<PAGE>
MONARCH BANCORP
30000 Town Center Drive
Laguna Niguel, California 92677
(714) 495 3300
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD July 17, 1995
INTRODUCTION
TO THE SHAREHOLDERS OF MONARCH BANCORP:
NOTICE IS HEREBY GIVEN that, pursuant to the call of its Board of Directors,
the Annual Meeting of Shareholders (the "Meeting") of Monarch Bancorp (the
"Company") will be held at South Coast Medical Center, 31872 Pacific Coast
Highway, Laguna Beach, California, on Monday, July 17, 1995 at 7:00 p.m.,
and at any and all adjournments thereof.
The matters to be considered and voted upon at the Meeting will include:
1. ELECTION OF DIRECTORS. Election of the following eight (8)
individuals to the Board of Directors to serve until the next Annual
Meeting of Shareholders and until their successors are elected and
have qualified:
Rice E. Brown Alfred H. Jannard
E. Lynn Caswell Cheryl Moore
Raymond B. Cox Margaret A. Redmond
William C. Demmin John W. Rose
2. AMENDMENT TO MONARCH BANCORP 1993 STOCK OPTION PLAN. To consider and
vote upon proposed amendments to the Company's 1993 Stock Option Plan
that would increase the number of shares subject to the Plan equal to
10% of the issued and outstanding shares of the Company following
completion of the current recapitalization plans of Monarch Bancorp,
as described in this Proxy Statement, subject to any necessary
approvals and amendments required by any regulatory agency.
3. DIRECTORS DEFERRED COMPENSATION PLAN AND TRUST AGREEMENT. Voting
upon the approval of the Directors Deferred Compensation Plan and
Trust Agreement as described in the Company's Proxy Statement for the
1995 Annual Meeting of Shareholders, subject to any necessary
approvals and amendments required by any regulatory agency.
4. OTHER BUSINESS. Transacting such other business as may properly come
before the Meeting, and any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 16, 1995 as the
record date for determination of shareholders entitled to notice of, and to
vote at, the Meeting or any adjournment thereof.
The Bylaws (as amended by the Board of Directors on April 23, 1986) of the
Company set forth the following procedures for nominations to the Board of
Directors:
<PAGE>
Nominations for election of members of the Board of Directors may be made
by the Board of Directors or by any stockholder of any outstanding class
of voting stock of the Corporation entitled to vote for the election of
directors. Notice of intention to make any nominations, other than by the
Board of Directors, shall be made in writing and shall be delivered or
mailed to the President of the Corporation not less than 30 days nor more
than 60 days prior to any meeting of stockholders called for the election
of directors; provided, however, that if less than 30 days notice of the
meeting is given to shareholders, such notice of intention to nominate
shall be mailed or delivered to the President of the Corporation not later
than the close of business on the seventh day following the day on which
the notice of the meeting is sent to shareholders. Such notification
shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee;
(b) the principal occupation of each proposed nominee; (c) the number of
shares of capital stock of the Corporation owned by each proposed nominee;
(d) the name and residence address of the notifying shareholder; and (e)
the number of shares of capital stock of the Corporation owned by the
notifying shareholder. Nominations not made in accordance herewith shall
be disregarded by the Chairman of the meeting, and the Inspector of
Election shall then disregard all votes cast for each such nominee.
By Order of the Board of Directors
/s/ William C. Demmin
William C. Demmin
Corporate Secretary
May 31, 1995
<PAGE>
MONARCH BANCORP
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JULY 17, 1995
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of Proxies
for use at the 1995 Annual Meeting of Shareholders (the "Meeting") of Monarch
Bancorp (the "Company") to be held at South Coast Medical Center, 31872 Pacific
Coast Highway, Laguna Beach, California, on Monday, July 17, 1995 at 7:00
p.m., and at any and all adjournments thereof.
It is expected that this Proxy Statement and accompanying Notice and Proxy will
be mailed to shareholders on or about June 6, 1995.
REVOCABILITY OF PROXIES
A Proxy for use at the Meeting is enclosed. Any shareholder who executes and
delivers such proxy has the right to revoke it at any time before it is
exercised by filing with the Company an instrument revoking it or by filing a
duly-executed Proxy bearing a later date. In addition, the powers of the proxy
holders will be revoked if the person executing the Proxy is present at the
Meeting and elects to vote in person. Subject to such revocation, all shares
represented by a properly executed Proxy received in time for the Meeting will
be voted by the proxy holders in accordance with the instruction on the Proxy.
IF NO INSTRUCTION IS SPECIFIED WITH REGARD TO A MATTER TO BE ACTED UPON, THE
SHARES REPRESENTED BY THE PROXY WILL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF MANAGEMENT AND IN FAVOR OF SUCH MATTER.
PERSONS MAKING THE SOLICITATION
This solicitation of Proxies is being made by the Board of Directors of the
Company. The expense of preparing, assembling, printing, and mailing this Proxy
Statement and the material used in the solicitation of proxies for the Meeting
will be borne by the Company. It is contemplated that proxies will be solicited
principally through the use of mail, but officers, directors, and employees of
the Company may solicit proxies personally or by telephone, without receiving
special compensation therefor. Although there is no formal agreement to do so,
the Company may reimburse banks, brokerage houses, and other custodians,
nominees and fiduciaries for the reasonable expense in forwarding these proxy
materials to their principals. In addition, the Company may utilize the
services of individuals or companies not regularly employed by the Company in
connection with the solicitation of proxies if Management of the Company
determines that this is advisable.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
There were issued and outstanding 5,341,541 shares of the Company's common
stock on May 16, 1995, which has been set as the record date for the purpose of
determining the shareholders entitled to notice of and to vote at the Meeting
(the "Record Date"). Each holder of common stock will be entitled to one vote,
in person or by the proxy, for each share of common stock standing in his or her
name on the books of the Company as of the Record Date on any matter submitted
to the vote of the shareholders, except that in connection with the election of
directors, the shares may be voted cumulatively if a candidate's or candidates'
name(s) have been properly placed in nomination prior to the voting and a
shareholder present at the meeting has given notice of his or her intention to
vote his or her shares cumulatively. If a shareholder has given such notice,
then all shareholders entitled to vote for the election of directors may
cumulate their votes. Cumulative voting entitles a shareholder to give one or
more nominees as many votes as is equal to the number of directors to be elected
multiplied by the number of shares owned by such shareholder, or to distribute
his or her votes on the same principle between two or more nominees as he or she
sees fit. In the election of directors, eight (8) receiving the highest number
of votes will be elected.
The following table lists any known shareholders with a beneficial ownership of
five percent of the Company's common stock as of March 31, 1995. All shares
are common stock, the only class of security outstanding.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
<S> <C> <C>
Peter Huizenga Testamentary Trust
Huizenga Capital Management
Oak Brook, IL 60521 530,000 9.92%
Robert A. Schoellhorn
c/o Bryan & Gross
Northbrook, IL 60062 530,000 9.92%
Mutual Discovery Fund (Mutual Series Fund, Inc.)
Short Hills, NJ 07078 530,000 9.92%
NB Bank Partners II 530,000 9.92%
Chicago, IL 60611
Basswood Partners
Paramus, NJ 07652 530,000 9.92%
Kenneth Gaspar
Lisle, IL 6053 370,370 6.88%
Jerome White
Chicago, IL 60614 333,333 6.19%
</TABLE>
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
At the Annual Meeting, eight (8) persons are to be elected to the Board of
Directors of the Company to serve until the next Annual Meeting of Shareholders
and until their successors are elected and have qualified.
The Bylaws of the Company provide that the authorized number of directors shall
not be less than seven (7) nor more than thirteen (13) with the exact number of
directors to be fixed from time to time by resolution of majority of the full
Board of Directors or by resolution of the shareholders. The number of
directors to be elected at the Annual Meeting has been fixed at eight (8).
A shareholder may withhold authority for the proxy holders to vote for the
nominees identified below by so indicating in the enclosed Proxy. Further, a
shareholder may withhold authority for the proxy holders to vote for any
individual nominee by writing that nominee's name in the appropriate space
provided on the Proxy. Unless authority to vote for the nominees is so
withheld, the proxy holders will vote the proxies received by them for the
election of the nominees identified below as directors of the Company. If any
of the nominees should be unable to or declines to serve, which is not now
anticipated, the proxy holders shall have discretionary authority to vote for a
substitute who shall be designated by the present Board of Directors to fill the
vacancy. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all of the proxies received by them
for the election of the nominees identified below as directors of the Company.
Each person who was a director, executive officer, or beneficial owner of more
than ten percent of any class of equity securities pursuant of Section 12 of the
Securities Exchange Act of 1934 has represented, in writing, to the Company that
they have disclosed on a Form 3 or Form 4 on a timely basis all reports required
by Section 16 during the most recent fiscal year.
DIRECTORS AND NOMINEES
The following table sets forth as to each of the persons nominated for election
as a director of the Company, such person's age, such person's principal
occupations during the past five years, and the period during which such person
has served as a director of the Company and also Monarch Bank (the "Bank"), its
wholly-owned subsidiary.
<TABLE>
<CAPTION>
DIRECTOR DIRECTOR OF
PRINCIPAL OCCUPATION OF COMPANY BANK
NAME AND OFFICE HELD AGE FOR PAST FIVE YEARS SINCE SINCE
- -------------------- --- ---------------------- ---------- -----------
<S> <C> <C> <C> <C>
Rice E. Brown 57 Owner & President of 1988 1988
Rice Brown Financial Services
E. Lynn Caswell 50 Commercial Banking and 1987 1987
Chairman of the Board, Bank Holding Company
President, and Chief Management
Executive Officer
Raymond B. Cox 86 President, Cox Marketing 1983 1979
Associates, marketing
consultants for real estate
investments
William C. Demmin 50 Exec. Vice President and 1993 1993
Chief Financial Officer of Bank;
Corporate Secretary of Bank
Holding Company
3
<PAGE>
Alfred H. Jannard 54 Pharmacist/Owner of drug store 1993 1993
Cheryl Moore 48 Owner/Operator of a retail 1993 1993
women's apparel store
Margaret A. Redmond 54 Vice President & Office 1986 1987
Manager of Professional
Orthodontia Practice Firm
John W. Rose 46 President/McAllen Capital Partners, Inc. - -
</TABLE>
The Company has nominated Mr. John Rose as a member of the Board of Directors
subject to regulatory approval. Mr. Rose is President of McAllen Capital
Partners Inc., a firm that specializes in providing financial advice to and
making investments in banks and thrifts. Mr. Rose is one of the Financial
Advisors who assisted the Company in structuring and completing the Private
Placement which is described in proposal 2. He has an extensive background in
banking and finance.
COMMITTEES OF THE BOARD OF DIRECTORS
During 1994, the Board of Directors of the Company held seven (7) meetings. The
Bank, during 1994, held fifteen (15) regular meetings, one (1) special meeting,
and seven (7) joint Executive Sessions. All Directors attended at least 85% of
the Board meetings of the Company. All Directors attended at least 80% of the
Board meetings of the Bank.
The Bank Loan Committee, which is responsible for reviewing and approving loans,
held 21 meetings during 1994. Members of the Bank Loan Committee also function
as the Bank's Investment Committee.
The Board of Directors' Audit Committee had five (5) official meetings in 1994,
and also met to review quarterly reports. The members of the Audit Committee
are: Rice E. Brown, Raymond B. Cox, Alfred H. Jannard, Cheryl Moore, and
Margaret A. Redmond. The duties of the Committee include meetings and
discussions with the Company's external auditors, and meeting with outside
operational auditors who are engaged to perform internal control audits and
review and approve various financial reports.
EXECUTIVE OFFICERS
The following table sets forth as to each of the persons who currently serves as
an Executive Officer of the Company and the Bank, such person's age, such
person's principal occupation during the past five years, such person's current
position with the Bank, and the period during which the person has served in
such position:
<TABLE>
<CAPTION>
PRINCIPAL
POSITION WITH OCCUPATION FOR YEAR APPOINTED TO
NAME AGE COMPANY AND BANK PAST FIVE YEARS COMPANY BANK
- ---- --- ---------------- --------------- ------- ----
<S> <C> <C> <C> <C> <C>
E. Lynn Caswell 50 Chairman, President and Commercial Banking 1987 1987
and Chief Executive Officer and Bank Holding
Company Management(1)
William C. Demmin 50 Executive Vice President Bank and Bank Holding 1987 1987
and Chief Financial Officer Company Management (2)
Louis F. Cumming 55 Executive Vice President Bank Management(3) 1995
and Senior Credit Officer
4
<PAGE>
<FN>
(1) Mr. Caswell was formerly the President and Chief Executive Officer of the
Bank of San Diego, and Chief Operating Officer of BSD Bancorp, its parent
Company, from 1984 to 1987, and he has over 27 years of banking experience.
(2) From 1986 to 1987, Mr. Demmin served as Cashier of Commercial Center Bank
of Santa Ana, California, and he had previously served as Senior Vice
President, Chief Financial Officer, and Cashier of First American Bank &
Trust in Laguna Beach from 1983 to 1986. Mr. Demmin had previously served
Bank of America for eleven (11) years, and has over 28 years of banking
experience.
(3) On April 28, 1995, Mr. Cumming was appointed Executive Vice President and
Senior Credit Officer of the Bank. Mr. Cumming was formerly the Executive
Vice President and Senior Credit Officer of Cuyamaca Bank from 1992 to
April 1995, Senior Vice President of First National Bank from 1989 to 1992,
and he has over 30 years of banking experience.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
5
<PAGE>
The following table reflects as of March 31, 1995 the beneficial ownership of
management of the Company's common stock including stock options which have been
vested or stock options that will be vested within 60 days.
Mr. John Rose is expected to become a director of the Company subject
to regulatory approval and shareholder approval. As of March 31, 1995 he held
185,185 shares of common stock or 3.47% of the outstanding shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
Rice E. Brown
Laguna Niguel, CA 92677 12,345 0.23%
E. Lynn Caswell(1)
Laguna Niguel, CA 92677 53,415 0.99%
Raymond B. Cox
Monarch Beach, CA 92629 23,689 0.44%
Louis F. Cumming
La Jolla, CA 92037 -0- -0-
William C. Demmin(2)
Laguna Niguel, CA 92677 26,882 0.50%
Alfred H. Jannard
Laguna Niguel, CA 92677 11,840 0.22%
Cheryl Moore
Laguna Niguel, CA 92677 8,108 0.15%
Margaret A. Redmond
San Clemente, CA 92672 26,396 0.44%
All eight (8) directors as a group 162,675 3.02%
<FN>
(1) Mr. Caswell is President and CEO of the Bank and Company
(2) Mr. Demmin is an Executive Vice President of the Bank and Company
</TABLE>
EXECUTIVE COMPENSATION
The Company's executive officers are E. Lynn Caswell, Chairman of the Board,
President and Chief Executive Officer; William C. Demmin, Executive Vice
President and Chief Financial Officer. The Company paid no salaries in 1994.
The following table reflects all compensation paid to Mr. E. Lynn Caswell, the
Company's and Bank's Chief Executive Officer. No other executive officer(s)
received a total annual salary and bonus of $100,000 or more.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
PROFIT OTHER ANNUAL OPTION/
NAME AND POSITION YEAR SALARY SHARING COMPENSATION SAR'S #
- ----------------- ---- ------ ------- ------------ -------
<S> <C> <C> <C> <C> <C>
E. Lynn Caswell 1994 $128,182 $ -- $ -- 0
1993 $128,182 $ -- $21,324 $55,620
1992 $124,730 $31,553 $ 8,700 0
</TABLE>
6
<PAGE>
Mr. E. Lynn Caswell executed an Employment Agreement dated July 23, 1987, and
amended effective July 23, 1989, and July 23, 1991 with the Company and the
Bank. The Agreement is now effective for a three (3) year period with
automatic, subsequent three (3) year renewals, unless notice is given thirty
(30) days prior to the end of any given period. The Agreement was extended for
one additional year in 1994 until June, 1995. The Agreement provides for a base
salary with annual cost of living adjustments to a maximum of 8%. Mr. Caswell's
current base annual salary as of February 28, 1995 is $128,182. In addition, Mr.
Caswell receives an automobile allowance, reimbursement for various business
expenses, use of the Bank's club memberships, four weeks annual vacation,
insurance, including disability and life insurance equal to four (4) times
annual salary, and other health and Company benefits. Mr. Caswell is entitled
to receive director's fees. A profit sharing agreement equal to 10% of the
pre-tax profit of the Bancorp, as calculated in accordance with generally
accepted accounting principles, is payable to Mr. Caswell within three (3)
months after the end of the fiscal year. The Agreement may be terminated
without cause by majority vote, or as the result of a merger or corporate
dissolution. Should the Agreement be terminated, Mr. Caswell would receive not
less than six (6) months' base salary, auto allowance, and insurance benefits.
The profit sharing arrangement of 10% of the pre-tax profit would be calculated
and payable as of the date of the termination of the Agreement.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF TOTAL
OPTIONS/SARS OPTIONS/SARS GRANTED TO EXERCISE OR BASE EXPIRATION
NAME GRANTED (#) EMPLOYEES IN FISCAL YEAR PRICE ($/SH) DATE
---- ----------- ------------------------ ------------ ----
<S> <C> <C> <C> <C>
NONE
</TABLE>
Mr. Caswell received options to purchase 2,000 shares of the Company's common
stock in September, 1993 at fair market value as defined in the Company's 1993
Stock Option Plan. Mr. Caswell was one of nine individuals who received options
in 1993. A description of the 1993 Plan is contained in proposal 2.
Mr. Caswell at the request of the Board of Directors also voluntarily canceled
53,620 options that had been granted in 1988. These options under the terms of
the 1983 Stock Options had been fully vested over a five year period, and were
exercisable at an average price of $4.28 per share. The Company reissued 53,620
options under the 1993 Stock Option Plan at $4.25 per share. The replacement
options will be vested as to 1/5 per year over five years and expire in
September 2003.
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END(#) FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
E. Lynn Caswell -- -- 10,000/
55,620
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE NOMINEES.
7
<PAGE>
PROPOSAL 2: APPROVAL OF AMENDMENT TO MONARCH BANCORP 1993 STOCK OPTION PLAN
INTRODUCTION
Shareholders of Monarch Bancorp are being asked to approve a proposed amendment
to the Monarch Bancorp 1993 Stock Option Plan (the "1993 Plan"), which was
originally adopted by the Board of Directors of Monarch Bancorp (the "Company")
on March 16, 1993 and approved at the 1993 Annual Meeting of Shareholders. The
Board of Directors on May 16, 1995 approved a proposed amendment to the 1993
Plan, subject to the approval of the California Commissioner of Corporations and
the holders of the majority of the issued and outstanding shares of the Company,
that would increase the number of shares that are subject to the 1993 Plan to
approximately 10% of the issued and outstanding shares of the Company following
the completion of the Company's recapitalization.
The 1983 and 1993 Plans provided for an aggregate total of 204,030 or 25.7% of
the issued and outstanding shares of the Company as of March 30, 1995, or 3.82%
of the Company's shares issued and outstanding on the Record Date.
On March 31, 1995, the Company completed the initial phase of a Private
Placement Offering of 4,547,111 shares of its Common Stock at a price of $1.35
per share to several accredited investors as defined in SEC Regulation D. The
Company raised approximately $5,669,000 in net proceeds in the Private Placement
Offering. The Company has now filed a Registration Statement on Form SB-2 in
which the Company is in the process of registering an additional 3,177,296
shares of Common Stock in connection with a proposed combination Rights and
Public Offering (the "Offering"). If the shares currently being registered
under the Registration Statement are completely sold, the Company will have
8,518,730 shares of the Company's Common Stock issued and outstanding.
The Board of Directors believes that the increase in shares in the 1993 Plan is
beneficial to the Company, the Bank and the Company's shareholders. The
increase in the number of shares in the 1993 Plan is subject to the approval of
the California Commissioner of Corporations and the holders of a majority of the
issued and outstanding shares of the Company, subject to any required amendments
by any regulatory agency. In accordance with the rules and regulations of the
California Commissioner of Corporations, the Company is allowed to have up to
30% of its issued and outstanding shares contained in a stock option plan.
The Company was extensively assisted in its recapitalization efforts by Belle
Plaine Partners, Inc., and McAllen Capital Partners, the Financial Advisors to
the Company. The Financial Advisors received cash compensation equal to 5% of
the Private Placement Offering proceeds, and the Financial Advisors will also
receive 5% of the Offering proceeds. The Company has also committed to grant to
the Financial Advisors in addition to the compensation described above, stock
options entitling the Financial Advisors to purchase shares equal to 5% of the
number of shares issued and outstanding following the completion of the Offering
at a price equal to 120% of the Offering price. The options are intended to be
granted for a term of 10 years and will be exercisable after the first year.
The options will be nontransferable.
The Board of Directors also intends to cancel existing stock options and
substitute new stock options on prices, and for terms, financially comparable to
terms of the options described above.
SUMMARY OF PLAN
The purpose of the 1993 Plan is to strengthen the Company and the Bank by
providing an additional means of attracting and retaining competent managerial
personnel. The 1993 Plan provides to participants added incentive for high
levels of performance and for unusual efforts to increase the earnings of the
Company and the Bank. The Board of Directors believes that the 1993 Plan has
assisted and will continue to assist in accomplishing these objectives and
facilitate in achieving these results by providing a means whereby directors,
officers, and key employees, as well as consultants, advisors and others having
a business relationship with the Company and the Bank, may purchase shares of
the Common Stock of the Company pursuant to options granted in accordance with
8
<PAGE>
the 1993 Plan. 104,013 unissued shares of the Company, or approximately 1.9% of
the current issued and outstanding shares of the Company on March 31, 1995, are
currently reserved for issuance to directors, officers and employees, as well as
consultants, advisors and others having a business relationship with the Company
and the Bank ("Eligible Participants"). Options granted pursuant to the 1993
Plan may be non-qualified options or incentive stock options within the meaning
of Section 422A of the Internal Revenue Code.
The 1993 Plan is administered by the Board of Directors of the Company or by a
committee appointed from time to time by the Board. The Board of Directors or
the committee determines the Eligible Participants in the 1993 Plan and the
extent of their participation.
The purchase price of stock subject to each option may not be less than one
hundred percent (100%) of the fair market value of such stock at the time such
option is granted. An Eligible Participant owning more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company may
only be granted an option with an exercise price at least 110% of the fair value
of Company stock at the date of grant. The purchase price of any shares
exercised shall be paid in full in cash or, with the prior written approval of
the committee, in shares of the Company or on a deferred basis evidenced by
promissory note. Options may be granted pursuant to the 1993 Plan for a term of
up to ten (10) years. Each option shall be exercisable according to the
determination of the Board or committee, except that options shall be
exercisable at a minimum of 20% per year over a five year period.
Options granted under the 1993 Plan are not transferable by the optionee during
the optionee's lifetime. In the event of termination of employment as a result
of the optionee's disability or in the event of an employee's death during the
exercise period, to the extent the option is exercisable on the date employment
terminates or the employee dies, the option shall remain exercisable for up to
one (1) year (but not beyond the end of the original option term) by the
disabled optionee or, in the event of death of the optionee, a non-qualified
option shall be exercisable by the person or persons to whom rights under the
option shall have passed by will or the laws of descent and distribution.
If an optionee's employment is terminated, unless termination was by reason of
disability or death, the optionee shall have the right, for a 3-month period
after termination, to exercise that portion of the option which was exercisable
immediately prior to such termination. If an optionee's employment is
terminated for cause, the optionee shall have the right for a 30 day period
after termination, to exercise that portion of the option which was exercisable
immediately prior to such termination. In no event may the option be exercised
after the end of the original option term.
In the event of certain changes in the outstanding Common Stock of the Company
without receipt of consideration by the Company, such as stock dividends, stock
splits, recapitalization, reclassification, reorganization, merger, stock
consolidation, or otherwise, appropriate and proportionate adjustments shall be
made in the number, kind and exercise price of shares covered by any unexercised
or partially unexercised options which were already granted. Optionees will
receive prior notice of any pending dissolution or liquidation of the Company,
or reorganization, merger or consolidation where the Company is not the
surviving corporation or sale of substantially all the assets of the Company
or other form of corporate reorganization in which the Company is not a
surviving entity, or the acquisition of stock representing more than 50% of
the voting power of the stock of the Company then outstanding ("Terminating
Event"). Optionees have thirty (30) days from the date of mailing of such
notices to exercise any option in full. After such thirty (30) days, any
option not exercised shall terminate and upon the occurrence of the Terminating
Event, the 1993 Plan shall terminate, unless some other provision is made in
connection with the Terminating Event.
The Board reserves the right to suspend, amend, or terminate the 1993 Plan, and,
with the consent of the optionee, make such modifications, of the terms and
conditions of his or her option as it deems advisable, except that the Board
may not, without further approval of a majority of the shares, increase the
maximum number of shares covered by the 1993 Plan, change the minimum option
price, increase the maximum term of options under the
9
<PAGE>
1993 Plan or permit options to be granted to anyone other than an officer,
employee or director, or consultant, advisor or other person having a business
relationship with the Company or the Bank.
Unless previously terminated by the Board of Directors, the 1993 Plan terminates
ten years from the date the Plan was adopted by the Board of Directors of the
Company, or March 16, 2003.
FEDERAL INCOME TAX CONSEQUENCES
To the extent that options granted under the 1993 Plan qualify as incentive
stock options and (i) the optionee does not sell the stock acquired upon
exercise of the options within two (2) years of the date of grant and one (1)
year from the date of exercise and (ii) the optionee was employed by the Company
or a subsidiary for the entire period beginning on the date of grant of option
and ending three (3) months prior to the exercise of the option, then the
optionee will not recognize compensation income to the extent of any "bargain
element" determined as of the time of grant or exercise, and the Company will
not be entitled to a corresponding tax deduction.
However, the bargain element is a time of tax preference for the purpose of
determining the employee's alternative minimum tax.
If the optionee disposes of the stock acquired through the exercise of the
incentive stock option prior to satisfaction of the holding period or fails to
satisfy the employment requirement, the optionee will recognize compensation
income and the Company will be entitled to a corresponding tax deduction to the
extent of the lesser of (i) the excess of the fair market value of the stock at
the date of exercise over the exercise price or (ii) the amount realized in
excess of the tax basis of the stock if disposed in a taxable transaction.
If the options granted under the 1993 Plan are non-qualified, the optionee will
not recognize taxable income, and the Company will not be entitled to a
corresponding tax deduction, at the time of grant or exchange. Upon the
exercise of a non-qualified stock option, however, the optionee will recognize
taxable income equal to the "bargain element" or the "spread", the difference
between the fair market value determined as of the time of exercise of the
Company's Common Stock acquired by the optionee and the option price paid for
the stock. The Company will be entitled to a corresponding tax deduction equal
to the income recognized by the optionee provided that the income tax
withholding attributable to the optionee's recognized income is collected from
the optionee.
SUMMARY
Approval of the proposed amendments to the 1993 Plan requires the affirmative
vote of a majority of the issued and outstanding shares of the Company, and the
amendment is subject to the approval of the California Commissioner of
Corporations. The description herein is intended to highlight and summarize the
principle terms of the 1993 Plan. For further information, shareholders are
referred to a copy of the 1993 Plan which is available for inspection at the
Company.
Shares of the Company's Common Stock to be issued upon exercise of stock options
need not be registered with the SEC. However, the Company has applied for a
permit from the California Commissioner of Corporations and the Company intends
to register the Common Stock reserved for issuance under the Plan with the SEC
prior to issuing any of its Common Stock upon exercise thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
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PROPOSAL 3: APPROVAL OF DIRECTORS DEFERRED
COMPENSATION PLAN AND TRUST AGREEMENT
DESCRIPTION OF PLAN AND TRUST
On May 16, 1995, the Board of Directors of the Company approved the
1995 Directors Deferred Compensation Plan (hereinafter "the Plan"). A complete
copy of the Plan (and the related Trust Agreement) is available on request by
any stockholder directed to William C. Demmin, the Company's Chief Financial
Officer, at 30000 Town Center Drive, Laguna Niguel, California 92667 (telephone
714/495-3300). The Plan is effective for fees earned on and after July 1, 1995,
subject to shareholder approval. Full power to construe, interpret and
administer the Plan is vested with the Administrative Committee (hereinafter
"the Committee"), which consists of all non-director executive officers of the
Bank. The Board of Directors also approved a trust agreement for deferred
amounts, the Directors Deferred Compensation Trust Agreement.
Approval of the Plan and Trust by stockholders is being sought in
order to assure that the Plan qualifies for exemption from short-swing profit
liability pursuant to Rule 16-b3 of the SEC. If stockholders do not approve the
Plan, the Board will consider whether to implement the Plan or may seek a ruling
that the Rule 16b-3 exemption is not required.
The Plan allows amendments to be made by the Board from time to time,
provided that no such amendment may (without a director's consent) alter rights
to payments of amounts already credited to accounts or delay the time at which
deferred amounts were scheduled to be paid under the Plan. The Company intends
to maintain the Plan and Trust in a a manner that will allow ongoing
availability of the exemption under SEC Rule 16b-3 (unless a ruling is received
indicating that such exemption is not necessary and therefore currently intends
to submit to stockholders for approval any amendments which would materially
increase the benefits available under the Plan or the number of shares of common
stock of the Company ("Company Stock") which may be issued under the Plan, or
materially modify the requirements for participation in the Plan.
The Plan allows all directors of the Company and Monarch Bank,
including employee directors, (currently a total of 7 persons), to elect by
written notice to defer payment of all or a portion of their director's fees for
the next succeeding calendar year, and of all or any portion of any grant of
Company Stock to the director made on or after the election. Participation in
the Plan is voluntary and directors may change their elections annually. The
Plan allows optional deferral of existing fees and awards of Company Stock, with
investments of such deferrals in Company Stock. Elections with respect to
deferred amounts are to be made in writing by the director prior to the latest
to occur of the following: (i) the beginning of the calendar year for which the
fees are to be earned; (ii) the director's first day of board service in the
year; or (iii) the first day of the calendar month next following the date the
director first becomes eligible to participate in the Plan; provided that
directors who file Form 4 reports with the SEC cannot make elections later than
six months prior to the date on which any fees deferred by the director are
invested in the Company Stock.
The Company will establish on its books a separate account for each of
its directors who participates in the Plan. All deferred amounts are invested
in Company Stock and the value of a director's account is measured by the value
of and income from the Company common stock. At the time a director makes his
or her first election, the director may also choose to have deferred amounts
contributed to a trust commonly known as a "rabbi" trust, established to aid in
the accumulation of assests for payment of deferred amounts. Separate accounts
are to be set up for each director who elects to make deferrals, and the Company
may, in its discretion, contribute to the trust an amount equal to the deferred
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amount, if it is done within five business days after the deferred amount would
otherwise be paid to the director.
The Company will pay all administrative expenses of the Plan for its
participating directors as well as the applicable portion of trustee's fees and
expenses, currently estimated at $1000 per year. (If the Company does not pay,
the trust is liable for the expenses.) All income received by the trust, net of
expenses and taxes (if any) will be reinvested in Company Stock.
Not later than the next regularly scheduled meeting of the Committee
following a director's termination of service, the Committee must direct the
trustee to commence distribution of the amounts credited to such director's
account and direct the trustee as to the form of payment (whether in cash or
Company Stock). Amounts held in the account are paid in a lump sum or in annual
installments, consistent with the method of payment selected by the director at
the time the deferral election was initially made. In the event of an
"unforseen emergency", such as a severe financial hardship to the director
resulting from a sudden and unexpected illness or accident of the director,
benficiary or dependent, (as defined by Section 152(a) of the Internal Revenue
Code), the Committee may determine the amount to be paid from the deferred
amount.
In the event of death, a director's payment shall be made to the
persons named in the last written instrument signed by the director and received
by the Committee prior to the director's death, and in the event the director
fails to name any person, the amounts shall be paid to the director's estate or
the appropriate distributee thereof.
NECESSARY APPROVAL
The Plan must be approved by a majority of the issued and oustanding
shares of the Company, and is subject to any and all necessary regulatory
approvals and amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE
THE DIRECTORS DEFERRED COMPENSATION PLAN AND TRUST AGREEMENT.
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INDEPENDENT ACCOUNTANTS
Audit services performed by Dayton & Associates for the year ended December 31,
1994, consisted of examination of the financial statements of the Bank, and
consultation matters related to account and financial reporting. Before each
professional service provided by Dayton & Associates was rendered, said services
were approved by, and the possible effect on the independence of the accountant
was considered by the Board of Directors Audit Committee.
It is expected that one or more representatives of Dayton & Associates will be
present at the Meeting to respond to all appropriate questions.
ADDITIONAL MATTERS
SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for action at the 1996 Annual
Meeting of Shareholders, which is desired to be presented in the Company's Proxy
Statement with respect to such meeting, should submit such proposal to the
Company at its principal place of business no later than 9:00 a.m., March 1,
1996. Matters pertaining to such proposal, including the number and length
thereof, eligibility of persons entitled to have such proposals included and
other aspects, are regulated by the Securities Exchange Act of 1934, rules and
regulations, to which interested persons should refer.
ANNUAL REPORT ON FORM 10-KSB
The Annual Report to Shareholders of the Company for the year ended December 31,
1994 is being mailed concurrently with this proxy statement to all shareholders
of record as of May 16, 1995. The Annual Report is not to be regarded as proxy
soliciting material nor as a communication by means of which any solicitation is
to be made.
REGULATORY ORDERS
The Bank is subject to various regulatory orders. The Company believes that the
Bank is in compliance with these Orders. (Details of the Orders are contained in
the Company's Annual Report and are hereby incorporated by reference.)
OTHER MATTERS
Management is not aware of any matters to be presented at the Meeting other than
those set forth above. However, if other matters come before the Meeting, it is
the intention of the persons named in the accompanying Proxy to vote said Proxy
in accordance with the recommendations of Management on such matters, and
discretionary authority to do so is included in the Proxy.
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<PAGE>
THE ENCLOSED PROXY SHOULD BE COMPLETED, DATED, SIGNED AND RETURNED IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. YOUR PROMPT MAILING OF THE SIGNED PROXY WILL BE
APPRECIATED.
MONARCH BANCORP
/s/ E. Lynn Caswell
E. Lynn Caswell
Chairman of the Board,
President, and Chief Executive Officer
Dated:__________________________
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MONARCH BANCORP
30000 TOWN CENTER DRIVE
LAGUNA NIGUEL, CALIFORNIA 92677
The undersigned Shareholders of Monarch Bancorp hereby appoint Rice E.
Brown, Raymond B. Cox, and Margaret A. Redmond, or any one of them, as Proxies,
each with the power to appoint his or her substitute, and hereby authorizes them
to represent and to vote, as designated below, all the shares of common stock of
Monarch Bancorp held of record by the undersigned on May 16, 1994 at the Annual
Meeting of Shareholders to be held at South Coast Medical Center, 31872 Pacific
Coast Highway, Laguna Beach, California on Monday, July 17, 1995, at 7:00 p.m.
or any adjournment thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present thereat, as follows:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS INDICATED TO THE CONTRARY BELOW). / / TO VOTE FOR ALL NOMINEES LISTED BELOW. / /
Rice E. Brown, E. Lynn Caswell, Raymond B. Cox, William C. Demmin, Alfred H. Jannard,
Cheryl Moore, Margaret A. Redmond, and John W. Rose
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S NAME IN THE SPACE
BELOW.)
-------------------------------------------------------------------------------------------------------------------
2. Amendment to Monarch Bancorp 1993 Stock Option Plan. To approve proposed amendments to the Company's 1993 Stock
Option Plan that would increase the number of shares subject to the Plan equal to 10% of the issued and outstanding
shares of the Company, subject to any necessary regulatory approvals and amendments.
/ / FOR / / AGAINST / / ABSTAIN
3. Directors Deferred Compensation Plan and Trust Agreement. Approving the 1995 Directors Deferred Compensation Plan
and Trust Agreement as described in the Company's Proxy Statement for the 1995 Annual Meeting of Shareholders,
subject to any necessary regulatory approvals and amendments.
/ / FOR / / AGAINST / / ABSTAIN
4. Other Business. Transacting such other business as may properly come before the Meeting, and any adjournment or
adjournments thereof.
</TABLE>
<PAGE>
The Board of Directors recommends a vote "FOR" all of the proposals as
presented. The Proxy confers authority and shall be voted in accordance with the
recommendation of the Board of Directors unless a contrary instruction is
indicated, in which case the Proxy shall be voted in accordance with such
instructions. In all other matters, if any, presented at the meeting, this Proxy
shall be voted in accordance with the recommendations of the Board of Directors.
----------------------------------
Dated
----------------------------------
Signature
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Signature
(Please date this Proxy and sign
your name as it appears on your
stock certificates. When signing
as attorney, executor,
administrator, trustee or
guardian, please give full title.
If more than one trustee, all
should sign. All joint owners
should sign.)
I DO / / I DO NOT / / expect to attend the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY.
