with a procedure under which a
stockholder may nominate a candidate for election as director at an annual
meeting. The nomination is required to be (i) written, (ii) delivered to, or
mailed and received at, the executive offices of the Company not less than 60
days nor more than 90 days prior to the date of the scheduled annual meeting and
(iii) accompanied by (A) the name, age, business address and residence of the
stockholder and each person whom the stockholder proposes to nominate for
election or re-election as a director, (B) the principal occupation or
employment of such persons, (C) the number of shares of Company stock which are
beneficially owned by such persons that is required to be disclosed in
solicitations of proxies with respect to nominees for election as directors,
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, and (D) the name and address, as they appear on the Company's books, of
the stockholder
<PAGE>
making the nomination and any other stockholder known by such stockholder to
support such nomination, and the number of shares of Company stock beneficially
owned by all such stockholders. If notice or public disclosure of the date of
the annual meeting occurs less than 70 days prior to the date of the annual
meeting, stockholders must deliver to the Company, or mail and have received by
the Company, the nomination and the required attendant information no later than
the close of business on the tenth day following the earlier of (i) the day on
which such notice of the date of the annual meeting was mailed or (ii) the day
on which such public disclosure was made.
Under the New Bylaws, to be properly brought before an annual meeting,
business must be (1) specified in the notice of the annual meeting (or any
supplement thereto) given pursuant to the New Bylaws, (2) brought before the
annual meeting by or under the direction of the board of directors (or the
Chairman of the Board or the President), or (3) properly brought before the
annual meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary. The New Bylaws provide that, nominations of persons for election
to the board of directors may be made at the annual meeting, by or under the
direction of the board of directors, or by any nominating committee or person
appointed by the board of directors, or by any stockholder of the Company
entitled to vote for the election of directors at the annual meeting who
complies with the notice procedures set forth below. Such nominations, other
than those made by or under the direction of the board of directors or by any
nominating committee or person appointed by the board of directors, can only be
made pursuant to timely notice in writing to the Secretary.
To be timely, such stockholder's notice must be delivered to or mailed and
received by the Secretary not less than 20 days nor more than 30 days prior to
the annual meeting (or, with respect to a proposal required to be included in
the Company's proxy statement pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934, or its successor provision, the earlier date such proposal was
received); provided, however, that in the event that less than 30 days notice or
prior public disclosure of the date of the annual meeting is given or made,
notice by the stockholder to be timely must be so received by the Secretary not
later than the close of business on the 10th day following the earlier of the
day on which the notice of the date of the annual meting was mailed or the day
on which the first public disclosure of the date of the annual meeting was made.
Such stockholder's notice shall set forth: (a) as to each person whom the
stockholder proposes to nominate for election as a director, (1) the name, age,
business address and residence address of the person, (2) the
<PAGE>
principal occupation or employment of the person, (3) the class and number of
shares of stock of the company which are beneficially owned by the person, and
(4) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to the
rules and regulations under the Securities Exchange Act of 1934, as amended; (b)
as to each matter the stockholder proposes to bring before the annual meeting, a
brief description of the business desired to be brought before the annual
meeting, (1) the reasons for conducting such business at the annual meeting, and
(2) any material interest of the stockholder in such business; and (c) as to the
stockholder giving the notice, (1) the name and address of the stockholder and
(2) the class and number of shares of the Company which are beneficially owned
by the stockholder. The Company may require any proposed nominee to furnish such
other information as may reasonably be required by the Company to determine the
eligibility of such proposed nominee to serve as a director of the Company.
Stockholders' Inspection Rights
Under Delaware Law a stockholder may inspect a corporation's stock ledgers,
the stockholders' list and its other books and records for any purpose
reasonably related to such person's interest as a stockholder. Maryland Law
provides that a corporation's books of account, its stock ledger and the
stockholders' list may be inspected only by one or more persons who together
have been stockholders of record for at least six months and who together hold
at least 5% of the outstanding stock of any class.
Special Meetings of Stockholders
The Present and New Charter and Present Bylaws provide that special meetings of
stockholders may be called at any time by the President, by a majority of the
board of directors, or by the holder or holders of not less than twenty-five
percent (25%) of the capital stock of the corporation issued and outstanding and
entitled to vote in an election of directors. See also, "-- Maryland
Unsolicited Takeovers Act--Special Meetings of Stockholders."
Stockholder Action Without a Meeting
The Present Charter, as permitted under Delaware Law, provides that
stockholder action may be taken only at a special or annual meeting of
stockholders and not by written consent. Maryland Law and the New Bylaws
provide that any action to be taken or which may be taken at any annual or
special meeting may be taken, without a meeting if a consent in writing, setting
forth the action so taken is given by the holders of all
<PAGE>
outstanding shares entitled to vote on the matter. A written waiver of any right
to dissent also must be signed by each stockholder entitled to notice of the
meeting but not entitled to vote.
Stockholders' Rights in Certain Transaction
Maryland Law provides generally, with certain exceptions hereinafter
described, that a stockholder of a Maryland corporation has the right to demand
and receive payment of the fair value of the stockholder's stock from a
successor corporation if (i) the corporation merges or consolidates with another
corporation, (ii) the stockholder's stock is to be acquired in a share exchange,
(iii) the corporation transfers its assets other than in the ordinary course of
business, or (iv) the corporation alters its charter in a way which alters
contractual rights, as expressly set forth in the charter, of any outstanding
stock and substantially adversely affects the stockholder's rights, unless the
right to do so is reserved by the charter of the corporation.
A stockholder must file with the corporation a demand in writing for the
fair cash value of his shares within certain time periods depending on the
transaction involved. Maryland Law provides that the right to fair value does
not apply, with certain exceptions, if (i) the stock is listed on a national
securities exchange, or is designated as a national or small cap market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., (ii) the stock is that of a successor in a merger,
unless the merger alters the contract rights of the stock as expressly set forth
in the charter and the charter does not reserve the right to do so, or the stock
is to be changed or converted in whole or in part in the merger into something
other than either stock in the successor or cash, scrip, or other rights or
interests arising out of the provisions for the treatment of fractional shares
of stock in the successor, or (iii) the stock is that of an open-end investment
company registered with the Securities and Exchange Commission and the value
placed on the stock in the transaction is its net asset value.
Delaware Law provides similar rights in the context of a merger or
consolidation only, and such rights are available if the corporation's stock is
designated as a small cap market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. Such rights are
not available, however, with respect to the merger of a parent corporation with
a wholly owned subsidiary corporation, as in the Merger. If the Reincorporation
Proposal is approved by stockholders, after consummation of the Merger,
stockholders will not have dissenters' rights under Maryland Law because Monarch
Maryland is traded on the Nasdaq SmallCap Stock Market.
<PAGE>
Costs
The State of Delaware imposes significantly greater annual franchise taxes
and other fees on corporations incorporated in Delaware than the State of
Maryland imposes on corporations organized under its laws. The annual franchise
tax for a Delaware corporation is calculated either by the authorized number of
shares or assumed capital methods, with the lesser tax being payable. The
Company currently pays franchise taxes of approximately $3,000 per year. The
Company, if incorporated in Maryland, would not be subject to any annual
franchise tax.
Possible Disadvantages of the Reincorporation Proposal
Despite the belief of the board of directors that the Reincorporation
Proposal is in the best interests of the Company and its stockholders,
stockholders should be aware that many provisions of the New Charter, the New
Bylaws and Maryland Law have not received extensive scrutiny and interpretation
by the Maryland courts. Delaware Law is widely regarded as the most extensive
and well-defined body of corporate law in the United States. Because of
Delaware's prominence as a state of incorporation for many major corporations,
both the legislature and courts in Delaware have demonstrated an ability and
willingness to act quickly and effectively to meet changing business needs.
Furthermore, Delaware corporations are often guided by the extensive body of
court decisions interpreting Delaware's corporate law. The board of directors,
however, believes Maryland Law will provide the Company with the comprehensive,
flexible structure which it needs to operate effectively. See also, "Potential
Disadvantages Of Anti-takeover Provisions and Election to be Subject to MUTA."
New Charter Anti-takeover Provisions
Several provisions contained in the New Charter and Bylaws, and under
Maryland Law could have the effect of discouraging an acquisition of the Company
or stock purchases in furtherance of an acquisition, and could, under certain
circumstances, discourage transactions which might otherwise have a favorable
effect on the price of the Company's common stock. These provisions may serve
to make it more difficult to remove incumbent management and may also discourage
an attempt to acquire control of the Company that is not approved by the board
of directors. As a result, stockholders who might desire to participate in, or
benefit from, such a transaction may not have an opportunity to do so. As of
the date of this Proxy Statement, the board of directors is not aware that any
person or group has indicated an intention or desire to institute a takeover of
the Company.
<PAGE>
Business Combination and Control Share Provisions
Delaware Law and Maryland Law regulate transactions with major stockholders
after they become major stockholders. Under Delaware Law, a Delaware corporation
is prohibited from engaging in mergers, dispositions of 10% or more of its
assets, issuances of stock and other transactions ("business combinations") with
a person or group that owns 15% or more of the voting stock of the corporation
(an "interested stockholder"), for a period of three years after the interested
stockholder crosses the 15% threshold. These restrictions on transactions
involving an interested stockholder do not apply in certain circumstances,
including those in which (i) before the interested stockholder owned 15% or more
of the voting stock, the board of directors approved the business combination or
the transaction that resulted in the person or group becoming an interested
stockholder; (ii) in the transaction that resulted in the person or group
becoming an interested stockholder, the person or group acquired at least 85% of
the voting stock other than stock owned by inside directors and certain employee
stock plans; (iii) after the person or group became an interested stockholder,
the board of directors and at least 66 2/3% of the voting stock other than stock
owned by the interested stockholder approved the business combination; or (iv)
certain competitive bidding circumstances were present.
Maryland Law prohibits an interested stockholder from engaging in a wide
range of business combinations similar to those prohibited by Delaware Law.
Under Maryland Law, however, an interested stockholder is a person or group that
owns 10% or more of the voting stock of a corporation and the restricted period
is for five years after the interested stockholder crosses the 10% threshold.
Maryland Law also provides for certain exemptions from these restrictions on
transactions involving an interested stockholder. The Maryland Law provisions
discussed above will generally apply to Monarch Maryland; however, the New
Charter provides that such provisions shall not apply to any business
combination of Monarch Maryland or any subsidiary of Monarch Maryland with A.
Eric Dott or Jackson Y. Dott; any person that becomes an interested stockholder
as a result of a transfer of securities to such person pursuant to a written
agreement that provides for such exemption to which A. Eric Dott or Jackson Y.
Dott or any of their affiliates or associates is a party or any affiliates or
associates of such persons.
Maryland Law also contains a control share statute which requires an
interested stockholder who acquires a threshold percentage of stock in a target
corporation to obtain the approval of non-interested stockholders before it may
exercise voting rights. Under Maryland Law, certain notice and informational
filings and special stockholder meeting and voting procedures must be followed
prior to consummation of a proposed "control
<PAGE>
share acquisition," which is defined as any acquisition of an issuer's shares
which would entitle the acquirer, immediately after such acquisition, directly
or indirectly, to exercise or direct the exercise of voting power of the issuer
in the election of directors within any of the following ranges of such voting
power: (i) one-tenth or more but less than one-third of such voting power; (ii)
one-third or more but less than a majority of such voting power; or (iii) a
majority or more of such voting power. Assuming compliance with the notice and
information filings prescribed by statute, the proposed control share
acquisition may be made only if the acquisition is approved by two-thirds of the
voting power of the issuer, excluding the combined voting power of the
"interested shares," being the shares held by the intended acquirer and the
directors and officers of the issuer. The New Charter opts out of these control
share provisions of Maryland Law so such provisions will not apply to Monarch
Maryland. Delaware Law does not contain any similar type of statute.
Approval of Business Combinations
Maryland Law requires consolidations, mergers, share exchanges and certain
asset transfers to be approved by a two-thirds vote of the voting power of the
corporation, which vote requirement can be reduced to a majority of the voting
power of the corporation, as so provided in the New Charter. Delaware Law does
not require stockholder approval in the case of asset and share acquisitions
and, in general, requires approval of mergers and dispositions of substantially
all of a corporation's assets by a majority vote of the voting power of the
corporation.
Amendment of Charter and Bylaws
Under the Present and New Charters, amendment to the charter may be made
when approved by a majority of the board of directors and a majority of the
outstanding shares entitled to vote. The Present Bylaws may be amended by a
majority vote of the board of directors. The New Charter provides that the
board of directors, and not the stockholders, shall have the exclusive power to
make, alter, amend or repeal the New Bylaws.
Constituency Provision
Maryland Law permits a corporation to include in its charter a provision
that allows the board of directors of a corporation, in considering a potential
acquisition of control of the corporation, to consider the effect of the
potential acquisition of control on stockholders, employees, suppliers,
customers, and creditors of the corporation and the communities in which offices
or other establishments of the corporation are located. The New Charter includes
such a provision.
<PAGE>
Board Authority to Change Authorized Stock
Maryland Law permits a corporation to include in its charter a provision
that allows the board of directors of a corporation, with the approval of a
majority of the entire board of directors, and without action by the
stockholders of the corporation, to amend the charter of the corporation to
increase or decrease the aggregate number of shares of stock of the corporation
or the number of shares of stock of any class that the corporation has authority
to issue. The New Charter includes such a provision.
Maryland Unsolicited Takeovers Act
Maryland Law provides certain protections with respect to unsolicited
takeover bids to Maryland corporations that are reporting companies under the
Securities Exchange Act of 1934 and have at least three directors who (i) are
not officers or employees of the corporation; (ii) are not persons seeking to
acquire control of the corporation ("Acquiring Persons"); (iii) are not
directors, officers, affiliates or associates of an Acquiring Person; and (iv)
were not nominated or designated as directors by an Acquiring Person. The
provisions are discussed below and are set forth in MUTA, which is attached
hereto as Annex IV.
The board of directors of a Maryland corporation can elect to be
subject to any or all of the provisions of MUTA by resolution of the board of
directors without the approval of the stockholders. If a corporation elects to
be subject to MUTA, the provisions of MUTA supersede any conflicting provisions
of the corporation's charter and bylaws. Although provisions comparable to
those set forth in MUTA may be made applicable to a Delaware corporation, such
provisions would generally require an amendment to the charter of the Delaware
corporation which would require the approval of the board of directors and
stockholders. See "--New Charter Anti-takeover Provisions--Amendment of Charter
and Bylaws."
The Present and New Charters and Bylaws do not contain any of the
provisions set forth in MUTA; however, following the Merger, the board of
directors intends to elect for Monarch Maryland to be subject to all the
provisions of MUTA.
Classified Board Of Directors
Under the Present and New Charters and Bylaws, members of the board of
directors are elected for a term that expires at the next following annual
meeting of stockholders. Following Monarch Maryland's election to be subject to
MUTA, Monarch Maryland's board of directors will be divided into three classes
of directors, Class I, Class II and Class III, with the
<PAGE>
number of directors in each class to be as nearly equal as possible, and with
each class to be elected for a term that expires at the annual meeting of
stockholders in the third year following the election of the class. Insofar as
the number of directors of Monarch Maryland is currently fixed at five, two
classes would be comprised of two directors and one class would be comprised of
one director.
In order to place the classes of directors on a staggered basis for
purposes of annual elections, the directors in Classes I, II and III will hold
office until the first, second and third annual meetings of stockholders,
respectively, following the date on which Monarch Maryland becomes subject to
MUTA and until their successors are elected and qualify. Thus, after the
meeting to which this Proxy Statement relates, stockholders will elect
approximately one-third of the directors at each annual meeting of stockholders.
If the current nominees for the board of directors are elected at the
Annual Meeting, Helen Delich Bentley will serve as a Class I director and her
term of office will expire at the 2001 annual meeting of stockholders; Kenneth
Holt and A. Eric Dott will serve as Class II directors and their term of office
will expire at the 2002 annual meeting of stockholders and David Gonano and
Jackson Y. Dott will serve as Class III directors and their term of office will
expire at the 2003 annual meeting of stockholders.
Removal of Directors
Under the Present and New Charters and Bylaws, any director or the entire
board of directors may be removed, with or without cause, by a majority of the
shares then entitled to vote in an election of directors. Following Monarch
Maryland's election to be subject to MUTA, stockholders will only be permitted
to remove directors for cause and upon a vote of at least two-thirds of all the
votes entitled to be cast generally in the election of directors.
Size of the Board of Directors; Vacancies
The Present and New Charters and Bylaws provide for a set number of
directors. By action of the board of directors of each of Monarch and New
Monarch, the current number of directors is fixed at five. Following Monarch
Maryland's election to be subject to MUTA, the number of directors shall be
fixed from time to time exclusively by the board, which in no event shall cause
the term of any incumbent director to be shortened. Under the Present and New
Charters and Bylaws, a vacancy on the board of directors caused by the removal
of a director may be filled by the stockholders. Following Monarch Maryland's
election to be subject to MUTA,
<PAGE>
each vacancy on the board of directors that results from an increase in the size
of the board of directors or the death, resignation or removal of a director may
be filled only by the affirmative vote of a majority of the remaining directors
in office, even if the remaining directors do not constitute a quorum. Any
director so elected by the board to fill a vacancy would become a member of the
same class as the director he or she succeeds and would hold office for the
remainder of the term of that class and until his or her successor is elected
and qualified.
Special Meetings of Stockholders
Under MUTA, the secretary of a corporation may call a special meeting of
stockholders only on written request of the stockholders entitled to cast at
least a majority of all the votes entitled to be cast at the meeting.
Election Not To Be Subject to MUTA
Under MUTA, if a corporation elects to be subject to a provision or
provisions of MUTA, such provision or provisions will not apply to a corporation
to the extent that the corporation subsequently elects not to be subject to such
provision or provisions in the same manner in which it previously elected to
become subject to such provision or provisions. Since Monarch Maryland intends
to elect to be subject to all of the provisions of MUTA by resolution of the
board of directors without stockholder approval, Monarch Maryland can only elect
to not be subject to a provision of MUTA by a resolution of the board of
directors.
Objectives And Potential Effects Of Anti-takeover Provisions and Election to be
Subject to MUTA
The board believes that the provisions of the New Charter that may have
anti-takeover effects and the provisions of MUTA will be in the best interests
of Monarch Maryland and its stockholders because such provisions should enhance
the continuity and stability of Monarch Maryland's management and the policies
formulated by the board. Under the classified board of directors provisions of
MUTA, at any given time, at least two-thirds of the directors will have at least
one year of experience as directors of Monarch Maryland and with its business
affairs and operations. New directors will therefore have an opportunity to
become familiar with the affairs of Monarch Maryland and to benefit from the
experience of co-members of the board who have served for longer than one-year
terms. Although the board believes the Company has not experienced problems with
continuity and stability of leadership and policy to date, it hopes to avoid
these problems for Monarch Maryland in the future. The board also believes that
classification will enhance Monarch Maryland's >
<PAGE>
ability to attract and retain well qualified individuals who are able to commit
the time and resources to understand its business affairs and operations. The
continuity and quality of leadership that results from a classified board
should, in the opinion of the board, promote the long-term value of Monarch
Maryland following the Merger.
The board also believes that the anti-takeover provisions and the MUTA
provisions are in the best interests of Monarch Maryland and its stockholders
because they should, if adopted, complement the business combination provisions
under Delaware and Maryland Law (see "--New Charter Anti-takeover Provisions--
Business Combination Provisions; Control Share Statute") and reduce the
possibility that a third party could effect a sudden or surprise change in
control of the board. Many companies have implemented anti-takeover provisions
for this purpose. These provisions are designed to reduce the vulnerability of
Monarch Maryland to an unsolicited takeover proposal, particularly a proposal
that does not contemplate the acquisition of all the Monarch Maryland's
outstanding shares, or an unsolicited proposal for the restructuring or sale of
all or part of Monarch Maryland; however, such provisions would not prevent a
negotiated acquisition with the cooperation of the board, and a negotiated
acquisition could be structured in a manner that would shift control of the
board to representatives of the acquirer as part of the transaction.
To effect these objectives, under the MUTA classified board provisions, at
least two annual meetings of stockholders, rather than one, will be required to
effect a change in a majority of board members. The delay afforded by these
provisions would help to ensure that the board, if confronted by a hostile
tender offer, proxy contest or other surprise proposal from a third party who
has acquired a block of the Common Stock, will have sufficient time to review
the proposal and appropriate alternatives to the proposal, and to act in a
manner which it believes to be in the best interest of Monarch Maryland and its
stockholders. If a potential acquirer were to purchase a significant or
controlling interest in Monarch Maryland, the acquirer could, if the board is
not classified, quickly obtain control of the board and thereby remove Monarch
Maryland's management, which could severely curtail Monarch Maryland's ability
to negotiate effectively with the potential acquirer on behalf of all other
stockholders. The threat of quickly obtaining control of the board could deprive
the board of the time and information necessary to evaluate the proposal, to
study alternative proposals, and to help ensure that the best price is obtained
in any transaction which may ultimately be undertaken.
The MUTA provisions that prevent the removal of directors "without cause"
and limit the ability of the stockholders to call a special meeting (at which a
director may be removed) also serve to ensure continuity on the board in the
face of a hostile bidder. Specifically, allowing <PAGE>
<PAGE>
stockholders to remove a director without cause could be used to subvert the
protections afforded by the creation of a classified board. One method employed
by takeover bidders to obtain control of a board of directors is to acquire a
significant percentage of a corporation's outstanding shares through a tender
offer or open market purchase and to use the voting power of those shares to
remove the incumbent directors and replace them with nominees chosen by the
hostile bidder, who would be more willing to approve the terms of a merger or
other business combination on terms less favorable to the other stockholders of
the corporation than those which would have been approved by the removed
directors.
Requiring cause in order to remove a director and limiting the ability of
the hostile bidder to call a special meeting precludes the use of this strategy,
thereby encouraging potential takeover bidders to obtain the cooperation of the
existing board before attempting a takeover. Likewise the New Charter provision
limiting authority to amend the Bylaws to the board of directors serves to
prevent a hostile bidder from eliminating the notice and other requirements set
forth in the Bylaws for nominations of directors. Accordingly, these provisions
support the concept of a classified board in its intended effect of moderating
the pace of a change in the board of directors.
Also, the board believes that the classified board, director removal,
special meeting and bylaws amendment provisions will properly condition a
director's continued service upon his or her ability to serve rather than his or
her position relative to a dominant stockholder including existing large
stockholders. Prohibiting a stockholder or group of stockholders from forcing
rapid change on the board is an essential part of the overall structure being
proposed to encourage individuals or groups who desire to propose takeover bids
or similar transactions to negotiate with the board of directors. These
provisions prevent a stockholder with a majority of the voting power of Monarch
Maryland from subverting the requirements of the MUTA and anti-takeover
provisions.
An alternative strategy used by some hostile bidders is to make an offer to
purchase a corporation and then commence litigation to force the board of
directors of the corporation to cooperate in the transaction notwithstanding its
unwillingness to do so. The constituency provision set forth in the New Charter
is designed to strengthen the position of the board of directors of Monarch
Maryland in any such litigation. For example, if a hostile bidder alleged in
litigation that the board has an obligation to cooperate with the hostile bidder
due to an obligation to obtain the highest possible price for stockholders, the
board's ability to consider the effects of a transaction on other constituencies
could serve as a defense. In the face of such defense the hostile bidder would
be forced to negotiate with the board the terms of any transaction.
<PAGE>
The increase in the amount of authorized stock under the New Charter and the
provision in the New Charter permitting the board to increase Monarch Maryland's
authorized stock without the approval of stockholders will permit the board to
implement additional anti-takeover provisions in the future, such as a class of
preferred stock or a stockholder rights plan. In the face of a hostile bidder,
such provisions, if adopted, would serve to complement the MUTA and anti-
takeover provisions discussed above.
Potential Disadvantages Of Anti-takeover Provisions and Election to be Subject
to MUTA.
The MUTA and anti-takeover provisions discussed above will operate in
complementary fashion, to generally delay, deter or impede changes in control of
the board or the approval of certain stockholder proposals which would have the
effect of facilitating changes in control of the board, even if the holders of a
majority of the Monarch Maryland Common Stock may believe the change or actions
would be in their best interests. For example, classifying the board will
operate to increase the amount of time required for new stockholders to obtain
control of Monarch Maryland without the cooperation or approval of the incumbent
board, even if the new stockholders hold or acquire a majority of the voting
power. Elimination of the right of stockholders to remove directors without
cause, increasing the proportion of stockholders necessary to call a special
meeting and limiting bylaws changes solely to the board of directors may make
the removal of any director more difficult (unless the holders of two-thirds of
the outstanding Monarch Common Stock agree and cause is readily apparent), even
if the holders of a majority of the outstanding Monarch Common Stock believe
removal to be in their best interests.
Further, the constituency provision permits the board to consider the
effect a potential acquisition may have on employees, suppliers, customers, and
creditors of Monarch Maryland and the communities in which offices or other
establishments of Monarch Maryland are located. Such constituencies may have
interests that are in conflict with the interests of Monarch Maryland
stockholders and a consideration of their interests may prevent a transaction
that the holders of a majority of the outstanding Monarch Common Stock believe
to be in their best interests. The increase in authorized shares in the New
Charter and the board's ability to increase the authorized shares under the New
Charter will enable to the board to implement additional anti-takeover devices
that may also serve to prevent a transaction that a majority of stockholders
believe to be in their best interests.
As a result, these provisions could have the effect of making it easier for
directors to remain in office for reasons relating to their own
<PAGE>
self interest, and since the board has the power to retain and discharge
management, also have the effect of making it easier for management to remain in
office for reasons relating to their own self interest. Additionally, one of the
effects of the anti-takeover provisions may be to discourage certain tender
offers and other attempts to change control of Monarch Maryland, even though
stockholders might feel those attempts would be beneficial to them or Monarch
Maryland. Because tender offers for control usually involve a purchase price
higher than the prevailing market price, these provisions may have the effect of
preventing or delaying a bid for Monarch Maryland's shares which could be
beneficial to Monarch Maryland and its stockholders.
Even though the MUTA and anti-takeover provisions may have these potential
disadvantages, the board nevertheless believes that the various protections
afforded to the stockholders from the inclusion of anti-takeover provisions in
the New Charter and a subsequent election to be subject to MUTA outweigh the
potential disadvantages.
Tax Consequences
The proposed Merger will be a tax free reorganization under the Internal
Revenue Code of 1986, as amended. Accordingly, (i) no gain or loss will be
recognized for federal income tax purposes by the stockholders of the Company as
a result of the Merger and (ii) the basis and holding period for the stock of
Monarch Maryland received by the stockholders of the Company in exchange for
Common Stock of the Company will be the same as the basis and holding period of
the stock of the Company exchanged therefor. The Merger will have no federal
income tax effect on the Company. State, local or foreign income tax
consequences to stockholders may vary from the federal tax consequences
described above, and stockholders should consult their own tax advisors as to
the effect of the Reincorporation Proposal under applicable state, local or
foreign income tax laws.
Vote Required
Pursuant to Delaware Law and the Present Charter, the affirmative vote of
the holders of a majority of the outstanding shares of the Company's Common
Stock is required for approval of the Merger to effectuate the reincorporation
of the Company in Maryland. Approval of the Reincorporation Proposal by
stockholders of the Company will constitute specific approval of the Merger
Agreement, the New Charter and New Bylaws, and of all other transactions and
proceedings relating to the Merger, including ratification of the directors of
the Company in the classes as set forth under "--Comparison of Stockholder
Rights-Board of Directors" and "--Maryland Unsolicited Takeovers Act--Classified
Board Of
<PAGE>
Directors," the assumption by the surviving corporation of the Company's 2000
Omnibus Stock Plan and all other employee benefit plans and agreements, and the
obligations of the Company under such plans and agreements.
The board of directors recommends that stockholders vote FOR
reincorporation of the Company in the state of Maryland. Unless contrary
instructions are given, the persons named in the accompanying proxy will vote
all proxies in favor of reincorporation of the Company in the state of Maryland.
PROPOSAL FOUR APPROVAL OF 2000 OMNIBUS STOCK PLAN
The board of directors has adopted, subject to stockholder approval, the
Company's 2000 Omnibus Stock Plan (the "Plan"), a copy of which is attached
hereto. A total of 300,000 shares or options to purchase shares are authorized
for issuance under the Plan.
The Plan is designed to provide additional incentives for directors,
consultants, officers and other employees of the Company to promote the success
of the business and to enhance the Company's ability to attract and retain the
services of persons who are experienced, highly qualified and in a position to
make material contributions to the Company's success. The Company believes that
stock options and other stock awards are critical in attracting and retaining
these key contributors.
The Company believes that the Plan is necessary to enable it to
successfully compete with other companies and is essential to the Company's
ability to retain experienced employees and to recruit additional qualified
individuals.
The following table sets forth the grants of stock options under the Plan,
to the extent currently known, if the proposed amendment to increase the number
of shares available to be issued under the Plan is approved.
NEW PLAN BENEFITS
2000 Omnibus Stock Plan
Name and Position Exercise Price per Number of
Share ($) Shares of
Common Stock
(#)
Jackson Y. Dott 3.94 40,000
Executive Group 3.94 80,000
Non-Executive Director 3.58* 90,000
Group
Non-Executive Officer 3.58 40,000
Employee Group
*Options grated to Kenneth Holt, director of the Company were granted at an
exercise price of $[ ] per share, the closing price of the Common Stock on the
Nasdaq SmallCap Stock Market on the date the option was granted.
Summary Of 2000 Omnibus Stock Plan
The following summary of the Plan, including the proposed amendments
requiring stockholder approval, is qualified in its entirety by the specific
language of the Plan.
The Plan is administered by the board of directors or by a compensation
committee of the board of directors (the "Committee") which is authorized to
grant to employees (approximately 27 persons), officers (4 persons), directors
(5 persons) and consultants and consultants engaged by the Company restricted
stock, incentive stock options, non-qualified stock options, stock appreciation
rights, phantom stock or performance awards. A maximum of 300,000 shares of
Common Stock will be available for issuance under the Plan. The market price
per share of such shares as of August 24, 2000 was $3.53. The Plan will expire
on, and no awards may be granted thereunder after, the tenth anniversary of the
initial adoption of the Plan, subject to the right of the board of directors to
terminate the Plan at any time prior thereto. The board of directors may amend
the Plan at any time, except no such amendment may impair the rights of
recipients of previous grants without such grantees' consent.
Restricted stock awards typically will be granted at no purchase price,
although if required under applicable corporate law, the board of directors or
the Committee may establish a purchase price set at the par value of the Common
Stock, payable in cash or by other means, including recognition of past
employment. Shares of restricted stock are shares of Common Stock which the
grantee is not entitled to sell or otherwise transfer until ownership of the
shares vests. The vesting schedule for restricted stock will be determined by
the board of directors or by the Committee upon grant. If so determined by the
board of directors or by the Committee upon grant, recipients of restricted
stock may receive certain other rights attaching to shares of Common Stock
generally, such as dividend and voting rights, as of the date of grant or such
later date as the Committee may determine (but not later than the date of
vesting for such stock). If the recipient of restricted stock ceases to be
employed by the Company or any subsidiary or affiliate of the Company before the
vesting date, the restricted stock will be forfeited to the Company.
An option enables the optionee to purchase shares of Common Stock at the
option exercise price. The per share exercise price of any options
<PAGE>
granted under the Plan shall be determined by the board of directors or the
Committee at the time of grant and, in the case of an incentive stock option,
may not be less than the fair market value of the Common Stock at the time the
option is granted, provided that, with respect to an incentive stock option
granted to an optionee who is or will be the beneficial owner of more than 10%
of the combined voting power of all classes of the Company's stock, the exercise
price may not be less than 110% of the fair market value of the Common Stock on
the date of grant. In order to obtain the shares, a participant must pay the
exercise price to the Company at the time of exercise of the option. The
exercise price may be paid in cash or, with the consent of the board of
directors or the Committee, stock of the Company, including stock acquired under
the same option. Incentive stock options are intended to qualify under Section
422 of the Code.
Incentive stock options and non-qualified stock options may be granted with
terms of no more than ten years from the date of grant, provided that, in the
case of an incentive stock option granted to an optionee who is or will be the
beneficial owner of more than 10% of the combined voting power of all classes of
the Company's stock, the term of such option may not exceed five years. Options
will survive for a limited period of time after the optionee's death, disability
or normal retirement from the Company. Any shares as to which an option expires,
lapses unexercised, or is terminated or canceled may be subject to a new option.
Upon exercise, a stock appreciation right ("SAR") entitles the grantee to
receive a payment equal to the product of the excess of the fair market value on
the exercise date of a share of Common Stock over the base price per share
specified in the grant agreement, multiplied by the number of shares with
respect to which the SAR is exercised. SARs will be granted either on a free-
standing basis (without regard to or in addition to the grant of a stock option)
or on a tandem basis (related to the grant of an underlying stock option). SARs
granted in tandem with or in addition to a stock option may be granted either at
the same time as the stock option or at a later time; provided, however, that a
tandem SAR shall not be granted with respect to any outstanding incentive stock
option award without the consent of the grantee.
Phantom stock entitles the holder to an economic interest equivalent to the
ownership of the underlying shares but not the rights of a stockholder.
Performance awards become payable on account of attainment of one or more
performance goals. Performance awards may be paid by the delivery of Common
Stock or cash, or any combination of Common Stock and cash by the Company upon
attainment of the performance goals.
<PAGE>
The Plan is not qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended ("Code") and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974.
Summary Of Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences to participants and the Company of stock awards and stock options
granted under the Plan. The summary is based on the provisions of the Code, as
in effect on the date of this document and on existing and proposed regulations
and rulings thereunder, all of which are subject to change. Each participant is
urged to consult his tax advisor prior to exercise of an option and prior to
sale or other disposition of shares acquired under the Plan.
Stock Awards
A grantee of a restricted stock award of Common Stock generally will
recognize ordinary income equal to the fair market value of the Common Stock
received less any amount paid for such Common Stock. The grantee's tax basis in
the Common Stock is equal to the sum of the amount paid, if any, for such Common
Stock and the amount of ordinary income recognized. Where the Common Stock is
subject to restrictions such as a performance contingency or other vesting
requirement, except as otherwise provided below, the ordinary income generally
will be recognized at the time the performance contingency is met or the vesting
requirement is satisfied (i.e., when the restrictions lapse). At such time, a
grantee generally will recognize ordinary income equal to the then fair market
value of the Common Stock less any amount paid for such Common Stock.
A grantee who is awarded restricted stock may elect (i.e., a "Section 83(b)
Election"), in accordance with Treasury Regulations and within thirty days after
the grant of the stock award, to recognize ordinary income on the grant date
rather than the date the restrictions lapse, in an amount equal to the fair
market value of the stock on the grant date less any amount paid for such stock.
If a Section 83(b) Election is timely made, any appreciation in the value of the
Common Stock subsequent to the grant date would not generate additional income
until the stock is sold or exchanged, in which case any gain on the sale or
exchange would be taxable as capital gain. However, if a Section 83(b) Election
is made and some or all of the Common Stock is subsequently forfeited in
accordance with the terms of the restricted stock award agreement, the grantee
is entitled to a capital loss deduction only to the extent that the amount paid,
if any, for such Common Stock exceeds the amount realized, if any, upon such
forfeiture.
<PAGE>
The Company generally will be entitled to a deduction for federal income tax
purposes which will correspond in timing and amount to the recognition of
ordinary income by the grantee.
Incentive Stock Options
An optionee will not recognize income upon the grant of an incentive stock
option or, unless the optionee is subject to the alternative minimum tax as
described below, upon the exercise of an incentive stock option. An optionee
who exercises an incentive stock option more than three months after retirement
or other termination of employment (one year in the event of a termination on
account of disability) will recognize income at the time of exercise as if the
option were a nonqualified stock option, as described below.
Upon sale of the shares acquired upon exercise of an incentive stock
option, an optionee generally will recognize long-term capital gain in an amount
equal to the difference between the sale price of the shares and the exercise
price of the option, if the sale of such shares occurs more than two years from
the date the incentive stock option was granted and more than one year from the
date the shares were transferred to him upon exercise of the option.
If the shares acquired upon exercise of the incentive stock option are sold
or disposed of (including by gift) prior to the expiration of the holding
periods described in the previous paragraph, the transaction constitutes a
disqualifying disposition and the optionee generally will recognize ordinary
income on the date of disposition in an amount equal to the lesser of (i) the
excess of the fair market value of the shares on the date the option was
exercised over the exercise price or (ii) the excess of the amount realized upon
such disposition over the exercise price. If the amount realized on a sale
exceeds the fair market value of the shares on the date of exercise, the excess
will be treated as long-term capital gain if the shares have been held for more
than one year or will be treated as short-term capital gain if the shares have
been held one year or less. If the amount realized on the sale is less than the
exercise price, the loss will be treated as long-term capital loss if the shares
have been held for more than one year or will be treated as short-term capital
loss if the shares have been held for one year or less.
The optionee's tax basis in the shares acquired upon exercise of the
incentive stock option is equal to the sum of the exercise price paid and the
amount of ordinary income recognized, if any.
The Company generally will not be entitled to any deduction for federal
income tax purposes at the time an incentive stock option is
<PAGE>
granted, exercised, or at the time the shares acquired upon exercise of an
incentive stock option are sold. However, if an optionee makes a disqualifying
disposition, the Company generally will be entitled (subject to certain
limitations regarding compensation deductions) to a deduction at the same time
and in the same amount as the optionee is considered to have recognized ordinary
income.
Nonqualified Options
An optionee generally will not recognize income for federal income tax
purposes at the time a nonqualified stock option is granted. Except as
described below, an optionee will recognize ordinary income upon exercise of a
nonqualified stock option in an amount equal to the difference between the fair
market value of the shares on the exercise date and the exercise price.
Notwithstanding the above, an optionee who is an "insider" within the
meaning of the Securities Exchange Act of 1934 (the "Exchange Act") and who
exercises a non-qualified stock option generally will not be subject to federal
income tax as a result of exercise until such time as he is no longer subject to
a claim for "short-swing" profits under Section 16(b) of the Exchange Act.
Depending upon the method used to approve the option grant, the optionee may be
able to exercise and sell immediately after grant (subject to any limitations
contained in the option agreement) without Section 16(b) liability;
alternatively, the optionee may be prohibited under Section 16(b) from selling
the Common Stock acquired upon exercise of the option for a period of six months
following the date of grant. An optionee who is an insider and who exercises
his option within six months from the date of grant (assuming the Section 16(b)
six-month prohibition is applicable to such option) will have ordinary income on
the date which is six months from the grant date in an amount equal to the then
fair market value of the shares of Common Stock received upon the exercise of
the option over the exercise price. Such an insider may, however, elect (i.e.,
a "Section 83(b) Election") to include in his taxable income at the time of
exercise the difference between the then fair market value of the Common Stock
received and the option exercise price. Insiders should consult their tax
advisors to determine the tax consequences to them of receiving and exercising
options.
An optionee's tax basis in shares received upon exercise of a nonqualified
stock option generally is the sum of the exercise price paid and the ordinary
income recognized as a result of exercising the nonqualified stock option. This
sum is generally equal to the fair market value of the shares on the date the
optionee recognizes ordinary income. An optionee's holding period for shares
received upon exercise of a
<PAGE>
nonqualified stock option begins on the date on which ordinary income is
recognized.
When shares acquired upon exercise of a nonqualified stock option are sold,
the optionee will recognize gain (or, under certain conditions, loss) at the
time of sale equal to the difference between the amount realized and the
optionee's tax basis in the shares. The gain (or loss) will be a long-term
capital gain (or loss) if more than one year has elapsed between the date on
which ordinary income was recognized and the date of sale, and short-term gain
(or loss) if one year or less has elapsed.
The Company generally will be entitled to a deduction for federal income
tax purposes upon exercise by an optionee of a nonqualified stock option
provided any applicable income reporting requirements are satisfied and subject
to certain limitations regarding compensation deductions. The deduction will
correspond in timing and amount to the recognition of ordinary income by the
optionee.
Tender of Stock in Payment of Option Exercise Price
The Plan provides that nonqualified stock options and incentive stock
options, if authorized by the Committee, may be exercised by tendering shares of
Company Common Stock with a fair market value equal to part or all of the option
exercise price. As a general rule, the delivery of Company Common Stock to
exercise an option granted under the Plan is treated as a nontaxable exchange to
the extent that the optionee receives an equal number of shares of Company
Common Stock upon exercise of the option. The tax basis of the shares received
will be the same as the optionee's tax basis for the tendered shares. The
excess of the value of any additional shares received over any money paid upon
exercise constitutes taxable income in the case of a nonqualified stock option,
but not in the case of an incentive stock option. Any additional shares
received upon the exercise of a nonqualified stock option will have an aggregate
basis equal to the amount included in the optionee's income as a result of the
exercise of the option plus any money paid (i.e., generally their fair market
value). Any additional shares received upon the exercise of an incentive stock
option will have a tax basis equal to the amount of the money paid, if any.
There is one exception to the above rules. If the Company Common Stock
used to effect the exchange was received pursuant to the exercise of an
incentive stock option and the requisite holding period requirements have not
been satisfied (including circumstances where shares are withheld or otherwise
tendered pursuant to a cashless exercise of an incentive stock option), the
tender of such shares would constitute a disqualifying disposition. In that
case, the exchange of such shares would be treated
<PAGE>
as a taxable exchange, not a nontaxable exchange. The optionee would recognize
income upon the exchange of such shares as described in the Section above.
Long Term Capital Gain
The maximum tax rate for long term capital gain under the Code is presently
20%.
Alternative Minimum Tax
A taxpayer may be subject to an alternative minimum tax which is payable to
the extent that such alternative minimum tax exceeds the taxpayer's regular
income tax for the year. The alternative minimum tax is imposed at a flat rate
of 26% on the taxpayer's alternative minimum taxable income up to $175,000 in
excess of an exemption amount, and at a rate of 28% on the taxpayer's
alternative minimum taxable income greater than $175,000 above the exemption
amount. In computing a taxpayer's alternative minimum taxable income, the
excess of the fair market value of the shares on the exercise date of an
incentive stock option (or, in the case of an officer potentially subject to
liability under Section l6(b) of the Exchange Act who exercises an option within
six months of the grant date, on the date six months from the grant date, unless
the officer elects to make an election pursuant to the Treasury Regulations to
be taxed on the exercise date) over the exercise price is included in
alternative minimum taxable income. If, however, a disqualifying disposition
occurs in the year in which the option is exercised, the maximum amount that is
included in alternative minimum taxable income is the gain realized on the
disposition of the shares. The portion of a taxpayer's alternative minimum tax
attributable to certain items included in the computation of alternative minimum
taxable income (including amounts attributable to the exercise of an incentive
stock option) may be credited against the taxpayer's regular tax liability in
later years to the extent that the regular tax liability exceeds the alternative
minimum tax.
Tax Withholding
The Company may require that a participant pay to the Company in cash any
federal, state and local taxes required by law to be withheld with respect to
the grant of any award under the Plan or exercise pursuant to such award or
related delivery of shares under the Plan. The Company, to the extent permitted
or required by law, will have the right to deduct from any payment owed to a
participant (including salary or other compensation), any such federal, state or
local taxes required to be withheld with respect to the grant of any award under
the Plan or exercise
<PAGE>
pursuant to such award or related delivery of shares under the Plan. In the
alternative, the Company may retain or sell without notice a sufficient number
of the shares to be issued to the participant to cover any such taxes.
Under the Plan, if authorized by the Committee, a participant may deliver
shares of the Company's Common Stock, including shares acquired upon exercise of
an option, to pay withholding taxes due on exercise of the option. Shares of
Common Stock delivered to or retained by the Company to pay withholding taxes
will be valued on the date as of which the withholding tax liability is
determined.
The delivery of Common Stock of the Company to pay withholding taxes
generally will result in a taxable gain to the participant to the extent that
this value exceeds the participant's basis in the stock. If the Common Stock
delivered was acquired pursuant to the exercise of an incentive stock option and
the requisite holding period requirements have not been satisfied (including
circumstances where shares are withheld upon the exercise of an incentive stock
option to pay the withholding taxes), a disqualifying disposition will result.
Vote Required
The adoption of the 2000 Omnibus Stock Plan requires
the affirmative vote of the holders of a majority of the shares
represented at the Annual Meeting and entitled to vote.
The board of directors recommends that stockholders vote FOR adoption of
the 2000 Omnibus Stock Plan. Unless contrary instructions are given, the persons
named in the accompanying proxy will vote all proxies in favor of adoption of
the 2000 Omnibus Stock Plan.
VOTING
As of the Record Date, there were 1,619,820 shares of common
stock issued, outstanding and entitled to vote. A quorum for the
meeting requires the presence in person or by proxy of holders of
a majority of the outstanding shares of Common Stock.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Teller of Elections appointed for the Annual Meeting
and will determine whether or not a quorum is present. Where, as to
any matter submitted to the stockholders for a vote, proxies are
marked as abstentions (or stockholders appear in person but abstain
from voting), such abstentions will be treated as shares that are
present and entitled to vote for purposes of determining the presence
<PAGE>
of a quorum but as unvoted for purposes of determining the approval
of any matter submitted to the stockholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect
to that matter; however, such shares will be considered present
for purposes of a quorum.
STOCKHOLDER NOMINATIONS AND PROPOSALS
The Company's Bylaws require compliance with a procedure under which a
stockholder may nominate a candidate for election as director at an annual
meeting. The nomination is required to be (i) written, (ii) delivered to, or
mailed and received at, the executive offices of the Company not less than 60
days nor more than 90 days prior to the date of the scheduled annual meeting,
and (iii) accompanied by (A) the name,
age, business address and residence of the stockholder and each
person whom the stockholder proposes to nominate for election or
re-election as a director, (B) the principal occupation or
employment of such persons, (C) the number of shares of Company
Stock which are beneficially owned by such persons that is
required to be disclosed in solicitations of proxies with respect
to nominees for election as directors, pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended, and (D)
the name and address, as they appear on the Company's books, of
the stockholder making the nomination and any other stockholder
known by such stockholder to support such nomination, and the
number of shares of Company stock beneficially owned by all such
stockholders. If notice or public disclosure of the date of the annual meeting
occurs less than 70 days prior to the date of the
annual meeting, stockholders must deliver to the Company, or mail
and have received at the Company, the nomination and the required
attendant information no later than the close of business on the
tenth day following the earlier of (i) the day on which such notice
of the date of the annual meeting was mailed or (ii) the day on
which such public disclosure was made. This discussion is intended
to summarize Section 2.10 of Article II of the Company's Bylaws,
and is qualified in its entirety by reference to the Company's
Bylaws.
Stockholder proposals intended to be presented at the 2001
Annual Meeting of Stockholders must be received by the Company no
later than XX, 2001 to be considered for inclusion in the
Company's proxy statement and form of proxy for that meeting.
Proposals should be sent to the Secretary of the Company at the
executive offices of the Company. For details concerning
<PAGE>
eligibility, extent and limitations respecting the right to include
proposals, stockholders should consult the proxy regulations of the
Securities and Exchange Commission.
If a stockholder intends to present a stockholder proposal at
the 2001 Annual Meeting in a manner other than the inclusion of the
proposal in the Company's proxy statement and proxy relating to
that meeting, unless the stockholder notifies the Company of such
intention by XX, 2001, the proxy holders named by the Company
may exercise their discretionary voting authority on the matter
in accordance with their best judgement.
OTHER MATTERS
As of the date of this proxy statement, the board of
directors is not aware of any matters, other than those stated
above, that may be brought before the Annual Meeting. The
persons named in the enclosed form of proxy or their substitutes
will vote said proxy in respect of any such business in accord-
ance with their best judgment.
By Order of the Board of Directors
Steven M. Szekely,
Secretary
September xx, 2000
<PAGE>
ANNEX I
ARTICLES OF INCORPORATION
OF
MONARCH SERVICES, INC.
ARTICLE I
INCORPORATOR
The undersigned, Michael W. Conron, whose post office address is
2 Hopkins Plaza, Suite 1800, Baltimore, Maryland 21201, being over eighteen
years of age and acting as incorporator, hereby forms a corporation under the
Maryland General Corporation Law.
ARTICLE II
NAME
The name of the corporation (which is hereinafter called the
"Corporation") is Monarch Services, Inc.
ARTICLE III
PURPOSES FOR WHICH CORPORATION FORMED
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the
Maryland General Corporation Law (the "MGCL").
ARTICLE IV
RESIDENT AGENT AND PRINCIPAL OFFICE
The post office address of the principal office of the Corporation in
this State is 11 East Chase Street, Suite 9-E, Baltimore, Maryland 21202. The
resident agent of the Corporation in this State is CSC-Lawyers Incorporating
Service Company, whose post office address is 11 East Chase Street, Suite 9-E,
Baltimore, Maryland 21202. Said resident agent is a Maryland corporation.
ARTICLE V
AUTHORIZED STOCK
The total number of shares of stock of all classes which the
Corporation has authority to issue is Ten Million (10,000,000) shares, of the
par value of $0.001 each, all of which shares are of one class and are
designated Common Stock. The aggregate par value of all shares of stock of the
Corporation is $10,000.
<PAGE>
ARTICLE VI
BOARD OF DIRECTORS
Section 1. Number of Directors.
The Corporation shall have five (5) directors, which number may be
increased or decreased pursuant to the Bylaws, but the number of directors shall
not be less than the lesser of three (3) or the number of stockholders.
Section 2. Initial Directors.
Jackson Y. Dott, Helen Delich Bentley, David Gonono, A. Eric Dott and
Kenneth C. Holt shall act as the initial directors of the Corporation until the
first annual meeting and until their successors are duly chosen and qualified.
Section 3. Board Authorization of Stock Issuance.
The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of its stock of any class,
whether now or hereafter authorized, and securities convertible into shares of
its stock, of any class or classes, whether now or hereafter authorized, for
such consideration as the Board of Directors may deem advisable.
Section 4. Classification of Stock.
The Board of Directors shall have the power to classify or reclassify
any unissued stock, whether now or hereafter authorized, by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, or terms or conditions of
redemption of such stock.
Section 5 Board Authorization to Increase or Decrease Authorized Stock.
The Board of Directors, with the approval of a majority of the entire
Board of Directors, and without action by the stockholders of the Corporation,
shall have the power to amend the charter of the Corporation to increase or
decrease the aggregate number of shares of stock of the Corporation or the
number of shares of stock of any class that the Corporation has authority to
issue.
Section 6. Conflict of Interest.
<PAGE>
No contract or other transaction between this Corporation and any
other corporation, partnership, individual or other entity and no act of this
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of this Corporation are directors, principals, partners or
officers of such other entity, or are pecuniarily or otherwise interested in
such contract, transaction or act; provided that (i) the existence of such
relationship or such interest shall be disclosed or known to the Board of
Directors or to a committee of the Board of Directors if the matter involves a
committee decision, and the contract, transaction or act shall be authorized,
approved or ratified by a majority of disinterested directors on the Board or on
such committee, as the case may be, even if the number of disinterested
directors constitutes less than a quorum or (ii) the contract, transaction or
act shall be authorized, ratified or approved in any other manner permitted by
the Maryland General Corporation Law.
Section 7. Permissible Considerations by Board of Directors.
The Board of Directors, in considering a potential acquisition of
control of the Corporation, is permitted to consider the effect of the potential
acquisition on the stockholders, employees, suppliers, customers, and creditors
of the corporation and the communities in which offices or other establishments
of the Corporation are located.
ARTICLE VII
PROVISIONS CONCERNING CERTAIN RIGHTS
OF THE CORPORATION AND THE SHAREHOLDERS
Section 1. Right to Amend Charter.
The Corporation reserves the right to make, from time to time, any
amendments of its charter which may now or hereafter be authorized by law,
pursuant to the vote of stockholders required by law, including any amendments
which alter the contract rights of any class of outstanding stock as expressly
set forth in the charter.
Section 2. Elimination of Preemptive Rights.
Unless otherwise provided by the Board of Directors, no holder of
stock of any class shall be entitled to preemptive rights to subscribe for or
purchase or receive any part of any new or additional issue of stock of any
class of the Corporation or securities convertible into stock of any class of
the Corporation.
Section 3. Required Stockholder Vote.
<PAGE>
Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of the holders of a greater proportion of
the votes of all classes or of any class of stock of the Corporation, such
action shall be effective and valid if taken or authorized by the affirmative
vote of a majority of the total number of votes entitled to be cast thereon,
except as otherwise provided in this charter.
Section 4. Bylaws.
The Board of Directors, and not the stockholders, shall have the
exclusive power to make, alter, amend or repeal the Bylaws of the Corporation.
Section 5. Business Combination Statute.
The provisions of Title 3, Subtitle 6 (Special Voting Requirements) of the
MGCL, including but not limited to Section 3-602, shall not apply to any
business combination of the Corporation or any subsidiary of the Corporation
with (a) A. Eric Dott or Jackson Y. Dott; (b) any person that becomes an
interested stockholder as a result of a transfer of securities of the
Corporation, including the transfer of voting rights or other interests in any
such securities, to such person pursuant to a written agreement that provides
for such exemption to which A. Eric Dott or Jackson Y. Dott or any affiliate or
associate of A. Eric Dott or Jackson Y. Dott is a party; or (c) any affiliate or
associate of the persons named in (a) and/or (b). As used in this Section 5,
the terms "affiliate," "associate," "business combination," "interested
stockholder" and "subsidiary" shall have the meanings ascribed to them in Title
3, Subtitle 6 of the MGCL.
Section 6. Control Share Law.
Any acquisition of any shares of stock of the Corporation, including any
acquisition of voting rights or other interests in any such stock, shall be
exempt from the provisions of Title 3, Subtitle 7 of the MGCL (Voting Rights of
Certain Control Shares). Accordingly, the provisions of Title 3, Subtitle 7 of
the MGCL shall not apply to this Corporation.
ARTICLE VIII
INDEMNIFICATION AND LIMITATION OF LIABILITY
Section 1. Mandatory Indemnification.
The Corporation shall indemnify its currently acting and its former
directors and officers against any and all liabilities and expenses incurred in
connection with their services in such capacities to the
<PAGE>
maximum extent permitted by the Maryland General Corporation Law, as from time
to time amended.
Section 2. Discretionary Indemnification.
If approved by the Board of Directors, the Corporation may indemnify
its officers, employees, agents and persons who serve and have served, at its
request as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture or other enterprise or employee benefit
plan to the extent determined to be appropriate by the Board of Directors.
Section 3. Advancing Expenses Prior to a Decision.
The Corporation shall advance expenses to its directors and officers
entitled to mandatory indemnification to the maximum extent permitted by the
Maryland General Corporation Law, as from time to time amended, and may in the
discretion of the Board of Directors advance expenses to officers, employees,
agents and others who may be granted indemnification.
Section 4. Other Provisions for Indemnification.
The Board of Directors may, by bylaw, resolution or agreement, make
further provision for indemnification of directors, officers, employees and
agents.
Section 5. Limitation of Liability of Directors.
To the maximum extent that limitations on the liability of directors
and officers are permitted by the Maryland General Corporation Law, as from time
to time amended, no director or officer of the Corporation shall have any
liability to the Corporation or its stockholders for money damages. This
limitation on liability applies to events occurring at the time a person serves
as a director or officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which liability is
asserted.
Section 6. Effect of Amendment or Repeal.
No amendment or repeal of any section of this Article, or the adoption
of any provision of the Corporation's charter inconsistent with this Article,
shall apply to or affect in any respect the rights to indemnification or
limitation of liability of any director of the Corporation with respect to any
alleged act or omission which occurred prior to such amendment, repeal or
adoption.
<PAGE>
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on the
[ ] day of [ ], 2000, and have acknowledged such Articles to be my act.
______________________________
Michael W. Conron, Incorporator
<PAGE>
ANNEX II
BYLAWS
OF
MONARCH SERVICES, INC.
ARTICLE I
Stockholders
Section 1. Annual Meetings.
The annual meeting of the stockholders of the Corporation shall be
held on such date within the month of October as may be fixed from time to time
by the Board of Directors. Not less than ten nor more than 90 days' written or
printed notice stating the place, day and hour of each annual meeting shall be
given in the manner provided in Section 1 of Article IX hereof. The business to
be transacted at the annual meetings shall include the election of directors,
consideration and action upon the reports of officers and directors, and any
other business within the power of the Corporation. All annual meetings shall
be general meetings at which any business may be considered without being
specified as a purpose in the notice unless otherwise required by law.
Section 2. Special Meetings Called by Chairman of the Board, President or Board
of Directors.
At any time in the interval between annual meetings, special meetings
of stockholders may be called by the Chairman of the Board, or by the President,
or by the Board of Directors. Not less than ten days' nor more than 90 days'
written notice stating the place, day and hour of such meeting and the matters
proposed to be acted on thereat shall be given in the manner provided in Section
1 of Article IX. No business shall be transacted at any special meeting except
that specified in the notice.
Section 3. Special Meeting Called by Stockholders.
Upon the request in writing delivered to the Secretary by the
stockholders entitled to cast at least 25% of all the votes entitled to be cast
at the meeting, it shall be the duty of the Secretary to call a special meeting
of the stockholders. Such request shall state the purpose of such meeting and
the matters proposed to be acted on thereat, and no other business shall be
transacted at any such special meeting. No such meeting shall be required to be
called for the election of directors except under the circumstances set forth in
Section 10 of Article I or
<PAGE>
Sections 7(b) or 7(c) of Article II of these Bylaws. The Secretary shall inform
such stockholders of the reasonably estimated costs of preparing and mailing the
notice of the meeting, and upon payment to the Corporation of such costs, the
Secretary shall give not less than ten nor more than 90 days' notice of the
time, place and purpose of the meeting in the manner provided in Section 1 of
Article IX. Unless requested by stockholders entitled to cast a majority of all
the votes entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as a matter voted
on at any special meeting of the stockholders held during the preceding 12
months.
Section 4. Place of Meetings.
All meetings of stockholders shall be held at the principal office of
the Corporation in the State of Maryland or at such other place within the
United States as may be fixed from time to time by the Board of Directors and
designated in the notice.
Section 5. Quorum.
At any meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall constitute a
quorum. In the absence of a quorum, the Chairman of the meeting or stockholders
present in person or by proxy acting by majority vote and without notice other
than by announcement at the meeting, may adjourn the meeting from time to time,
but not for a period exceeding 120 days after the original record date, until a
quorum shall attend.
Section 6. Adjourned Meetings.
A meeting of stockholders convened on the date for which it was called
(including one adjourned to achieve a quorum as above provided in Section 5 of
this Article) may be adjourned (in the manner provided in said Section 5) from
time to time without further notice other than by announcement at the meeting to
a date not more than 120 days after the original record date, and any business
may be transacted at any adjourned meeting which could have been transacted at
the meeting as originally called.
Section 7. Voting.
A plurality of all the votes cast at a meeting of stockholders duly
called and at which a quorum is present shall be sufficient to elect a director.
Each share of stock may be voted for as many individuals as <PAGE>
there are directors to be elected and for whose election the share is entitled
to be voted.
A majority of the votes cast at a meeting of stockholders, duly called
and at which a quorum is present, shall be sufficient to take or authorize
action upon any other matter which may properly come before the meeting, unless
more than a majority of votes cast is required by statute or by the Charter.
The Board of Directors may fix the record date for the determination of
stockholders entitled to vote in the manner provided in Article VIII, Section 3
of these Bylaws. Unless otherwise provided in the Charter, each outstanding
share of stock, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of stockholders.
Section 8. Proxies.
A stockholder may vote the shares owned of record either in person or
by proxy. The proxy shall be in writing and shall be signed by the stockholder
or by the stockholder's duly authorized attorney-in-fact or be in such other
form as may be permitted by the Maryland General Corporation Law, including
documents conveyed by electronic transmission. A copy, facsimile transmission
or other reproduction of the writing or transmission may be substituted for the
original writing or transmission for any purpose for which the original
transmission could be used. Every proxy shall be dated, but need not be sealed,
witnessed or acknowledged. No proxy shall be valid after 11 months from its
date, unless otherwise provided in the proxy. In the case of stock held of
record by more than one person, any co-owner or co-fiduciary may execute the
proxy without the joinder of the co-owner(s) or co-fiduciary(ies), unless the
Secretary of the Corporation is notified in writing by any co-owner or co-
fiduciary that the joinder of more than one is to be required. At all meetings
of stockholders, the proxies shall be filed with and verified by the Secretary
of the Corporation, or, if the meeting shall so decide, by the Secretary of the
meeting.
Section 9. Order of Business.
At all meetings of stockholders, any stockholder present and entitled
to vote in person or by proxy shall be entitled to require, by written request
to the Chairman of the meeting, that the order of business shall be as follows:
(1) Organization.
(2) Proof of notice of meeting or of waivers thereof. (The
certificate of the Secretary of the Corporation, or the affidavit of any >
<PAGE>
other person who mailed or published the notice or caused the same to be mailed
or published, shall be proof of service of notice.)
(3) Submission by Secretary of the Corporation to the Chairman of the
meeting of a list of the stockholders entitled to vote, present in person or by
proxy.
(4) A reading of unapproved minutes of preceding meetings and action
thereon.
(5) Reports.
(6) If an annual meeting, or a special meeting called for that
purpose, the election of directors.
(7) Unfinished business.
(8) New business.
(9) Adjournment.
Section 10. Removal of Directors.
At any properly called annual or special stockholders' meeting, the
stockholders, by the affirmative vote of a majority of all the votes entitled to
be cast for the election of directors, may remove any director or directors from
office, with or without cause, and may elect a successor or successors to fill
any resulting vacancies for the remainder of the term of the removed directors.
Section 11. Informal Action by Stockholders.
Any action required or permitted to be taken at any meeting of
stockholders may be taken without a meeting if a consent in writing setting
forth such action is signed by all the stockholders entitled to vote thereon, a
written waiver of any right to dissent is signed by each stockholder entitled to
notice of, but not the right to vote on, such action and such consent is filed
with the records of stockholders' meetings.
Section 12. Advance Notice of Matters to be Presented at an Annual Meeting of
Stockholders.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting as set forth
below. To be properly brought before an annual meeting, such business must (1)
be specified in the notice of the meeting (or any
<PAGE>
supplement thereto) given by the Corporation pursuant to Section 1 of Article IX
of these bylaws, or (2) be brought before the meeting by or under the direction
of the Board of Directors (or the Chairman of the Board or the President), or
(3) be properly brought before the meeting by a stockholder. In addition to any
other applicable requirements, for business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary. To be timely, such stockholder's notice
must be delivered to or mailed and received by the Secretary at the principal
executive offices of the Corporation not earlier than the close of business on
the 120th day and not later than the close of business on the 90th day prior to
the date of the annual meeting; provided, however, that in the event that during
the prior year the Corporation did not hold an annual meeting, or if the date of
the annual meeting has changed more than 30 days from the first anniversary of
the prior year's annual meeting (other than as a result of adjournment), than
such stockholder's notice must be delivered to or mailed and received by the
Secretary at the principal executive offices of the Corporation not earlier than
the close of business on the 120th day prior to such annual meeting and not
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such annual meeting is first made. For purposes of this section,
"public announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of
1934, as amended. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 12.
The Chairman of the meeting shall have the authority, if the facts
warrant, to determine that business was not properly brought before the meeting
in accordance with the provisions of this Section 12, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 13. Advance Notice of Nominees for Directors.
<PAGE>
Only persons who are nominated in accordance with the following procedures shall
be eligible for election as directors at any meeting of stockholders.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at an annual meeting of stockholders or at a special meeting of
stockholders as to which the notice of meeting provides for election of
directors, by or under the direction of the Board of Directors, or by any
nominating committee or person appointed by the Board of Directors, or by any
stockholder of the Corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
13. Such nominations, other than those made by or under the direction of the
Board of Directors or by any nominating committee or person appointed by the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary. In the event that such stockholder's notice pertains to an annual
meeting of stockholders, to be timely, such stockholder's notice must be
delivered to or mailed and received by the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the 120th
day and not later than the close of business on the 90th day prior to the date
of the annual meeting; provided, however, that in the event that during the
prior year the Corporation did not hold an annual meeting, or if the date of the
annual meeting has changed more than 30 days from the first anniversary of the
prior year's annual meeting (other than as a result of adjournment), than such
stockholder's notice must be delivered to or mailed and received by the
Secretary at the principal executive offices of the Corporation not earlier than
the close of business on the 120th day prior to such annual meeting and not
later than the close of business on the later of the 90th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such annual meeting is first made. In the event that such
stockholder's notice pertains to a special meeting of stockholders, to be
timely, such stockholder's notice must be delivered to or mailed and received by
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the later of the 90th day prior to such special
meeting or the 10th day following the day on which public announcement of the
date of such special meeting is first made. For purposes of this section,
"public announcement" shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of
1934, as amended. Such stockholder's notice shall set forth: (a) as to each
person whom the stockholder proposes to nominate for election as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of stock of the Corporation which are beneficially owned by the person,
and (iv) any other information relating
<PAGE>
to the person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the rules and regulations under the Securities
Exchange Act of 1934; and (b) as to the stockholder giving the notice, (i) the
name and address of the stockholder and (ii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder. The
Corporation may require any proposed nominee to furnish such other information
as may reasonably be required by the Corporation to determine the eligibility of
such proposed nominee to serve as a director of the Corporation. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth herein.
The Chairman of the meeting shall have the authority, if the facts
warrant, to determine that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
ARTICLE II
Directors
Section 1. Powers.
The business and affairs of the Corporation shall be managed under the
direction of its Board of Directors. All powers of the Corporation may be
exercised by or under the authority of the Board of Directors except as
conferred on or reserved to the stockholders by law, by the Charter or by these
Bylaws. A director need not be a stockholder. The Board of Directors shall
keep minutes of its meetings and full and fair accounts of its transactions.
Section 2. Number; Term of Office.
The number of directors of the Corporation shall be not less than
three or the same number as the number of stockholders (or one if there is no
stockholder), whichever is less; provided, however, that such number may be
increased and thereafter decreased from time to time by vote of a majority of
the entire Board of Directors. The number of directors shall not exceed fifteen
(15). The first directors of the Corporation shall hold their office until the
first annual meeting of the Corporation, or until their successors are elected
and qualify, and thereafter the directors shall hold office for the term of one
year, or until their successors are elected and qualify.
<PAGE>
Section 3. Annual Meeting; Regular Meetings.
As soon as practicable after each annual meeting of stockholders, the
Board of Directors shall meet for the purpose of organization and the
transaction of other business. No notice of the annual meeting of the Board of
Directors need be given if it is held immediately following the annual meeting
of stockholders and at the same place. Other regular meetings of the Board of
Directors may be held at such times and at such places, within or without the
State of Maryland, as shall be designated in the notice for such meeting by the
party making the call. All annual and regular meetings shall be general
meetings, and any business may be transacted thereat.
Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President, or by a majority of the directors.
Section 5. Quorum; Voting.
A majority of the Board of Directors shall constitute a quorum for the
transaction of business at every meeting of the Board of Directors; but, if at
any meeting there be less than a quorum present, a majority of those present may
adjourn the meeting from time to time, but not for a period exceeding ten days
at any one time or 60 days in all, without notice other than by announcement at
the meeting, until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called. Except as hereinafter
provided or as otherwise provided by the Charter or by law, directors shall act
by a vote of a majority of those members in attendance at a meeting at which a
quorum is present.
Section 6. Notice of Meetings.
Notice of the time and place of every regular and special meeting of
the Board of Directors shall be given to each director in the manner provided in
Section 2 of Article IX hereof. Subsequent to each Board meeting, and as soon
as practicable thereafter, each director shall be furnished with a copy of the
minutes of said meeting. At least 24 hours' notice shall be given of all
meetings. The purpose of any meeting of the Board of Directors need not be
stated in the notice.
Section 7. Vacancies.
(a) If the office of a director becomes vacant for any reason,
including increase in the size of the Board, such vacancy may be filled by
<PAGE>
the Board by a vote of a majority of directors then in office, although such
majority is less than a quorum.
(b) If the vacancy occurs as a result of the removal of a director,
the stockholders may elect a successor at the meeting at which the removal
occurs.
(c) If the entire Board of Directors shall become vacant, any
stockholder may call a special meeting in the same manner that the Chairman of
the Board or the President may call such meeting, and directors for the
unexpired terms may be elected at such special meeting in the manner provided
for their election at annual meetings.
(d) A director elected by the Board of Directors to fill a vacancy
shall serve until the next annual meeting of stockholders and until a successor
is elected and qualifies. A director elected by the stockholders to fill a
vacancy shall serve for the unexpired term and until a successor is elected and
qualifies.
Section 8. Rules and Regulations.
The Board of Directors may adopt such rules and regulations for the
conduct of its meetings and the management of the affairs of the Corporation as
it may deem proper and not inconsistent with the laws of the State of Maryland,
these Bylaws and the Charter.
Section 9. Committees.
The Board of Directors may constitute an Executive Committee and other
committees composed of one or more directors, from among its members. Such
committees shall hold office at the pleasure of the Board of Directors. If any
position on a committee becomes vacant, or if the number of members is
increased, such vacancy may be filled by the Board of Directors. Committees
shall hold formal meetings and keep minutes of all of their proceedings. Any
action taken by a committee within the limits permitted by law, the Board
resolutions establishing such committee, the Charter and the Bylaws shall have
the force and effect of Board action unless and until revised or altered by the
Board. The presence of not less than a majority of a committee shall be
necessary to constitute a quorum. Action may be taken without a meeting if a
unanimous written consent is signed by all of the members of the committee, and
if such consent is filed with the records of the committee. A committee shall
have the power to elect one of its members to serve as its Chairman unless the
Board of Directors shall have designated such Chairman. The members of a
committee present at any meeting, whether or not they constitute a quorum, shall
have the power to appoint a director to act in the place of
<PAGE>
an absent member unless the Board of Directors shall have appointed a director
to act in the place of an absent member of such committee.
Between sessions of the Board of Directors, if appointed, the
Executive Committee shall have all of the powers of the Board of Directors in
the management of the business and affairs of the Corporation, except those
powers specifically denied by law. The taking of any action by the Executive
Committee shall be conclusive evidence that the Board of Directors was not in
session at the time of such action. A copy of the minutes of the proceedings of
the Executive Committee shall, after approval by the members of the Executive
Committee, be sent to all directors as a matter of information.
Section 10. Compensation.
The directors may receive a stated salary or an attendance fee for
each meeting of the Board of Directors or any committee thereof attended, plus
reimbursement of reasonable expenses of attendance. The amount of the salary or
attendance fee and any entitlement to reimbursement of expenses shall be
determined by resolution of the Board; provided, however, that nothing herein
contained shall be construed as precluding a director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 11. Place of Meetings.
Regular or special meetings of the Board may be held within or without
the State of Maryland, as the Board may from time to time determine. The time
and place of meeting may be fixed by the party calling the meeting.
Section 12. Informal Action by the Directors.
Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting, if a written consent to such action is
signed by all members of the Board and such consent is filed with the minutes of
the Board.
Section 13. Telephone Conference.
Members of the Board of Directors or any committee thereof may
participate in a meeting of the Board or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at the meeting.
<PAGE>
ARTICLE III
Officers
Section 1. In General.
The Board of Directors may choose a Chairman of the Board from among
the directors. The Board of Directors shall elect a President, a Treasurer, a
Secretary, and may elect one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers as the Board may from time to time deem appropriate. All
officers shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. Any two of the above offices, except those
of President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity
when such instrument is required to be executed, acknowledged or verified by any
two or more officers. The Board of Directors may from time to time appoint such
other agents and employees with such powers and duties as the Board may deem
proper. In its discretion, the Board of Directors may leave unfilled any
offices except those of President, Treasurer and Secretary.
Section 2. Chairman of the Board.
The Chairman of the Board, if one is elected, shall have the
responsibility for the implementation of the policies determined by the Board of
Directors and for the administration of the business affairs of the Corporation.
The Chairman shall preside over the meetings of the Board and of the
stockholders if present at the meeting. The Chairman shall be the Chief
Executive Officer of the Corporation if so designated by resolution of the
Board.
Section 3. President.
The President shall have the responsibility for the active management
of the business and general supervision and direction of all of the affairs of
the Corporation. In the absence of a Chairman of the Board, the President shall
preside over the meetings of the Board and of the stockholders if present at the
meeting, and shall perform such other duties as may be assigned by the Board of
Directors or the Executive Committee. The President shall have the authority on
the Corporation's behalf to endorse securities owned by the Corporation and to
execute any documents requiring the signature of an executive officer. The
President shall perform such other duties as the Board of Directors may direct
and shall be the Chief Executive Officer of the Corporation unless the Chairman
of the Board is so designated by resolution of the Board.
<PAGE>
Section 4. Vice Presidents.
The Vice Presidents, in the order of priority designated by the Board
of Directors, shall be vested with all the power and may perform all the duties
of the President in the latter's absence. They may perform such other duties as
may be prescribed by the Board of Directors, the Executive Committee or the
President.
Section 5. Treasurer.
The Treasurer shall have general supervision over the Corporation's
finances, and shall perform such other duties as may be assigned by the Board of
Directors or the President. Unless the Board designates another officer, the
Treasurer shall be the Chief Financial Officer of the Corporation. If required
by resolution of the Board, the Treasurer shall furnish a bond (which may be a
blanket bond) with such surety and in such penalty for the faithful performance
of duty as the Board of Directors may from time to time require, the cost of
such bond to be paid by the Corporation.
Section 6. Secretary.
The Secretary shall keep the minutes of the meetings of the
stockholders and of the Board of Directors and shall attend to the giving and
serving of all notices of the Corporation required by law or these Bylaws. The
Secretary shall maintain at all times in the principal office of the Corporation
at least one copy of the Bylaws with all amendments to date, and shall make the
same, together with the minutes of the meeting of the stockholders, the annual
statement of affairs of the Corporation and any voting trust or other
stockholders agreement on file at the office of the Corporation, available for
inspection by any officer, director or stockholder during reasonable business
hours. The Secretary shall perform such other duties as may be assigned by the
Board of Directors.
Section 7. Assistant Treasurer and Secretary.
The Board of Directors may designate from time to time Assistant
Treasurers and Secretaries, who shall perform such duties as may from time to
time be assigned to them by the Board of Directors or the President.
Section 8. Compensation; Removal; Vacancies.
The Board of Directors shall have power to fix the compensation of all
officers of the Corporation. It may authorize any committee or officer, upon
whom the power of appointing subordinate officers may have been conferred, to
fix the compensation of such subordinate officers. The
<PAGE>
Board of Directors shall have the power at any regular or special meeting to
remove any officer if, in the judgment of the Board, the best interests of the
Corporation will be served by such removal. The Board of Directors may
authorize any officer to remove subordinate officers. The Board of Directors
may authorize the Corporation's employment of an officer for a period in excess
of the term of the Board. The Board of Directors at any regular or special
meeting shall have power to fill a vacancy occurring in any office for the
unexpired portion of the term.
Section 9. Substitutes.
The Board of Directors may, from time to time in the absence of any
one of its officers or at any other time, designate any other person or persons
on behalf of the Corporation to sign any contracts, deeds, notes or other
instruments in the place or stead of any of such officers, and may designate any
person to fill any one of said offices, temporarily or for any particular
purpose; and any instruments so signed in accordance with a resolution of the
Board shall be the valid act of the Corporation as fully as if executed by any
regular officer.
ARTICLE IV
Resignation
Any director or officer may resign from office at any time. Such
resignation shall be made in writing and shall take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE V
Commercial Paper, Etc.
All bills, notes, checks, drafts and commercial paper of all kinds to
be executed by the Corporation as maker, acceptor, endorser or otherwise, and
all assignments and transfers of stock, contracts, or written obligations of the
Corporation, and all negotiable instruments, shall be made in the name of the
Corporation and shall be signed by any one or more of the following officers as
the Board of Directors may from time to time designate: the Chairman of the
Board, the President, any Vice President, or the Treasurer, or such other person
or persons as the Board of Directors or Executive Committee may from time to
time designate.
<PAGE>
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall cover such period of 12
months as the Board of Directors may determine. In the absence of any such
determination, the accounts of the Corporation shall be kept on a calendar year
basis.
ARTICLE VII
Seal
The seal of the Corporation shall be in the form of two concentric
circles inscribed with the name of the Corporation and the year and State in
which it is incorporated. The Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, shall have the right and power to attest to
the corporate seal. In lieu of affixing the corporate seal to any document, it
shall be sufficient to meet the requirements of any law, rule or regulation
relating to a corporate seal to affix the word "(SEAL)" adjacent to the
signature of the person authorized to sign the document on behalf of the
Corporation.
ARTICLE VIII
Stock
Section 1. Issue.
Each stockholder shall be entitled to a certificate or certificates
which shall represent and certify the number and class of shares of stock owned
in the Corporation. Each certificate shall be signed by the Chairman of the
Board, the President or any Vice President and be countersigned by the Secretary
or any Assistant Secretary or the Treasurer or any Assistant Treasurer. The
signatures of the Corporation's officers and its corporate seal appearing on
stock certificates may be facsimiles if each such certificate is authenticated
by the manual signature of an officer of a duly authorized transfer agent.
Stock certificates shall be in such form, not inconsistent with law and the
Charter, as shall be approved by the Board of Directors. In case any officer of
the Corporation who has signed any certificate ceases to be an officer of the
Corporation, whether by reason of death, resignation or otherwise, before such
certificate is issued, then the certificate may nevertheless be issued by the
Corporation with the same effect as if the officer had not ceased to be such
officer as of the date of such issuance.
<PAGE>
Section 2. Transfers.
The Board of Directors shall have power and authority to make all such
rules and regulations as the Board may deem expedient concerning the issue,
transfer and registration of stock certificates. The Board of Directors may
appoint one or more transfer agents and/or registrars for its outstanding stock,
and their duties may be combined. No transfer of stock shall be recognized or
binding upon the Corporation until recorded on the books of the Corporation, or,
as the case may be, of its transfer agent and/or of its registrar, upon
surrender and cancellation of a certificate or certificates for a like number of
shares.
Section 3. Record Dates for Dividends and Stockholders' Meeting.
The Board of Directors may fix a date not exceeding 90 days preceding
the date of any meeting of stockholders, any dividend payment date or any date
for the allotment of rights, as a record date for the determination of the
stockholders entitled to notice of and to vote at such meeting, or entitled to
receive such dividends or rights, as the case may be, and only stockholders of
record on such date shall be entitled to notice of and to vote at such meeting
or to receive such dividends or rights, as the case may be. In the case of a
meeting of stockholders, the record date shall be fixed not less than ten days
prior to the date of the meeting.
Section 4. New Certificates.
In case any certificate of stock is lost, stolen, mutilated or
destroyed, the Board of Directors may authorize the issuance of a new
certificate in place thereof upon such indemnity to the Corporation against loss
and such other terms and conditions as it may deem advisable. The Board of
Directors may delegate such power to any officer or officers of the Corporation
or to any transfer agent or registrar of the Corporation; but the Board of
Directors, such officer or officers or such transfer agent or registrar may, in
their discretion, refuse to issue such new certificate save upon the order of
some court having jurisdiction.
ARTICLE IX
Notice
Section 1. Notice to Stockholders.
Whenever by law or these Bylaws notice is required to be given to any
stockholder, such notice shall be in writing and may be given to each
stockholder by personal delivery or at the stockholder's residence or usual
place of business, or by mailing it, postage prepaid, and addressed
<PAGE>
to the stockholder at the address appearing on the books of the Corporation or
its transfer agent. Such leaving or mailing of notice shall be deemed the time
of giving such notice.
Section 2. Notice to Directors and Officers.
Whenever by law or these Bylaws notice is required to be given to any
director or officer, such notice may be given in any one of the following ways:
by personal delivery to such director or officer, by telephone communication
with such director or officer personally or by telephone facsimile transmission,
by telegram, cablegram, radiogram, first class mail or by delivery service
providing confirmation of delivery, addressed to such director or officer at the
address appearing on the books of the Corporation. The time when such notice
shall be consigned to a communication company for delivery shall be deemed to be
the time of the giving of such notice; if mailed, such notice shall be deemed
given 48 hours after the time it is deposited in the mail, postage prepaid.
Section 3. Waiver of Notice.
Notice to any stockholder or director of the time, place and/or
purpose of any meeting of stockholders or directors required by these Bylaws may
be dispensed with if such stockholder shall either attend in person or by proxy,
or if such director shall attend in person, or if such absent stockholder or
director shall, in writing filed with the records of the meeting either before
or after the holding thereof, waive such notice.
ARTICLE X
Voting of Stock in Other Corporations
Any stock in other corporations, which may from time to time be held
by the Corporation, may be represented and voted at any meeting of stockholders
of such other corporations by the President or a Vice-President or by proxy or
proxies appointed by the President or a Vice-President, or otherwise pursuant to
authorization thereunto given by a resolution of the Board of Directors adopted
by a vote of a majority of the directors.
ARTICLE XI.
Indemnification
To the maximum extent permitted by the Maryland General Corporation
Law as from time to time amended, the Corporation may indemnify its currently
acting and its former directors, officers, agents
<PAGE>
and employees and those persons who, at the request of the Corporation serve or
have served another corporation, partnership, joint venture, trust or other
enterprise in one or more of such capacities against any and all liabilities
incurred in connection with their services in such capacities to the extent
determined appropriate by the Board of Directors. To the extent required by the
Charter or applicable law, the Corporation shall indemnify such individuals.
ARTICLE XII.
Amendments
The Board of Directors, and not the stockholders, shall have the
exclusive power to make, alter, amend or repeal the Bylaws of the Corporation.
I HEREBY CERTIFY that the foregoing is a full, true and correct copy of the
Bylaws of Monarch Services, Inc., a Maryland corporation, adopted as of [ ],
2000, and as in effect on the date hereof.
Dated: [ ], 2000 _______________________________
Name: Steven M. Szekely
Title: Secretary
(SEAL)
<PAGE>
ANNEX III
PLAN OF REORGANIZATION
AND
AGREEMENT OF MERGER
This Plan of Reorganization and Agreement of Merger (hereinafter called the
"Merger Agreement") is made as of [ ], 2000, by and between Monarch Services,
Inc., a Delaware corporation ("Monarch Delaware") and Monarch Services, Inc., a
Maryland corporation ("Monarch Maryland"). Monarch Delaware and/or Monarch
Maryland, when reference is made to the entity irrespective of the state of
incorporation, is sometimes herein referred to as the "Company."
WITNESSETH:
WHEREAS, Monarch Delaware is a corporation duly organized and existing
under the laws of the State of Delaware;
WHEREAS, Monarch Maryland is a corporation duly organized and existing
under the laws of the State of Maryland;
WHEREAS, as of the date of this Merger Agreement, Monarch Delaware has
authority to issue 3,000,000 shares of common stock, par value $0.25 per share,
of which 1,619,820 shares are issued and outstanding; and 100,000 shares of
preferred stock, par value $0.01 per share, none of which are issued or
outstanding;
WHEREAS, as of the date of this Merger Agreement, Monarch Maryland has
authority to issue 10,000,000 shares of common stock, par value $0.001 per
share, of which of which 100 shares are issued and outstanding and owned by
Monarch Delaware;
WHEREAS, the respective Boards of Directors of Monarch Delaware and Monarch
Maryland have determined that, for the purpose of effecting the reincorporation
of Monarch Delaware in the State of Maryland, it is advisable and to their
advantage and the advantage of their respective stockholders that Monarch
Delaware merge with and into Monarch Maryland upon the terms and conditions
herein provided; and
WHEREAS, the respective Boards of Directors of Monarch Delaware and Monarch
Maryland have approved this Merger Agreement and have directed that this Merger
Agreement be submitted to the vote of their respective stockholders.
<PAGE>
AGREEMENT
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Monarch Delaware
shall merge with and into Monarch Maryland on the following terms, conditions
and other provisions:
I. TERMS AND CONDITIONS
1.1 Merger. Subject to approval of the respective stockholders of Monarch
Delaware and Monarch Maryland and the receipt of all required regulatory
approvals, Monarch Delaware shall be merged with and into Monarch Maryland (the
"Merger"), and Monarch Maryland shall be the surviving corporation, effective
upon the date when this Merger Agreement is made effective in accordance with
applicable law (the "Effective Date").
1.2 Succession. Upon the Effective Date, Monarch Maryland shall succeed to
all of the rights, privileges, powers and property of Monarch Delaware in the
manner of and as more fully set forth in Section 3-114 of the Maryland General
Corporation Law.
1.3 Common Stock of Monarch Delaware. Upon the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof, each share
of common stock, par value $0.25 per share, of Monarch Delaware outstanding
immediately prior thereto shall be changed and converted into one fully paid and
non-assessable share of the common stock of Monarch Maryland, par value $0.001
per share.
1.4 Common Stock of Monarch Maryland. Upon the Effective Date, by virtue of
the Merger and without any action on the part of the holder thereof, the 100
shares of common stock, par value $0.001 per share, of Monarch Maryland
outstanding immediately prior thereto shall be canceled and returned to the
status of authorized but unissued shares.
1.5 Stock Certificates. Upon and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of common
stock, par value $0.25 per share, of Monarch Delaware shall be deemed for all
purposes to evidence ownership of and to represent the shares of common stock,
par value $0.001 per share, of Monarch Maryland into which the shares of Monarch
Delaware represented by such certificates have been converted as herein
provided. The registered owner on the books and records of Monarch Maryland or
its transfer agent of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to
<PAGE>
Monarch Maryland or its transfer agent, have and be entitled to exercise any
voting and other rights with respect to, and to receive any dividend and other
distributions upon, the shares of Monarch Maryland evidenced by such outstanding
certificate as above provided.
1.6 Options. Upon the Effective Date, Monarch Maryland will assume and
continue Monarch Delaware's 2000 Omnibus Stock Plan, and the outstanding and
unexercised portions of all options and rights to buy common stock, par value
$.01 per share, of Monarch Delaware shall become options or rights for the same
number of shares of common stock, par value $.01 per share, of Monarch Maryland,
with no other changes in the terms and conditions of such options or rights,
including exercise prices, and effective upon the Effective Date, Monarch
Maryland hereby assumes the outstanding and unexercised portions of such options
and rights and the obligations of Monarch Delaware with respect thereto.
1.7 Other Employee Benefit Plans. Upon the Effective Date, Monarch Maryland
will assume all obligations of Monarch Delaware under any and all employee
benefit plans in effect as of the Effective Date or with respect to which
employee rights or accrued benefits are outstanding as of the Effective Date.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Articles of Incorporation and Bylaws. The Articles of Incorporation of
Monarch Maryland in effect on the Effective Date, shall continue to be the
Articles of Incorporation of Monarch Maryland. The Bylaws of Monarch Maryland in
effect on the Effective Date shall continue to be the Bylaws of Monarch
Maryland.
2.2 Directors. The directors of Monarch Maryland immediately preceding the
Effective Date shall remain the directors of Monarch Maryland on and after the
Effective Date. Such directors of Monarch Maryland shall hold office for the
terms as in effect immediately prior to the Effective Date, and until their
successors are elected and qualified or their prior resignation, removal or
death.
2.3 Officers. The officers of Monarch Maryland shall remain the officers of
Monarch Maryland upon the Effective Date and shall serve until their successors
are elected and qualified or their prior resignation, removal or death.
III. MISCELLANEOUS
3.1 Further Assurances. From time to time, as and when required by Monarch
Maryland or by its successors and assigns, there shall be executed
<PAGE>
and delivered on behalf of Monarch Delaware such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action as shall be appropriate or necessary in order to vest or perfect, or to
conform of record or otherwise, in Monarch Maryland the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises, and authority of Monarch Delaware, and otherwise to carry out the
purposes of this Merger Agreement, and the officers and directors of Monarch
Maryland are fully authorized in the name of and on behalf of Monarch Delaware
or otherwise to take any and all such actions and to execute and deliver any and
all such deeds and other instruments.
3.2 Amendment. At any time before or after approval by the stockholders of
Monarch Delaware, this Merger Agreement may be amended in any manner (except
that Section 1.3 and 1.4 and any of the other principal terms hereof as set
forth in Section 251(d) of the Delaware General Corporation Law may not be
amended without the approval of the stockholders of Monarch Delaware) as may be
determined in the judgment of the respective Boards of Directors of Monarch
Delaware and Monarch Maryland to be necessary, desirable or expedient in order
to clarify the intention of the parties hereto or to effect or facilitate the
purposes and intent of this Merger Agreement.
3.3 Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either Monarch Delaware or Monarch Maryland or both,
notwithstanding the approval of this Merger Agreement by the stockholders of
Monarch Delaware.
3.4 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Boards of Directors of Monarch Delaware and Monarch Maryland, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
ATTEST: MONARCH SERVICES, INC.,
a Delaware corporation
/s/ STEVEN M. SZEKELY By: /s/ A. ERIC DOTT
Steven M. Szekely A. Eric Dott
Secretary Chairman
ATTEST: MONARCH SERVICES, INC.,
<PAGE>
a Maryland corporation
/s/ STEVEN M. SZEKELY By: /s/ A. ERIC DOTT
Steven M. Szekely A. Eric Dott
Secretary Chairman
<PAGE>
Annex IV
Subtitle 8. Corporations and Real Estate Investment Trusts-Unsolicited
Takeovers.
3-801. Definitions.
(a) In general. - In this subtitle the following words have the meanings
indicated.
(b) Acquiring person. - "Acquiring person" means a person who is seeking
to acquire control of a corporation.
(c) Act. - "Act" includes an omission or failure to act.
(d) Affiliate. - "Affiliate" means a person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, a specified person.
(e) Associate. - "Associate", when used to indicate a relationship with
any person, means;
(1) Any corporation or organization (other than the corporation or a
subsidiary of the corporation) of which such person is an officer, director, or
partner or is, directly or indirectly, the beneficial owner of 10 percent or
more of any class of equity securities;
(2) Any trust or other estate in which such person has a substantial
beneficial interest or a to which such person serves as trustee or in a similar
fiduciary capacity; and
(3) Any relative or spouse of such person, or any relative of such
spouse, who has the same principal residence as such person or who is a director
or officer of the corporation or any of its affiliates.
(f) Beneficial owner. - "Beneficial owner", when used with respect to any
stock, means a person:
(1) That, individually or with any of its affiliates or associates,
beneficially owns stock, directly or indirectly; or
(2) That, individually or with any of its affiliates or associates,
has:
(i) The right to acquire stock (whether such right is
exercisable immediately or only after the passage of time), pursuant to any
agreement, arrangement, or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options, or otherwise; or
(ii) The right to vote stock pursuant to any agreement,
arrangement, or understanding; or
(3) That has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of stock with any other
person that beneficially owns, or whose affiliates or associates beneficially
own, directly or indirectly, such shares of stock.
(g) Charter. - "Charter" includes the declaration of trust of a real
estate investment trust.
(h) Control. - "Control", including the terms "controlling", "controlled
by", and "under common control with", means the possession,
<PAGE>
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise, and the beneficial ownership of 10
percent or more of the votes entitled to be cast by a corporation's stock
creates a presumption of control.
(i) Corporation. - "Corporation" includes a real estate investment trust
as defined in Title 8 of this article.
(j) Director. - "Director" includes a trustee of a real estate investment
trust.
(k) Equity security. - "Equity security" means:
(1) Any stock or similar security, certificate of interest, or
participation in any profit sharing agreement, voting trust certificate, or
certificate of deposit for an equity security;
(2) Any security convertible, with or without consideration, into an
equity security, or any warrant or other security carrying any right to
subscribe to or purchase an equity security; or
(3) Any put, call, straddle, or other option or privilege of buying
an equity security from or selling an equity security to another without being
bound to do so.
(l) Real estate investment trust. - "Real estate investment trust" has the
meaning stated in Title 8 of this article.
(m) Stockholder. - "Stockholder" includes a shareholder of a real estate
investment trust.
(n) Subsidiary. - "Subsidiary" means any corporation of which stock having
a majority of the votes entitled to be cast is owned, directly or indirectly, by
the corporation.
3-802. Applicability of subtitle.
(a) In general. - Notwithstanding any other provision in this article
except subsection (b) of this section, this subtitle applies to each corporation
that:
(1) Has a class of equity securities registered under the Federal
Securities Exchange Act of 1934; and
(2) Elects to be subject to any or all provisions, in whole or in
part, of this subtitle by provision in:
(i) Its charter or bylaws; or
(ii) A resolution of its board of directors.
(b) Director requirements. - (1) This subtitle applies only to a
corporation that has at least three directors who, at the time of any election
to become subject to the provisions of this subtitle:
(i) Are not officers or employees of the corporation;
(ii) Are not acquiring persons;
(iii) Are not directors, officers, affiliates, or associates
of an acquiring person; and
<PAGE>
(iv) Were not nominated or designated as directors by an
acquiring person,
(2) A director does not fail to satisfy paragraph (1) of this
subsection because the director:
(i) Owns securities issued by the corporation;
(ii) Is entitled to compensation, retirement, severance, or other
benefits as a director of the corporation; or
(iii) Might continue to serve as a director of the
corporation or become a director of an acquiring person.
(3) This subtitle does not apply to a corporation to the extent that
the corporation elects not to be subject to any provision of this subtitle to
which it has previously elected to be subject, if the corporation elects not to
be subject to the provision in the same manner in which it elected to become
subject to the provision, including the satisfaction of subsection (d) (1) of
this section, if applicable.
(c) Complete or partial opt out permitted. - The charter of a corporation
may contain a provision or the board of directors may adopt a resolution that
prohibits the corporation from electing to be subject to any or all provisions
of this subtitle.
(d) Supplementary filings. - (1) A corporation shall file articles
supplementary with the Department if:
(i) The corporation elects to be subject to any or all
provisions of this subtitle by resolution of the board of directors or bylaw
amendment; or
(ii) The Board of directors adopts a resolution in accordance
with subsection (c) of this section that prohibits the corporation from electing
to be subject to any or all provisions of this subtitle.
(2) The articles supplementary shall describe any provision of this
subtitle to which the corporation:
(i) Has elected to become subject; or
(ii) May not elect to become subject in accordance with the
resolution of the board.
(3) Stockholder approval is not required for the filing of articles
supplementary in accordance with paragraph (1) of this subsection.
3-803. Directors - Classes.
(a) Designation. - (1) Before the first annual meeting of stockholders
after a corporation elects to be subject to this subtitle, the board of
directors shall designate by resolution, from among its members, directors to
serve as class I directors, class II directors, and class III directors.
(2) To the extent possible, the classes shall have the same number of
directors.
<PAGE>
(b) Terms of office - Class I directors. - The term of office of the class
I directors shall continue until the first annual meeting of stockholders after
the date on which the corporation becomes subject to this subtitle and until
their successors are elected and qualify.
(c) Same - Class II directors. - The term of office of the class II
directors shall continue until the second annual meeting of stockholders after
the date on which the corporation becomes subject to this subtitle and until
their successors are elected and qualify.
(d) Same - Class III directors. - The term of office of the class III
directors shall continue until the third annual meeting of stockholders
following the date on which the corporation becomes subject to this subtitle and
until their successors are elected and qualify.
(e) Succession. - At each annual meeting of the stockholders of a
corporation, the successors to the class of directors whose term expires at that
meeting shall be elected to hold office for a term continuing until:
(1) The annual meeting of stockholders held in the third year
following the year of their election; and
(2) Their successors are elected and qualify.
(f) Retained corporate powers. - This subtitle does not limit the power of
a corporation by provision in its charter to:
(1) Confer on the holders of any class or series of preference or
preferred stock the right to elect one or more directors; and
(2) Designate the terms and voting powers of the directors, which may
vary among the directors.
3-804. Same - Removal, number, and vacancy.
(a) Removal. - Notwithstanding any other lesser proportion of votes
required by a provision in the charter or the bylaws, but subject to 2-
406(b) (3) of this article the stockholders for a corporation may remove any
director by the affirmative vote of at least two-thirds of all the votes
entitled to be cast by the stockholders generally in the election of directors.
(b) Number. - Subject to 2-402(a) of this article but notwithstanding
any provision in the charter or bylaws, the number of directors of a corporation
shall be fixed only by vote of the board of directors.
(c) Vacancy. - (1) Notwithstanding any provision in the charter or bylaws,
this subsection applies to a vacancy that results from:
(i) An increase in the size of the board of directors; or
(ii) The death, resignation, or removal of a director.
(2) Each vacancy on the board of directors of a corporation may be filled
only by the affirmative vote of a majority of the remaining directors in office,
even if the remaining directors do not constitute a quorum.
<PAGE>
(3) Any director elected to fill a vacancy shall hold office:
(i) For the remainder of the full term of the class of directors in
which the vacancy occurred; and
(ii) Until a successor is elected and qualifies.
3-805. Special meetings of stockholders.
Notwithstanding any provision in the charter or bylaws, the secretary of a
corporation may call a special meeting of stockholders only:
(1) On the written request of the stockholders entitled to cast at least a
majority of all the votes entitled to be cast at the meeting; and
(2) In accordance with the procedures set forth under 2-502(b) (2) and
(3) and (e) of this article.
<PAGE>
ANNEX V
MONARCH SERVICES, INC.
OMNIBUS STOCK PLAN
1. Establishment, Purpose and Types of Awards
Monarch Services, Inc. hereby establishes the MONARCH SERVICES, INC.
OMNIBUS STOCK PLAN (the "Plan"). The purpose of the Plan is to promote
the long-term growth and profitability of Monarch Services, Inc. (the
"Corporation") by (i) providing key people with incentives to improve
stockholder value and to contribute to the growth and financial success of
the Corporation, and (ii) enabling the Corporation to attract, retain and
reward the best available persons for positions of substantial
responsibility.
The Plan permits the granting of stock options (including nonqualified
stock options and incentive stock options qualifying under Section 422 of the
Code), stock appreciation rights (including free-standing, tandem and limited
stock appreciation rights), restricted or unrestricted share awards, phantom
stock, performance awards, or any combination of the foregoing (collectively,
"Awards").
2. Definitions
Under this Plan, except where the context otherwise indicates, the
following definitions apply:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean: (i) any sale, exchange or other
disposition of substantially all of the Corporation's assets or over 50% of its
Common Stock; or (ii) any merger, share exchange, consolidation or other
reorganization or business combination in which the Corporation is not the
surviving or continuing corporation, or in which the Corporation's stockholders
become entitled to receive cash, securities of the Corporation other than voting
common stock, or securities of another issuer.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
any regulations issued thereunder.
(d) "Committee" shall mean the Board or committee of Board members
appointed pursuant to Section 3 of the Plan to administer the Plan.
(e) "Common Stock" shall mean shares of the Corporation's common stock.
<PAGE>
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" of a share of the Corporation's Common Stock for
any purpose on a particular date shall be determined in a manner such as the
Committee shall in good faith determine to be appropriate.
(h) "Grant Agreement" shall mean a written agreement between the
Corporation and a grantee memorializing the terms and conditions of an Award
granted pursuant to the Plan.
(i) "Grant Date" shall mean the date on which the Committee formally acts
to grant an Award to a grantee or such other date as the Committee shall so
designate at the time of taking such formal action.
(j) "Parent" shall mean a corporation, whether now or hereafter existing,
within the meaning of the definition of "parent corporation" provided in Section
424(e) of the Code, or any successor thereto of similar import.
(k) "Rule 16b-3" shall mean Rule 16b-3 as in effect under the Exchange Act
on the effective date of the Plan, or any successor provision prescribing
conditions necessary to exempt the issuance of securities under the Plan (and
further transactions in such securities) from Section 16(b) of the Exchange Act.
(l) "Subsidiary" and "subsidiaries" shall mean only a corporation or
corporations, whether now or hereafter existing, within the meaning of the
definition of "subsidiary corporation" provided in Section 424(f) of the Code,
or any successor thereto of similar import.
3. Administration
(a) Procedure. The Plan shall be administered by the Board. In the
alternative, the Board may appoint a Committee consisting of two (2) or more
members of the Board to administer the Plan on behalf of the Board, who are
"outside directors" within the meaning of Section 162(m) of the Code and "non-
employee directors" within the meaning of Rule 16b-3. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan. In
the event that the Board is the administrator of the Plan in lieu of a
Committee, the term "Committee" as used herein shall be deemed to mean the
Board.
<PAGE>
Members of the Board or Committee who are either eligible for Awards or have
been granted Awards may vote on any matters affecting the administration of the
Plan or the grant of Awards pursuant to the Plan, except that no such member
shall act upon the granting of an Award to himself or herself, but any such
member may be counted in determining the existence of a quorum at any meeting of
the Board or the Committee during which action is taken with respect to the
granting of an Award to him or her.
The Committee shall meet at such times and places and upon such notice
as it may determine. A majority of the Committee shall constitute a quorum.
Any acts by the Committee may be taken at any meeting at which a quorum is
present and shall be by majority vote of those members entitled to vote.
Additionally, any acts reduced to writing or approved in writing by all of the
members of the Committee shall be valid acts of the Committee.
(b) Powers of the Committee. The Committee shall have all the powers
vested in it by the terms of the Plan, such powers to include authority, in its
sole and absolute discretion, to grant Awards under the Plan, prescribe Grant
Agreements evidencing such Awards and establish programs for granting Awards.
The Committee shall have full power and authority to take all other actions
necessary to carry out the purpose and intent of the Plan, including, but not
limited to, the authority to:
(i) determine the eligible persons to whom, and the time or
times at which Awards shall be granted,
(ii) determine the types of Awards to be granted,
(iii) determine the number of shares to be covered by or
used for reference purposes for each Award,
(iv) impose such terms, limitations, restrictions and
conditions upon any such Award as the Committee shall deem
appropriate,
(v) modify, extend or renew outstanding Awards, accept the
surrender of outstanding Awards and substitute new Awards, provided
that no such action shall be taken with respect to any outstanding
Award which would adversely affect the grantee without the grantee's
consent,
(vi) accelerate or otherwise change the time in which an Award
may be exercised or becomes payable and to waive or accelerate the
lapse, in whole or in part, of any restriction or
<PAGE>
condition with respect to such Award, including, but not limited to,
any restriction or condition with respect to the vesting or
exercisability of an Award following termination of any grantee's
employment, and
(vii) to establish objectives and conditions, if any,
for earning Awards and determining whether Awards will be paid after
the end of a performance period.
The Committee shall have full power and authority to administer and interpret
the Plan and to adopt such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable and to interpret same,
all within the Committee's sole and absolute discretion.
(c) Limited Liability. To the maximum extent permitted by law, no member
of the Board or Committee shall be liable for any action taken or decision made
in good faith relating to the Plan or any Award thereunder.
(d) Indemnification. To the maximum extent permitted by law, the members
of the Board and Committee shall be indemnified by the Corporation in respect of
all their activities under the Plan.
(e) Effect of Committee's Decision. All actions taken and decisions and
determinations made by the Committee on all matters relating to the Plan
pursuant to the powers vested in it hereunder shall be in the Committee's sole
and absolute discretion and shall be conclusive and binding on all parties
concerned, including the Corporation, its stockholders, any participants in the
Plan and any other employee of the Corporation, and their respective successors
in interest.
4. Shares Available for the Plan; Maximum Awards
Subject to adjustments as provided in Section 12 of the Plan, the shares of
stock that may be delivered or purchased or used for reference purposes (with
respect to stock appreciation rights, phantom stock units or performance awards
payable in cash) with respect to Awards granted under the Plan, including with
respect to incentive stock options intended to qualify under Section 422 of the
Code, shall not exceed an aggregate of Three Hundred Thousand (300,000) shares
of Common Stock of the Corporation. The Corporation shall reserve said number
of shares for Awards under the Plan, subject to adjustments as provided in
Section 12 of the Plan. If any Award, or portion of an Award, under the Plan
expires or terminates unexercised, becomes unexercisable or is forfeited or
otherwise
<PAGE>
terminated, surrendered or canceled as to any shares without the delivery of
shares of Common Stock or other consideration, the shares subject to such Award
shall thereafter be available for further Awards under the Plan.
The maximum number of shares of Common Stock subject to Awards of any
combination that may be granted during any one calendar year to any one
individual shall be limited to One Hundred Thousand (100,000). To the extent
required by Section 162(m) of the Code and so long as Section 162(m) of the Code
is applicable to persons eligible to participate in the Plan, shares of Common
Stock subject to the foregoing limit with respect to which the related Award is
terminated, surrendered or canceled shall not again be available for grant under
this limit.
5. Participation
Participation in the Plan shall be open to all employees, officers,
directors and consultants of the Corporation, or of any Parent or Subsidiary of
the Corporation, as may be selected by the Committee from time to time.
Notwithstanding the foregoing, participation in the Plan with respect to Awards
of incentive stock options shall be limited to employees of the Corporation or
of any Parent or Subsidiary of the Corporation.
Awards may be granted to such eligible persons and for or with respect to
such number of shares of Common Stock as the Committee shall determine, subject
to the limitations in Section 4 of the Plan. A grant of any type of Award made
in any one year to an eligible person shall neither guarantee nor preclude a
further grant of that or any other type of Award to such person in that year or
subsequent years.
6. Stock Options
Subject to the other applicable provisions of the Plan, the Committee may
from time to time grant to eligible participants Awards of nonqualified stock
options or incentive stock options as that term is defined in Section 422 of the
Code. The stock option Awards granted shall be subject to the following terms
and conditions.
(a) Grant of Option. The grant of a stock option shall be evidenced by a
Grant Agreement, executed by the Corporation and the grantee, stating the number
of shares of Common Stock subject to the stock option evidenced thereby and the
terms and conditions of such stock option, in such form as the Committee may
from time to time determine.
(b) Price. The price per share payable upon the exercise of each
<PAGE>
stock option ("exercise price") shall be determined by the Committee.
(c) Payment. Stock options may be exercised in whole or in part by
payment of the exercise price of the shares to be acquired in accordance with
the provisions of the Grant Agreement, and/or such rules and regulations as the
Committee may have prescribed, and/or such determinations, orders, or decisions
as the Committee may have made. Payment may be made in cash (or cash
equivalents acceptable to the Committee) or, unless otherwise determined by the
Committee, in shares of Common Stock or a combination of cash and shares of
Common Stock, or by such other means as the Committee may prescribe. The Fair
Market Value of shares of Common Stock delivered on exercise of stock options
shall be determined as of the date of exercise. Shares of Common Stock
delivered in payment of the exercise price may be previously owned shares or, if
approved by the Committee, shares acquired upon exercise of the stock option.
Any fractional share will be paid in cash. The Corporation may make or
guarantee loans to grantees to assist grantees in exercising stock options and
satisfying any related withholding tax obligations.
If the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Committee, subject to such limitations as it may determine,
may authorize payment of the exercise price, in whole or in part, by delivery of
a properly executed exercise notice, together with irrevocable instructions, to:
(i) a brokerage firm designated by the Corporation to deliver promptly to the
Corporation the aggregate amount of sale or loan proceeds to pay the exercise
price and any withholding tax obligations that may arise in connection with the
exercise, and (ii) the Corporation to deliver the certificates for such
purchased shares directly to such brokerage firm.
(d) Terms of Options. The term during which each stock option may be
exercised shall be determined by the Committee; provided, however, that in no
event shall a stock option be exercisable more than ten years from the date it
is granted. Prior to the exercise of the stock option and delivery of the
shares certificates represented thereby, the grantee shall have none of the
rights of a stockholder with respect to any shares represented by an outstanding
stock option.
(e) Restrictions on Incentive Stock Options. Incentive stock option
Awards granted under the Plan shall comply in all respects with Code Section 422
and, as such, shall meet the following additional requirements:
(i) Grant Date. An incentive stock option must be granted within 10
years of the earlier of the Plan's adoption by the Board of Directors or
approval by the Corporation's shareholders.
<PAGE>
(ii) Exercise Price and Term. The exercise price of an incentive
stock option shall not be less than 100% of the Fair Market Value of the
shares on the date the stock option is granted and the term of the stock
option shall not exceed ten years. Also, the exercise price of any
incentive stock option granted to a grantee who owns (within the meaning of
Section 422(b)(6) of the Code, after the application of the attribution
rules in Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of shares of the Corporation or its Parent or
Subsidiary corporations (within the meaning of Sections 422 and 424 of the
Code) shall be not less than 110% of the Fair Market Value of the Common
Stock on the grant date and the term of such stock option shall not exceed
five years.
(iii) Maximum Grant. The aggregate Fair Market Value (determined
as of the Grant Date) of shares of Common Stock with respect to which all
incentive stock options first become exercisable by any grantee in any
calendar year under this or any other plan of the Corporation and its
Parent and Subsidiary corporations may not exceed $100,000 or such other
amount as may be permitted from time to time under Section 422 of the Code.
To the extent that such aggregate Fair Market Value shall exceed $100,000,
or other applicable amount, such stock options shall be treated as
nonqualified stock options. In such case, the Corporation may designate
the shares of Common Stock that are to be treated as stock acquired
pursuant to the exercise of an incentive stock option by issuing a separate
certificate for such shares and identifying the certificate as incentive
stock option shares in the stock transfer records of the Corporation.
(iv) Grantee. Incentive stock options shall only be issued to
employees of the Corporation, or of a Parent or Subsidiary of the
Corporation.
(v) Designation. No stock option shall be an incentive stock option
unless so designated by the Committee at the time of grant or in the Grant
Agreement evidencing such stock option.
(vi) Stockholder Approval. No stock option issued under the Plan
shall be an incentive stock option unless the Plan is approved by the
shareholders of the Corporation within 12 months of its adoption by the
Board in accordance with the Bylaws and Articles of the Corporation and
governing law relating to such matters.
(f) Other Terms and Conditions. Stock options may contain such other
provisions, not inconsistent with the provisions of the Plan, as the
<PAGE>
Committee shall determine appropriate from time to time.
7. Stock Appreciation Rights
(a) Award of Stock Appreciation Rights. Subject to the other applicable
provisions of the Plan, the Committee may at any time and from time to time
grant stock appreciation rights ("SARs") to eligible participants, either on a
free-standing basis (without regard to or in addition to the grant of a stock
option) or on a tandem basis (related to the grant of an underlying stock
option), as it determines. SARs granted in tandem with or in addition to a
stock option may be granted either at the same time as the stock option or at a
later time; provided, however, that a tandem SAR shall not be granted with
respect to any outstanding incentive stock option Award without the consent of
the grantee. SARs shall be evidenced by Grant Agreements, executed by the
Corporation and the grantee, stating the number of shares of Common Stock
subject to the SAR evidenced thereby and the terms and conditions of such SAR,
in such form as the Committee may from time to time determine. The term during
which each SAR may be exercised shall be determined by the Committee. In no
event shall a SAR be exercisable more than ten years from the date it is
granted. The grantee shall have none of the rights of a stockholder with
respect to any shares of Common Stock represented by a SAR.
(b) Restrictions of Tandem SARs. No incentive stock option may be
surrendered in connection with the exercise of a tandem SAR unless the Fair
Market Value of the Common Stock subject to the incentive stock option is
greater than the exercise price for such incentive stock option. SARs granted
in tandem with stock options shall be exercisable only to the same extent and
subject to the same conditions as the stock options related thereto are
exercisable. The Committee may, in its discretion, prescribe additional
conditions to the exercise of any such tandem SAR.
(c) Amount of Payment Upon Exercise of SARs. A SAR shall entitle the
grantee to receive, subject to the provisions of the Plan and the Grant
Agreement, a payment having an aggregate value equal to the product of (i) the
excess of (A) the Fair Market Value on the exercise date of one share of Common
Stock over (B) the base price per share specified in the Grant Agreement, times
(ii) the number of shares specified by the SAR, or portion thereof, which is
exercised. In the case of exercise of a tandem SAR, such payment shall be made
in exchange for the surrender of the unexercised related stock option (or any
portion or portions thereof which the grantee from time to time determines to
surrender for this purpose).
(d) Form of Payment Upon Exercise of SARs. Payment by the Corporation of
the amount receivable upon any exercise of a SAR may be made by the delivery of
Common Stock or cash, or any combination of Common
<PAGE>
Stock and cash, as determined in the sole discretion of the Committee from time
to time. If upon settlement of the exercise of a SAR a grantee is to receive a
portion of such payment in shares of Common Stock, the number of shares shall be
determined by dividing such portion by the Fair Market Value of a share of
Common Stock on the exercise date. No fractional shares shall be used for such
payment and the Committee shall determine whether cash shall be given in lieu of
such fractional shares or whether such fractional shares shall be eliminated.
8. Stock Awards (Including Restricted and Unrestricted Shares and Phantom
Stock)
(a) Stock Awards, In General. Subject to the other applicable provisions
of the Plan, the Committee may at any time and from time to time grant stock
Awards to eligible participants in such amounts and for such consideration,
including no consideration or such minimum consideration as may be required by
law, as it determines. A stock Award may be denominated in shares of Common
Stock or stock-equivalent units ("phantom stock"), and may be paid in Common
Stock, in cash, or in a combination of Common Stock and cash, as determined in
the sole discretion of the Committee from time to time.
(b) Restricted Shares. Each stock Award shall specify the applicable
restrictions, if any, on such shares of Common Stock, the duration of such
restrictions, and the time or times at which such restrictions shall lapse with
respect to all or a specified number of shares of Common Stock that are part of
the Award. Notwithstanding the foregoing, the Committee may reduce or shorten
the duration of any restriction applicable to any shares of Common Stock awarded
to any grantee under the Plan. Share certificates with respect to restricted
shares of Common Stock granted pursuant to a stock Award may be issued at the
time of grant of the stock Award, subject to forfeiture if the restrictions do
not lapse, or upon lapse of the restrictions. If share certificates are issued
at the time of grant of the stock Award, the certificates shall bear an
appropriate legend with respect to the restrictions applicable to such stock
Award or, alternatively, the grantee may be required to deposit the certificates
with the Corporation during the period of any restriction thereon and to execute
a blank stock power or other instrument of transfer therefor. Except as
otherwise provided by the Committee, during such period of restriction following
issuance of share certificates, the grantee shall have all of the rights of a
holder of Common Stock, including but not limited to the rights to receive
dividends (or amounts equivalent to dividends) and to vote with respect to the
restricted shares. If share certificates are issued upon lapse of restrictions
on a stock Award, the Committee may provide that the grantee will be entitled to
receive any amounts per share pursuant to any dividend
<PAGE>
or distribution paid by the Corporation on its Common Stock to stockholders of
record after grant of the stock Award and prior to the issuance of the share
certificates.
(c) Phantom Stock. The grant of phantom stock units shall be evidenced by
a Grant Agreement, executed by the Corporation and the grantee, that
incorporates the terms of the Plan and states the number of phantom stock units
evidenced thereby and the terms and conditions of such phantom stock units in
such form as the Committee may from time to time determine. Phantom stock units
granted to a participant shall be credited to a bookkeeping reserve account
solely for accounting purposes and shall not require a segregation of any of the
Corporation's assets. Phantom stock units may be exercised in whole or in part
by delivery of an appropriate exercise notice to the Committee in accordance
with the provisions of the Grant Agreement, and/or such rules and regulations as
the Committee may prescribe, and/or such determinations, orders, or decisions as
the Committee may make. Except as otherwise provided in the applicable Grant
Agreement, the grantee shall have none of the rights of a stockholder with
respect to any shares of Common Stock represented by a phantom stock unit as a
result of the grant of a phantom stock unit to the grantee. Phantom stock units
may contain such other provisions, not inconsistent with the provisions of the
Plan, as the Committee shall determine appropriate from time to time.
9. Performance Awards
The Committee may in its discretion grant performance Awards which become
payable on account of attainment of one or more performance goals established by
the Committee. Performance Awards may be paid by the delivery of Common Stock
or cash, or any combination of Common Stock and cash, as determined in the sole
discretion of the Committee from time to time. Performance goals established by
the Committee may be based on the Corporation's operating income or one or more
other business criteria selected by the Committee that apply to an individual or
group of individuals, a business unit, or the Corporation as a whole, over such
performance period as the Committee may designate. The Committee in its
discretion may recommend to the Board of Directors of the Corporation that the
material terms of any Performance Award or program with respect to some or all
eligible participants be submitted for approval by the stockholders.
10. Withholding of Taxes
The Corporation may require, as a condition to the grant of any Award under
the Plan or exercise pursuant to such Award or to the delivery of certificates
for shares issued or payments of cash to a grantee pursuant
<PAGE>
to the Plan or a Grant Agreement (hereinafter collectively referred to as a
"taxable event"), that the grantee pay to the Corporation, in cash or, unless
otherwise determined by the Corporation, in shares of Common Stock, including
shares acquired upon grant of the Award or exercise of the Award, valued at Fair
Market Value on the date as of which the withholding tax liability is
determined, any federal, state or local taxes of any kind required by law to be
withheld with respect to any taxable event under the Plan. The Corporation, to
the extent permitted or required by law, shall have the right to deduct from any
payment of any kind (including salary or bonus) otherwise due to a grantee any
federal, state or local taxes of any kind required by law to be withheld with
respect to any taxable event under the Plan, or to retain or sell without notice
a sufficient number of the shares to be issued to such grantee to cover any such
taxes.
11. Transferability
No Award granted under the Plan shall be transferable by a grantee
otherwise than by will or the laws of descent and distribution. Unless
otherwise determined by the Committee in accord with the provisions of the
immediately preceding sentence, an Award may be exercised during the lifetime of
the grantee, only by the grantee or, during the period the grantee is under a
legal disability, by the grantee's guardian or legal representative.
12. Adjustments; Business Combinations
In the event of a reclassification, recapitalization, stock split, stock
dividend, combination of shares, or other similar event, the maximum number and
kind of shares reserved for issuance or with respect to which Awards may be
granted under the Plan as provided in Section 4 shall be adjusted to reflect
such event, and the Committee shall make such adjustments as it deems
appropriate and equitable in the number, kind and price of shares covered by
outstanding Awards made under the Plan, and in any other matters which relate to
Awards and which are affected by the changes in the Common Stock referred to
above.
In the event of any proposed Change in Control, the Committee shall take
such action as it deems appropriate and equitable to effectuate the purposes of
this Plan and to protect the grantees of Awards, which action may include, but
without limitation, any one or more of the following: (i) acceleration or
change of the exercise and/or expiration dates of any Award to require that
exercise be made, if at all, prior to the Change of Control; (ii) cancellation
of any Award upon payment to the holder in cash of the Fair Market Value of the
Common Stock subject to such Award as of the date of (and, to the extent
applicable, as established for purposes of) the Change in Control, less the
aggregate exercise price, if any, of
<PAGE>
the Award; and (iii) in any case where equity securities of another entity are
proposed to be delivered in exchange for or with respect to Common Stock of the
Corporation, arrangements to have such other entity replace the Awards granted
hereunder with awards with respect to such other securities, with appropriate
adjustments in the number of shares subject to, and the exercise prices under,
the award.
The Committee is authorized to make adjustments in the terms and conditions
of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in the
preceding two paragraphs of this Section 12) affecting the Corporation, or the
financial statements of the Corporation or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles, whenever the Committee
determines that such adjustments are appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan.
In the event the Corporation dissolves and liquidates (other than pursuant
to a plan of merger or reorganization), then notwithstanding any restrictions on
exercise set forth in this Plan or any Grant Agreement, or other agreement
evidencing a stock option, stock appreciation right or restricted stock Award:
(i) each grantee shall have the right to exercise his stock option or stock
appreciation right, or to require delivery of share certificates representing
any such restricted stock Award, at any time up to ten (10) days prior to the
effective date of such liquidation and dissolution; and (ii) the Committee may
make arrangements with the grantees for the payment of appropriate consideration
to them for the cancellation and surrender of any stock option, stock
appreciation right or restricted stock Award that is so canceled or surrendered
at any time up to ten (10) days prior to the effective date of such liquidation
and dissolution. The Committee may establish a different period (and different
conditions) for such exercise, delivery, cancellation, or surrender to avoid
subjecting the grantee to liability under Section 16(b) of the Exchange Act.
Any stock option or stock appreciation right not so exercised, canceled, or
surrendered shall terminate on the last day for exercise prior to such effective
date; and any restricted stock as to which there has not been such delivery of
share certificates or that has not been so canceled or surrendered, shall be
forfeited on the last day prior to such effective date. The Committee shall
give to each grantee written notice of the commencement of any proceedings for
such liquidation and dissolution of the Corporation and the grantee's rights
with respect to his outstanding Award.
13. Termination and Modification of the Plan
The Board, without further approval of the stockholders, may modify
<PAGE>
or terminate the Plan or any portion thereof at any time, except that no
modification shall become effective without prior approval of the stockholders
of the Corporation to increase the number of shares of Common Stock subject to
the Plan or if stockholder approval is necessary to comply with any tax or
regulatory requirement or rule of any exchange or Nasdaq System upon which the
Common Stock is listed or quoted (including for this purpose stockholder
approval that is required for continued compliance with Rule 16b-3 or
stockholder approval that is required to enable the Committee to grant incentive
stock options pursuant to the Plan).
The Committee shall be authorized to make minor or administrative
modifications to the Plan as well as modifications to the Plan that may be
dictated by requirements of federal or state laws applicable to the Corporation
or that may be authorized or made desirable by such laws. The Committee may
amend or modify the grant of any outstanding Award in any manner to the extent
that the Committee would have had the authority to make such Award as so
modified or amended. No modification may be made that would materially
adversely affect any Award previously made under the Plan without the approval
of the grantee.
14. Non-Guarantee of Employment
Nothing in the Plan or in any Grant Agreement thereunder shall confer any
right on an employee to continue in the employ of the Corporation or shall
interfere in any way with the right of the Corporation to terminate an employee
at any time.
15. Termination of Employment
For purposes of maintaining a grantee's continuous status as an employee
and accrual of rights under any Award, transfer of an employee among the
Corporation and the Corporation's Parent or Subsidiaries shall not be considered
a termination of employment. Nor shall it be considered a termination of
employment for such purposes if an employee is placed on military or sick leave
or such other leave of absence which is considered as continuing intact the
employment relationship; in such a case, the employment relationship shall be
continued until the date when an employee's right to reemployment shall no
longer be guaranteed either by law or contract.
16. Written Agreement
Each Grant Agreement entered into between the Corporation and a grantee
with respect to an Award granted under the Plan shall incorporate the terms of
this Plan and shall contain such provisions, consistent with
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the provisions of the Plan, as may be established by the Committee.
17. Non-Uniform Determinations
The Committee's determinations under the Plan (including without limitation
determinations of the persons to receive Awards, the form, amount and time of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated.
18. Limitation on Benefits
With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or action by
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
19. Listing and Registration
If the Corporation determines that the listing, registration or
qualification upon any securities exchange or upon any listing or quotation
system established by the National Association of Securities Dealers, Inc.
("Nasdaq System") or under any law, of shares subject to any Award is necessary
or desirable as a condition of, or in connection with, the granting of same or
the issue or purchase of shares thereunder, no such Award may be exercised in
whole or in part and no restrictions on such Award shall lapse, unless such
listing, registration or qualification is effected free of any conditions not
acceptable to the Corporation.
20. Compliance with Securities Law
The Corporation may require that a grantee, as a condition to exercise of
an Award, and as a condition to the delivery of any share certificate, provide
to the Corporation, at the time of each such exercise and each such delivery, a
written representation that the shares of Common Stock being acquired shall be
acquired by the grantee solely for investment and will not be sold or
transferred without registration or the availability of an exemption from
registration under the Securities Act and applicable state securities laws. The
Corporation may also require that a grantee submit other written representations
which will permit the Corporation to comply with federal and applicable state
securities laws in connection with the issuance of the Common Stock, including
representations as to the knowledge and experience in financial and
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business matters of the grantee and the grantee's ability to bear the economic
risk of the grantee's investment. The Corporation may require that the grantee
obtain a "purchaser representative" as that term is defined in applicable
federal and state securities laws. The stock certificates for any shares of
Common Stock issued pursuant to this Plan may bear a legend restricting
transferability of the shares of Common Stock unless such shares are registered
or an exemption from registration is available under the Securities Act and
applicable state securities laws. The Corporation may notify its transfer agent
to stop any transfer of shares of Common Stock not made in compliance with these
restrictions. Common Stock shall not be issued with respect to an Award granted
under the Plan unless the exercise of such Award and the issuance and delivery
of share certificates for such Common Stock pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any national securities exchange or Nasdaq System upon which the
Common Stock may then be listed or quoted, and shall be further subject to the
approval of counsel for the Corporation with respect to such compliance to the
extent such approval is sought by the Committee.
21. No Limit on Other Compensation Arrangements
Nothing contained in the Plan shall prevent the Corporation or its Parent
or Subsidiary corporations from adopting or continuing in effect other
compensation arrangements (whether such arrangements be generally applicable or
applicable only in specific cases) as the Committee in its discretion determines
desirable, including without limitation the granting of stock options, stock
awards, stock appreciation rights or phantom stock units otherwise than under
the Plan.
22. No Trust or Fund Created
Neither the Plan nor any Award shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship between the
Corporation and a grantee or any other person. To the extent that any grantee
or other person acquires a right to receive payments from the Corporation
pursuant to an Award, such right shall be no greater than the right of any
unsecured general creditor of the Corporation.
23. Governing Law
The validity, construction and effect of the Plan, of Grant Agreements
entered into pursuant to the Plan, and of any rules, regulations, determinations
or decisions made by the Board or Committee relating to the Plan or such Grant
Agreements, and the rights of any and
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All persons having or claiming to have any interest therein or thereunder, shall
be determined exclusively in accordance with applicable federal laws and the
laws of the State of Maryland, without regard to its conflict of laws rules and
principles.
24. Plan Subject to Charter and By-Laws
This Plan is subject to the Articles and By-Laws of the Corporation, as
they may be amended from time to time.
25. Effective Date; Termination Date
The Plan is effective as of the date on which the Plan was adopted by the
Board; provided that the Plan is approved by the stockholders of the Corporation
twelve (12) months before or after such date. Any Award issued under the Plan
prior to the date of stockholder approval is contingent on such approval being
obtained. No Award shall be granted under the Plan after the close of business
on the day immediately preceding the tenth anniversary of the effective date of
the Plan. Subject to other applicable provisions of the Plan, all Awards made
under the Plan prior to such termination of the Plan shall remain in effect
until such Awards have been satisfied or terminated in accordance with the Plan
and the terms of such Awards.
Date Approved by the Board: January 21, 2000
Date Approved by the Shareholders:
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MONARCH SERVICES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
OCTOBER xx, 2000
The undersigned hereby appoints A. Eric Dott and David F.
Gonano, and each of them, with full power of substitution,
as proxy, to vote all shares of the Common Stock of Monarch
Services, Inc. (the "Company"), which the undersigned is
entitled to vote at the Annual Meeting of stockholders of
the Company on October xx, 2000 at 11:00 a.m., and at any
adjournment or postponements thereof (the "Annual Meeting"),
on the following matters, each of which is fully described
in the proxy statement.
The Board of Directors recommends a vote FOR each of the
items listed below.
1. FOR / / WITHHOLD / / The election of four persons to
the Board of Directors of the Company to serve until until their successors are
elected and qualified (except as marked to the contrary):
A. Eric Dott, David F. Gonano, Jackson Y. Dott, Helen
Delich Bentley and Kenneth C. Holt (TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE THROUGH THE
NOMINEE'S NAME)
2. FOR / / AGAINST / / ABSTAIN / / Proposal to ratify
Stegman & Company , as independent auditors of the Company
for the fiscal year ending April 30, 2001.
3. FOR / / AGAINST / / ABSTAIN / / Proposal to reincorporate
the Company in Maryland.
4. FOR / / AGAINST / / ABSTAIN / / Proposal to approve the Company's 2000
Omnibus Stock Plan.
To act upon any other matter which may properly come before
the Annual Meeting.
THIS PROXY WILL BE VOTED ON EACH OF THE FOREGOING ITEMS AS
SPECIFIED BY THE PERSON SIGNING IT, BUT IF NO SPECIFICATION
IS MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE DIRECTOR
NOMINEES AND FOR EACH OF PROPOSALS 2, 3 AND 4.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. IT MAY BE REVOKED PRIOR TO ITS EXERCISE.
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Receipt of notice of the Annual Meeting and proxy statement is
hereby acknowledged, and the terms of the notice and proxy statement
are hereby incorporated by reference into this proxy. The
undersigned hereby revokes all proxies heretofore given for
the Annual Meeting.
WITNESS the hand and seal undersigned, this day of
, 2000.
[SEAL]
[SEAL]
Please date and then sign exactly as name appears to the right.
If signing for trusts, estates or corporations, capacity or
title should be stated. If shares are jointly owned, both
owners should sign.
PLEASE DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE
