SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of
the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
QUAKER CITY BANCORP, INC.
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(Name of Registrant as Specified in Its Charter)
N/A
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(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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials:
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[_] 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.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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7021 Greenleaf Avenue
Whittier, CA 90602
(562) 907-2200
October 5, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
(the "Annual Meeting") of Quaker City Bancorp, Inc. (the "Company"), the holding
company for Quaker City Federal Savings and Loan Association (the
"Association"), scheduled to be held on Wednesday, November 18, 1998, at the
Whittier Hilton, 7320 Greenleaf Avenue, Whittier, California, at 10:00 a.m.
local time. As described in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement, stockholders will be asked to vote on the
election of directors for the Company and on the amendment of the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock of the Company. Directors and executive officers of the Company
will be present at the Annual Meeting to respond to any questions that our
stockholders may have regarding the business to be transacted.
I URGE YOU TO VOTE YOUR PROXY AS SOON AS POSSIBLE. Your vote is very
important, regardless of the number of shares you own. Whether or not you plan
to attend the Annual Meeting in person, I urge you to sign, date and return the
enclosed proxy card promptly in the accompanying postage prepaid envelope. You
may, of course, attend the Annual Meeting and vote in person even if you have
previously returned your proxy card.
On behalf of the Board of Directors and all of the employees of the Company
and the Association, I wish to thank you for your continued support.
Sincerely yours,
/s/ RICK McGILL
FREDERIC R. (RICK) McGILL
President and Chief Executive Officer
IMPORTANT: IF YOUR QUAKER CITY BANCORP, INC. SHARES ARE HELD IN THE NAME OF A
BROKERAGE FIRM OR NOMINEE, ONLY THEY CAN EXECUTE A PROXY ON YOUR BEHALF. TO
ENSURE THAT YOUR SHARES ARE VOTED, PLEASE TELEPHONE THE INDIVIDUAL RESPONSIBLE
FOR YOUR ACCOUNT TODAY AND OBTAIN INSTRUCTIONS ON HOW TO DIRECT HIM OR HER TO
EXECUTE A PROXY ON YOUR BEHALF.
If you have any questions concerning the Proxy Statement or accompanying
proxy or if you need any help in voting your stock, please telephone Morrow &
Company at 1-800-856-8309 today.
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PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD TODAY.
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Quaker City Bancorp, Inc.
7021 Greenleaf Avenue
Whittier, CA 90602
(562) 907-2200
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on November 18, 1998
_______________________
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Quaker City Bancorp, Inc. (the "Company"), the holding
company of Quaker City Federal Savings and Loan Association, will be held on
Wednesday, November 18, 1998, at the Whittier Hilton, 7320 Greenleaf Avenue,
Whittier, California, at 10:00 a.m. local time, subject to adjournment or
postponement by the Board of Directors, for the following purposes:
1. To elect two persons to the Board of Directors to serve until the
annual meeting of stockholders to be held in the year 2001 and until their
successors are duly elected and qualified;
2. To amend the Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock;
3. To transact such other business as may properly come before the
Annual Meeting or any or all adjournment or postponements thereof.
Only holders of record of the common stock, par value $.01 per share, of
the Company on Tuesday, September 22, 1998, will be entitled to notice of, and
to vote at, the Annual Meeting and any adjournment or postponement thereof.
Prior to the voting thereof, a proxy may be revoked by the person executing
such proxy by (i) filing with the Corporate Secretary of the Company, prior to
the commencement of the Annual Meeting, either a written notice of revocation or
a duly executed proxy bearing a later date or (ii) by voting in person at the
Annual Meeting.
By order of the Board of Directors
/s/ KATHRYN M. HENNIGAN
KATHRYN M. HENNIGAN
Corporate Secretary
Whittier, California
October 5, 1998
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YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
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Quaker City Bancorp, Inc.
7021 Greenleaf Avenue
Whittier, CA 90602
(562) 907-2200
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
November 18, 1998
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (the "Board" or the "Board of Directors") of Quaker City
Bancorp, Inc., a Delaware corporation (the "Company"), the holding company of
Quaker City Federal Savings and Loan Association (the "Association"), of proxies
for use at the 1998 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") scheduled to be held at the time and place and for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders.
INFORMATION REGARDING VOTING AT THE ANNUAL MEETING
GENERAL
At the Annual Meeting, the stockholders of the Company are being asked to
consider and to vote upon the election of the two directors nominated by the
Company's Board of Directors to serve until the annual meeting of stockholders
to be held in the year 2001 and the amendment of the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock of the
Company. For information regarding the proposal regarding the election of
directors, see the section of this Proxy Statement entitled "ELECTION OF
DIRECTORS." For information regarding the proposed amendment to the Certificate
of Incorporation, see the section of this Proxy Statement entitled "PROPOSED
AMENDMENT TO CERTIFICATE OF INCORPORATION." Shares represented by properly
executed proxies received by the Company will be voted at the Annual Meeting in
the manner specified therein or, if no instructions are marked on the enclosed
proxy card, FOR each of the director nominees identified on such card and FOR
the proposed amendment to the Company's Certificate of Incorporation. Although
management does not know of any matter other than the election of directors and
the proposed amendment to the Company's Certificate of Incorporation to be acted
upon at the Annual Meeting, unless contrary instructions are given, shares
represented by valid proxies will be voted by the persons named on the
accompanying proxy card in accordance with their respective best judgment with
respect to any other matters that may properly come before the Annual Meeting.
Execution of a proxy will not in any way affect a stockholder's right to
attend the Annual Meeting and vote in person, and any person giving a proxy has
the right to revoke it at any time before it is exercised by (i) filing with the
Corporate Secretary of the Company, prior to the commencement of the Annual
Meeting, a duly executed instrument dated subsequent to such proxy revoking the
same or a duly executed proxy bearing a later date or (ii) attending the Annual
Meeting and voting in person.
The mailing address of the principal executive offices of the Company is
7021 Greenleaf Avenue, Whittier, California 90602, and its telephone number is
(562) 907-2200. The approximate date on which this Proxy Statement and the
enclosed proxy card are first being sent to stockholders is October 5, 1998.
RECORD DATE AND VOTING
Only stockholders of record on Tuesday, September 22, 1998 (the "Record
Date"), will be entitled to notice of and to vote at the Annual Meeting. There
were outstanding on the Record Date 5,799,226 shares of
common stock, par value $.01 per share, of the Company ("Common Stock") as
adjusted for the 25% Common Stock dividend paid to stockholders by the Company
on or about May 30, 1997 (the "1997 Stock Dividend") and June 30, 1998 (the
"1998 Stock Dividend" and, together with the 1997 Stock Dividend, the "Stock
Dividends"). All information set forth herein regarding numbers of shares and
exercise prices of outstanding awards under Company stock benefit plans has been
adjusted, to the extent applicable, for the effect of the Stock Dividends. Each
share of outstanding Common Stock is entitled to one vote on each matter to be
voted on at the Annual Meeting.
As provided in the Company's Certificate of Incorporation, holders of
Common Stock who beneficially own in excess of 10% of the outstanding shares of
Common Stock (the "Limit") are not entitled to any vote with respect to the
shares held in excess of the Limit. A person or entity is deemed to
beneficially own shares owned by an affiliate of, as well as persons acting in
concert with, such person or entity. The Company's Certificate of Incorporation
authorizes the Board of Directors (i) to make all determinations necessary to
implement and apply the Limit, including determining whether persons or entities
are acting in concert, and (ii) to demand that any person who is reasonably
believed to beneficially own stock in excess of the Limit supply information to
the Company to enable the Board to implement and apply the Limit.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote (after
subtracting any shares held in excess of the Limit pursuant to the Company's
Certificate of Incorporation) is necessary to constitute a quorum at the Annual
Meeting. In the event there are not sufficient votes for a quorum at the time
of the Annual Meeting, the Annual Meeting may be adjourned in order to permit
the further solicitation of proxies.
Abstentions and broker non-votes are counted for the purpose of determining
the presence or absence of a quorum for the transaction of business. With
regard to the election of directors, votes may be cast in favor or withheld;
votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders other than the election of directors, thus having the
effect of a negative vote, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved. Directors will be elected
by a plurality of the votes of the shares of Common Stock present in person or
represented by proxy and entitled to vote on the election of directors.
Approval of the proposed amendment to the Quaker City Bancorp, Inc. Certificate
of Incorporation to increase the number of authorized shares of Common Stock of
the Company and any stockholder proposals that properly come before the Annual
Meeting require the affirmative vote of a majority of the shares of Common Stock
present, in person or represented by proxy, at the Annual Meeting and entitled
to vote on the subject matter. Shares in excess of the Limit will not be
counted for either the purpose of determining the presence or absence of a
quorum or whether a proposal has been approved.
SOLICITATION
The cost of preparing, assembling and mailing the Notice of Annual Meeting
of Stockholders, this Proxy Statement and the enclosed proxy card will be paid
by the Company. Following the mailing of this Proxy Statement, directors,
officers and other employees of the Company may solicit proxies by mail,
telephone, telegraph or personal interview. Such persons will receive no
additional compensation for such services. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of Common Stock of record
will be requested to forward proxy soliciting material to the beneficial owners
of such shares, and will be reimbursed by the Company for their reasonable
charges and expenses in connection therewith. In addition, the Company has
retained proxy solicitor Morrow & Co., Inc. ("Morrow & Co.") to assist in the
solicitation of proxies. Morrow & Co. may solicit proxies by mail, telephone,
telegraph and personal solicitation, and will request brokerage houses and other
nominees, fiduciaries and custodians nominally holding shares of Common Stock of
record to forward proxy soliciting material to the beneficial owners of such
shares. For these services, the Company will pay Morrow & Co. a fee estimated
not to exceed $6,000, plus reimbursement for reasonable out-of-pocket expenses.
________________________
The date of this Proxy Statement is October 5, 1998.
2
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The following table sets forth certain information, except where otherwise
indicated, as of June 30, 1998 with respect to the directors of the Company and
the Association. While Mr. Ferguson as Director Emeritus attends meetings of
the Board of Directors of the Company and of the Association, he does not vote
upon matters presented to the Boards.
Each of the seven directors of the Company serves a three-year term and
approximately one-third of the seven directors are elected at each annual
stockholders' meeting. The Association continues to have a classified board,
approximately one-third of the members of which are elected each year to serve
three-year terms.
FIRST
TERM AS BECAME TERM AS POSITION HELD
FIRST BECAME ASSOCIATION DIRECTOR COMPANY WITH THE
DIRECTOR OF DIRECTOR OF DIRECTOR COMPANY
NAME OF DIRECTOR AGE ASSOCIATION EXPIRES COMPANY EXPIRES AND THE ASSOCIATION
- --------------------- ----- -------------- ------------ --------- --------- --------------------------
J.L. Thomas 62 1975 2000 1993 2000 Director and Chairman of
the Board
Frederic R. McGill 51 1995 1998 1995 1998 Director, President and
Chief Executive Officer
David T. Cannon 68 1984 1999 1993 1999 Director
Alfred J. Gobar 65 1992 1998 1993 1998 Director
Wayne L. Harvey 60 1981 2000 1993 2000 Director
David K. Leichtfuss 53 1991 1999 1993 1999 Director
Edward L. Miller 61 1985 2000 1993 2000 Director
D. W. Ferguson 82 1952 NA 1993 NA Director Emeritus
Set forth below is certain information concerning the principal occupation
and business experience of each of the individuals named above during the past
five years.
J.L. Thomas is Chairman of the Company and the Association. Mr. Thomas
served as President and Chief Executive Officer of the Company since its
formation in 1993 until July of 1996. Mr. Thomas joined the Association in
1961, and was elected to the Board of Directors in 1975. Mr. Thomas served as
Chief Operating Officer of the Association from 1976 to 1982, and became its
President and Chief Executive Officer in 1982, serving in that capacity until
July of 1996. Mr. Thomas also serves as the Chairman of the Board of Directors
of Quaker City Financial Corp., a wholly owned subsidiary of the Association
("QCFC"), and of Quaker City Neighborhood Development, Inc. a wholly owned
subsidiary of the Company ("QCND").
Frederic R. (Rick) McGill served as Executive Vice President and Chief
Operating Officer of the Company since its formation in 1993, serving in that
capacity until July of 1996. Mr. McGill joined the Association in 1991 as
Executive Vice President and Chief Operating Officer. Mr. McGill was appointed
President of and elected to the Board of Directors of the Company and the
Association in 1995, and was appointed Chief Executive Officer effective July 1,
1996. Prior to joining the Association, Mr. McGill was an independent financial
consultant specializing in mortgage banking. Mr. McGill has over 25 years
experience in the banking industry. Mr. McGill has also served as the Chief
Executive Officer of QCFC since 1991 and of QCND since July 1, 1996.
3
David T. Cannon, retired, has been a member of the Board of the Association
since 1984 and of the Company since its formation in 1993. Previously, he
served as Western Regional Director for Industrial Relations of Eastman Kodak
Company. Mr. Cannon currently operates his own marketing and management
consulting business, D.T. Cannon Associates. Mr. Cannon is the Chairman of the
Compensation Committee of the Company's Board.
Alfred J. Gobar is President and Chairman of AJGA, Inc., a family-owned
economics consulting firm. Mr. Gobar has held this position since 1990. Prior
to 1990, Mr. Gobar served as President and Chairman of Alfred Gobar Associates,
Inc., a family-owned economics consulting firm. Mr. Gobar has been a director
of the Association since 1992 and of the Company since its formation in 1993.
Wayne L. Harvey is the Managing Partner of Harvey & Parmelee, certified
public accountants, and has been with such firm since 1958. Mr. Harvey has been
a director of the Association since 1981 and of the Company since its formation
in 1993. Mr. Harvey is the Chairman of the Audit Committee of the Company's
Board.
David K. Leichtfuss is the President of Broadview Mortgage Corp., a
mortgage banking company that specializes in residential permanent financing,
and has been with such company since 1988. Mr. Leichtfuss has been a director
of the Association since 1991 and of the Company since its formation in 1993.
Edward L Miller is a partner in the law firm of Bewley, Lassleben & Miller
and has been associated with such firm since 1963. Mr. Miller has been a
director of the Association since 1985 and of the Company since its formation in
1993. Mr. Miller is the Chairman of the Philanthropy Committee of the
Association's Board.
D.W. Ferguson is Director Emeritus of the Board of the Company and the
Association. Mr. Ferguson has served as Chairman of the Company since its
formation in 1993 until November of 1995. Mr. Ferguson joined the Association
in 1937 and held various positions prior to becoming the President and Chief
Executive Officer in 1951, a position he held until 1982. Mr. Ferguson was
elected to the Board of Directors of the Association in 1952 and served as the
Chairman of the Association's Board from 1982 to 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has a standing Audit Committee and
Compensation Committee.
The Audit Committee held 4 meetings during the 1998 fiscal year, and
currently consists of Messrs. Harvey (Chairman), Miller and Cannon. The Audit
Committee's responsibilities are generally to assist the Board in fulfilling its
legal and fiduciary responsibilities relating to accounting, audit and reporting
policies and practices of the Company, the Association and their subsidiaries.
The Audit Committee also, among other things, recommends to the Board the
engagement of the Company's independent auditors; monitors and reviews the
quality and activities of the Company's internal audit function and those of its
independent auditors; and, monitors the adequacy of the Company's operating and
internal controls as reported by management, the independent auditors and
internal auditors.
The Compensation Committee held 3 meetings during the 1998 fiscal year, and
currently consists of Messrs. Cannon (Chairman), Miller and Harvey. The
Compensation Committee is authorized to review salaries and compensation,
including non-cash benefits, of directors, officers and other employees of the
Company and to recommend to the Board salaries, remuneration and other forms of
additional compensation and benefits as it deems necessary. In July of 1996,
the Board established a subcommittee of the Compensation Committee, made up of
two outside directors, Messrs. Cannon and Harvey, whose principal
responsibility is to administer for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and rules thereunder, the
stock benefit plans of the Company with respect to certain transactions by
executive officers and directors of the Company.
4
The Company's Board of Directors selects nominees for election as
directors. The Company does not have a standing nominating committee. The
candidates for election at this Annual Meeting were nominated by the Board of
Directors. In accordance with Section 6 of Article I of the Company's Bylaws (a
copy of which is available upon request to the Corporate Secretary of the
Company), stockholder nominations for election of directors may be voted on at
an annual meeting only if such nominations are made pursuant to written notice
timely given to the Corporate Secretary accompanied by certain information. To
be timely, a stockholder's written notice must be delivered to or mailed and
received at the principal executive offices of the Company not less than 90 days
prior to the date of the meeting, provided that, in the event that less than 100
days' notice or prior disclosure of the date of the meeting is given or made to
stockholders, a stockholder's notice will be timely if received not later than
the tenth day following the day on which such notice of the date of the meeting
is mailed or such public disclosure is made. Such stockholder's notice must set
forth with respect to each director nominee all of the information relating to
such person that is required to be disclosed in solicitations for elections of
directors under the rules of the Securities and Exchange Commission ("SEC") and
the stockholder's name and address, as they appear on the Company's books, and
the number of shares of Common Stock owned by the stockholder giving the notice.
MEETINGS OF THE BOARD OF DIRECTORS
During the 1998 fiscal year, there were 12 meetings of the Board of
Directors of the Company. All directors attended at least 75% of the meetings
of the Board of Directors, and all members of the committees of the Board
attended at least 75% of the meetings of those committees, in each case, after
the election of such individual to the Board or to such committee.
COMPENSATION OF DIRECTORS
Directors' Fees. The Company does not currently pay directors' fees.
Currently, the Chairman of the Board of the Association receives a monthly
retainer fee of $2,200 (which is included in, and is not in addition to, the
Chairman's salary) and all other directors of the Association receive a monthly
retainer fee of $2,000 each. Committee meeting fees of $100 per hour per
meeting are also paid to non-employee directors of the Association. In
addition, a $200 monthly retainer is paid to the Audit Committee Chairman for
general services in addition to meetings.
Directors' Option Plan. In 1993, the Company adopted a stock option plan
for directors who are not officers or employees of the Company or its
affiliates. See "COMPENSATION AND OTHER INFORMATION--Non-Employee Directors'
Option Plan," below.
In 1997, the Company adopted a stock incentive plan for employees and
directors that provides for the grant of awards ("Awards") in the form of stock
options (including incentive stock options or unqualified stock options),
restricted stock, stock appreciation rights, stock payments, dividend
equivalents, stock bonuses, stock sales, phantom stock and other stock-based
benefits. See "COMPENSATION AND OTHER INFORMATION--Quaker City Bancorp. Inc.
1997 Stock Incentive Plan," below.
EXECUTIVE OFFICERS
Set forth below are the executive officers of the Company, together with
the positions currently held by those persons, as of June 30, 1998. The
executive officers serve at the pleasure of the Company's Board of Directors;
however, the Company has entered into employment agreements with Messrs. Thomas
and McGill,
5
which agreements are described under "COMPENSATION AND OTHER MATTERS--Employment
Agreements and Change of Control Arrangements," below.
NAME AGE POSITION (1)
- ----------------------- ---- -----------------------------------------------------------------------------
Kathryn M. Hennigan 47 Corporate Secretary and Senior Vice President, Administrative Services
Hank H. Kadowaki 51 Senior Vice President, Income Property Lending of the Association
Frederic R. McGill 51 Director, President and Chief Executive Officer
Harold L. Rams 52 Senior Vice President, Single Family Lending of the Association
Karen A. Tannheimer 39 Senior Vice President, Loan Service of the Association
Robert C. Teeling 48 Senior Vice President, Retail Banking of the Association
J. L. Thomas 62 Director and Chairman of the Board
Dwight L. Wilson 50 Senior Vice President, Treasurer and Chief Financial Officer
- ---------------------
(1) Unless otherwise indicated, the indicated position is with the Company and
the Association.
Set forth below is certain information concerning the business experience
during the past five years of each of the individuals named above (other than
Mr. Thomas and Mr. McGill--see "Directors" above).
Kathryn M. Hennigan has served as Senior Vice President, Administrative
Services and Corporate Secretary of the Company since its formation in 1993.
Ms. Hennigan joined the Association in 1992 as the Human Resource Manager. Ms.
Hennigan was promoted to Senior Vice President, Administrative Services and
Corporate Secretary of the Association in January, 1993. Prior to joining the
Association, Ms. Hennigan held various management and administrative positions,
including principal for seven years in a senior high school in Fullerton,
California.
Hank H. Kadowaki joined the Association in 1994 as Major Loan Manager, and
was promoted to Senior Vice President, Income Property Lending of the
Association in April, 1998. Prior to joining the Association, Mr. Kadowaki had
over fifteen years experience in commercial and multifamily lending.
Harold L. Rams joined the Association in 1975 and currently serves as the
Senior Vice President, Single Family Lending. Mr. Rams has over 20 years
experience in the banking industry, primarily in multifamily residential
lending.
Karen A. Tannheimer joined the Association in 1983 as the Loan Service
Supervisor. Ms. Tannheimer served in such capacity until 1986 when she left the
Association for a position with a computer service company. Ms. Tannheimer
attained the position of Supervisor-Systems Analysis Group before leaving the
computer services company to rejoin the Association in June, 1992. Ms.
Tannheimer currently serves as the Senior Vice President, Loan Service.
Robert C. Teeling joined the Association in 1991 as the Senior Vice
President, Retail Banking. Prior to joining the Association, Mr. Teeling had
over 20 years experience in retail banking with various savings and loan
associations in the southern California area.
Dwight L. Wilson has served as Senior Vice President, Treasurer and Chief
Financial Officer of the Company since its formation in 1993. Mr. Wilson joined
the Association in 1976 as the Assistant Controller and held that position until
1979. Mr. Wilson served as the Controller of the Association from 1979 to 1985.
Since 1985, Mr. Wilson has been the Treasurer and Chief Financial Officer of the
Association and QCFC.
6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the shares of Common Stock beneficially
owned as of September 22, 1998, the Record Date, by each director (and director
nominee), by the Chief Executive Officer and the four most highly compensated
executive officers of the Company and/or the Association who were serving as
executive officers at June 30, 1998 and who each received total salary and bonus
in excess of $100,000 in fiscal 1998 (the "Named Executive Officers") and by all
directors and executive officers as a group.
SHARES OF COMMON
STOCK BENEFICIALLY PERCENT OF
NAME AND ADDRESS(1) TITLE(2) OWNED (3)(4) CLASS (5)
- ----------------------------- -------------------------------------------------- ------------------- -------------
J.L. Thomas(6) Chairman of the Board 164,323 2.81%
Frederic R. McGill(7) President and Chief Executive Officer 161,005 2.73%
David T. Cannon(8) Director 47,618 *
Wayne L. Harvey(8) Director 101,133 1.74%
Edward L. Miller(8) Director 133,987 2.30%
David K. Leichtfuss(8) Director 38,824 *
Alfred J. Gobar(9) Director 138,829 2.39%
D.W. Ferguson(10) Director Emeritus 68,012 1.17%
Dwight L. Wilson(11) Senior Vice President, Treasurer and Chief
Financial Officer 72,691 1.24%
Harold L. Rams(12) Senior Vice President, Single Family Lending
of the Association 56,875 *
Kathryn M. Hennigan(13) Corporate Secretary and Senior Vice President,
Administrative Services 71,350 1.22%
--------- -----
All directors and executive
officers as a group (14
persons)(14) 1,149,982 19.70%
========= =====
- ----------------------
* Does not exceed 1.0% of the Company's voting securities.
(1) The address of each person is c/o Quaker City Bancorp, Inc., 7021
Greenleaf Avenue, Whittier, California 90602.
(2) Titles are for both the Company and the Association unless otherwise
indicated.
(3) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting and dispositive power as to shares
reported.
(4) All shares beneficially owned have been adjusted for the Stock Dividends.
(5) As of the Record Date, there were 5,799,226 shares of Common Stock
outstanding.
(6) Includes 10,557 allocated shares under the Quaker City Federal Savings and
Loan Association Employee Stock Ownership Plan and Trust (the "ESOP");
46,093 shares subject to options granted under the 1993 Management Option
Plan, which options are all currently exercisable, and 2,083 shares
subject to currently exercisable options granted under the 1997 Stock
Incentive Plan.
(7) Includes 10,557 allocated shares under the ESOP; 6,468 shares under the
Quaker City Federal Savings and Loan Association Recognition and Retention
Plan for Officers and Employees ("RRP"), which will vest on January 1,
1999 as to which voting may be directed; 80,859 shares subject to options
granted under the 1993 Management Option Plan, which options are all
currently exercisable, and 20,833 shares subject to currently exercisable
options granted under the 1997 Stock Incentive Plan.
(8) Includes 24,257 shares subject to options granted under the Quaker City
Bancorp, Inc. 1993 Directors' Option Plan, which options are all currently
exercisable, and 2,083 shares subject to currently exercisable options
granted under the 1997 Stock Incentive Plan.
(9) Includes 2,083 shares subject to currently exercisable options granted
under the 1997 Stock Incentive Plan.
(10) Includes 22,343 shares subject to options granted under the 1993
Directors' Option Plan, which options are all currently exercisable, and
2,083 shares subject to currently exercisable options granted under the
1997 Stock Incentive Plan.
7
(11) Includes 9,191 allocated shares under the ESOP; 3,881 shares under the
RRP, which will vest on January 1, 1999, as to which voting may be
directed; 46,328 shares subject to options granted under the 1993
Management Option Plan, which options are all currently exercisable, and
4,166 shares subject to currently exercisable options granted under the
1997 Stock Incentive Plan.
(12) Includes 8,659 allocated shares under the ESOP, 3,881 shares under the
RRP, which will vest on January 1, 1999, as to which voting may be
directed; and 4,166 shares subject to currently exercisable options
granted under the 1997 Stock Incentive Plan.
(13) Includes 7,273 allocated shares under the ESOP; 3,234 shares under the
RRP, which will vest on January 1, 1999, as to which voting may be
directed; 48,515 shares subject to options granted under the 1993
Management Option Plan, which options are all currently exercisable, and
4,166 shares subject to currently exercisable options granted under the
1997 Stock Incentive Plan.
(14) Includes 62,072 allocated shares under the ESOP; 23,932 shares under the
RRP, which will vest on January 1, 1999, as to which voting may be
directed; 119,371 shares subject to options granted under the 1993
Directors' Option Plan, which options are all currently exercisable;
275,075 shares subject to options granted under the 1993 Management Option
Plan, which options are all currently exercisable, and 56,250 shares
subject to currently exercisable options granted under the 1997 Stock
Incentive Plan.
COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Company,
including any of its subsidiaries, to the Named Executive Officers for services
during the fiscal years ended June 30, 1998, 1997 and 1996.
LONG TERM COMPENSATION
-------------------------------------------
ANNUAL COMPENSATION(1) AWARDS PAYOUTS
-------------------------- --------------------------- -------------
RESTRICTED SECURITIES
STOCK UNDERLYING
AWARD(S) OPTIONS LTIP PAYOUTS
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($) (#) ($)
- ---------------------------- ---- --------- ------- ----------- ---------- -------------
J.L. Thomas 1998 $175,000 $75,900 $ -- $ -- $ --
Chairman of the Board 1997 175,000 65,700 -- -- --
1996 250,000 94,838 -- -- --
Frederic R. McGill 1998 $235,000 $99,722 $ -- $ -- $ --
President and 1997 210,000 71,652 -- -- --
Chief Executive Officer 1996 189,000 55,764 -- -- --
Dwight L. Wilson 1998 $129,200 $30,827 $ -- $ -- $ --
Senior Vice President, Treasurer 1997 123,000 25,473 -- -- --
and Chief Financial Officer 1996 118,000 25,146 -- -- --
Harold L. Rams 1998 $113,200 $26,743 $ -- $ -- $ --
Senior Vice President, Single 1997 111,000 23,820 -- -- --
Family Lending 1996 108,800 23,675 -- -- --
Kathryn M. Hennigan 1998 $103,900 $24,442 $ -- $ -- $ --
Senior Vice President, 1997 98,900 21,817 -- -- --
Administrative Services and 1996 94,700 20,465 -- -- --
Corporate Secretary
____________________
(1) Under Annual Compensation, the column titled "Salary" includes deferred
compensation. The column titled "Bonus" consists of payments earned in the
reported fiscal year under the Association's Incentive Compensation Plan.
8
STOCK OPTIONS
The following table sets forth the number of shares of Common Stock covered
by options granted under the 1993 Management Option Plan and under the Quaker
City Bancorp, Inc. 1997 Stock Incentive Plan held by the Named Executive
Officers at fiscal year-end June 30, 1998. All shares of Common Stock reserved
under the 1993 Management Option Plan are subject to outstanding options and no
shares remain available under the 1993 Management Option Plan for future option
grants. The Named Executive Officers do not hold any options granted under the
1993 Directors' Option Plan. Awards under the Quaker City Bancorp, Inc. 1997
Stock Incentive Plan may be granted in the form of stock options, restricted
stock, stock appreciation rights, stock payments, dividend equivalents, stock
bonuses, stock sales, phantom stock and/or other stock-based benefits. A total
of 110,000 shares of Common Stock (as adjusted for the 1998 Stock Dividend)
remains available for future grants of Awards under the 1997 Stock Incentive
Plan. The table below also sets forth the value of unexercised options granted
under the 1993 Management Option Plan and the 1997 Stock Incentive Plan that
were in-the-money at June 30, 1998. Options are "in-the-money" if the fair
market value of the shares covered thereby is greater than the option exercise
price. At June 30, 1998, all the options set forth in the table were in-the-
money.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES(1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END (#)(2) FISCAL YEAR END ($)(3)
-------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- ---------------- ---------------- -------------- ---------------
J.L. Thomas 46,093 6,250 $ 626,864 $ 12,500
Frederic R. McGill 80,859 62,500 1,099,683 125,000
Dwight L. Wilson 46,328 12,500 630,061 25,000
Harold L. Rams 32,343 12,500 439,865 25,000
Kathryn M. Hennigan 48,515 12,500 659,804 25,000
___________________
(1) No free-standing stock appreciation rights ("SARs") are issuable under the
Company's 1993 Management Option Plan.
(2) Number of shares of Common Stock underlying exercisable options has been
adjusted for the Stock Dividends.
(3) The values of unexercised in-the-money options set forth in the table have
been calculated, in accordance with requirements promulgated by the SEC, by
determining the difference between the fair market value of the underlying
Common Stock at fiscal year-end June 30, 1998 and the exercise price of the
options (as adjusted for the Stock Dividends).
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
In connection with the conversion of the Association from mutual to stock
form in December of 1993 (the "Conversion") and the commencement of operations
by the Company as the holding company thereof, the Association and the Company
entered into employment agreements with Messrs. Thomas and McGill ("Executive,"
respectively). The Association and the Company also entered into change in
control agreements, which are two-year agreements, with Messrs. Wilson and Rams
and with Ms. Hennigan ("Executive," respectively). The, employment agreements
and change in control agreements were entered into with the intent of ensuring
that the Association and the Company will be able to maintain a stable and
competent management
9
base after the Conversion. The continued success of the Association and the
Company depends to a significant degree on the skills and competence of these
individuals.
The employment agreements with the Association and the Company provide for
a three-year term for Messrs. Thomas and McGill. Commencing on the first
anniversary date and continuing each anniversary date thereafter, the Board of
Directors of the Association may extend the employment agreements with the
Association for an additional year such that the remaining terms shall be the
amount of the original term unless written notice of non-renewal is given by the
Board of Directors of the Association after conducting a performance evaluation
of the Executive. Mr. Thomas' employment agreement with the Association
includes a "sunset provision" such that the agreement automatically terminates
on his sixty-fifth birthday, unless earlier terminated. Effective June 30,
1998, the Association's Board extended the employment agreements of Mr. McGill
until June 30, 2001 and of Mr. Thomas until September 25, 2000, his sixty-fifth
birthday. With respect to their employment agreements with the Company,
commencing on the date of execution of the employment agreement with the
Company, the term of the employment agreements for Messrs. Thomas and McGill
extend, unless earlier terminated, one day each day until such time as the
Company's Board of Directors or the Executive elects not to extend the term of
the employment agreement by giving written notice to the other party, in which
case the term of the employment agreement will be fixed and will end on the
third anniversary date of the written notice. Notwithstanding the foregoing,
Mr. Thomas' employment agreement with the Company also automatically terminates
upon his sixty-fifth birthday, September 25, 2000, unless earlier terminated.
The employment agreements provide that Messrs. Thomas and McGill will
receive an annual base salary of $175,000 and $255,000 respectively, which will
be reviewed annually by the Board of the Association. In addition to the base
salary, the employment agreements provide for, among other things, disability
pay, participation in stock benefit plans and other fringe benefits applicable
to executive personnel.
The employment agreements provide for termination by the Association or the
Company for cause at any time. In the event the Association or the Company
chooses to terminate the Executive's employment for reasons other than for cause
or for disability, or in the event of the Executive's resignation from the
Association and the Company upon: (i) failure to re-elect the Executive to his
current offices, (ii) a material change in the Executive's functions, duties or
responsibilities, or relocation of his principal place of employment, or a
material reduction in benefits or perquisites; (iii) liquidation or dissolution
of the Association or the Company; or (iv) a breach of the employment agreement
by the Association or the Company, the Executive or, in the event of death, his
beneficiary, would be entitled to receive an amount equal to: (i) the amount of
the remaining salary payments that the Executive would have earned if he
continued his employment with the Association or Company during the remaining
unexpired term of the employment agreement at the Executive's defined base
salary on the date the Executive was terminated; (ii) the average of the amount
of bonus and any other cash compensation paid to the Executive during the term
of the employment agreement times the remaining number of years of the
employment agreement and any fraction thereof, and (iii) an amount equal to the
average of the annual contributions that were made on the Executive's behalf to
any employee benefit plan of the Company or Association during the term of the
employment agreement times the remaining number of years of the employment
agreement and any fraction thereof.
If termination of employment follows a "change in control" of the
Association or the Company, as defined in the employment agreement, the
Executive or, in the event of death, his beneficiary, would be entitled to an
aggregate payment from the Association and the Company equal to the greater of:
(i) the payments due for the remaining term of the agreement; or (ii) three
times the Executive's average annual compensation for the three preceding
taxable years, including bonuses and any other cash compensation paid or to be
paid to the Executive during such years, and the amount of any contributions
made or to be made to any employee benefit plan. The Association and the
Company would also continue the Executive's life, health and disability coverage
for the remaining unexpired term of the employment agreements to the extent
allowed by the plans or policies
10
maintained by the Company or Association from time to time. Payments to the
Executive under the Association's employment agreements are guaranteed by the
Company in the event that payments or benefits are not paid by the Association.
The employment agreements also provide for reduced benefits to an Executive upon
termination of employment due to disability and further provide that the
Association and Company shall indemnify the Executive to the fullest extent
allowable under federal and Delaware law.
In the event of a change in control based upon the fiscal 1998 salary and
bonus, Messrs. Thomas and McGill would receive approximately $752,700 and
$1,044,166, respectively, in severance payments in addition to other cash and
noncash benefits provided under the employment agreements.
The change in control agreements with the Association and the Company
provide for a two-year term for Messrs. Wilson and Rams and Ms. Hennigan.
Commencing on the first anniversary date and continuing on each anniversary
thereafter, the change in control agreements may be extended by the Board of
Directors of the Association for a year so that the remaining terms shall be two
years. Effective June 30, 1998, the Association's Board extended the term of
the change of control agreements with each Executive until June 30, 2000.
Commencing on the date of execution of the change in control agreement with the
Company, the term of the change in control agreement extends for one day each
day until such time as the Board of Directors of the Company or the Executive
elects not to extend the term of the change in control. agreement by giving
written notice to the other party, in which case the term of the change in
control agreement will be fixed and will end on the second anniversary date of
the written notice. Each change in control agreement provides that at any time
following a change in control of the Company or the Association, if the Company
or the Association terminates the Executive's employment for any reason other
than cause, the Executive or, in the event of death, the Executive's beneficiary
would be entitled to receive an aggregate payment from the Association and the
Company equal to two times the Executive's average annual salary for the two
preceding taxable years, including bonuses and any other cash compensation paid
or to be paid to the Executive during such years and the amount of any
contributions made or to be made to any employee benefit plan. The Association
and the Company would also continue the Executive's life, health and disability
coverage for the remaining unexpired term of his change in control agreement to
the extent allowed by the plans or policies maintained by the Company or
Association from time to time. Payments to the Executive under the
Association's change in control agreements are guaranteed by the Company in the
event that payments or benefits are not paid by the Association.
If a change in control occurs, based upon fiscal 1998 salary and bonus, the
amounts payable to Messrs. Wilson and Rams and Ms. Hennigan, pursuant to the
change in control agreements would be approximately $320,054, $279,886 and
$256,684, respectively, in addition to other cash and noncash benefits provided
for under the change in control agreements.
The change in control agreements and the employment agreements contain a
provision to the effect that in the event of a change in control, the aggregate
payments under the agreements shall not constitute an excess parachute payment
under Section 28OG of the Internal Revenue Code of 1986, as amended ("Code")
(which imposes an excise tax on the recipient and denial of the deduction for
such excess amounts to the employer). Such provision provides that the payments
under the agreements shall be reduced to one dollar below the amount that would
trigger an excise tax under Section 280G.
CHANGE IN CONTROL PROVISIONS IN STOCK BENEFIT PLANS
Each of the Quaker City Federal Savings and Loan Association Recognition
and Retention Plan for Officers and Employees (referred to herein as the "RRP"),
the Quaker City Bancorp, Inc. 1993 Incentive Option Plan and the Quaker City
Bancorp, Inc. 1997 Stock Incentive Plan each contain change in control
provisions. The definition of "change in control" is the same in each of the
RRP, the 1993 Incentive Option Plan and the 1997 Stock Incentive Plan.
11
The RRP contains a change in control provision. Such change in control
provision provides that all shares of Common Stock subject to an award under the
RRP held by an employee of the Association or an affiliate whose employment
terminates following a change in control of the Company or the Association will
be deemed earned on the employee's last day of employment.
The Company's 1993 Incentive Option Plan provides that to the extent not
previously exercisable, options granted under the 1993 Management Option Plan
become exercisable upon a change in control. All outstanding unexercised
options under the 1993 Management Option Plan are currently exercisable. No
shares of Common Stock remain available under the 1993 Management Option Plan
for future option grants.
The 1997 Stock Incentive Plan also contains a change in control provision.
Pursuant to such provision, as of the effective time of any change in control,
the 1997 Incentive Stock Plan and any then outstanding Awards granted thereunder
(whether or not vested) shall automatically terminate unless (a) provision is
made in writing in connection with such transaction for the continuance of the
1997 Stock Incentive Plan and for the assumption of such Awards, or for the
substitution for such Awards of new awards covering the securities of a
successor entity or an affiliate thereof, with appropriate adjustments as to the
number and kind of securities and exercise prices, in which event the 1997 Stock
Incentive Plan and such outstanding Awards will continue or be replaced, as the
case may be, in the manner and under the terms so provided; or (b) the Board
otherwise provides in writing for such adjustments as it deems appropriate in
the terms and conditions of the then-outstanding Awards (whether or not vested),
including without limitation (i) accelerating the vesting of outstanding Awards
and/or (ii) providing for the cancellation of Awards and their automatic
conversion into the right to receive the securities, cash or other consideration
that a holder of the shares underlying such Awards would have been entitled to
receive upon consummation of such change in control had such shares been issued
and outstanding immediately prior to the effective time of the change in control
(net of the appropriate option exercise prices). If the 1997 Stock Incentive
Plan and the Awards terminate by reason of the occurrence of a change in control
without provision for any of the actions described in clause (a) or (b) of the
immediately preceding sentence, then any holder of outstanding Awards will have
the right, at such time immediately prior to the consummation of the change in
control as the Board designates, to exercise such Awards to the full extent not
theretofore exercised, including any installments which have not yet become
vested.
DEFINED BENEFIT PLAN
The Association maintains the Quaker City Federal Savings and Loan
Association Employee Retirement Income Plan, a non-contributory defined benefit
pension plan ("Defined Benefit Plan"). An employee hired prior to December 1,
1992 becomes eligible to participate in the Defined Benefit Plan upon attaining
the age of 21 and completing one year of service during which he or she has
served a minimum of 1,000 hours. The Defined Benefit Plan provides for a
monthly benefit to the employee upon retirement at the age of 65, or if later,
the fifth anniversary of the employee's initial participation in the Defined
Benefit Plan. The Defined Benefit Plan also provides for a monthly benefit upon
the participant's death, disability and early retirement. Early retirement is
conditioned upon the attainment of the age of 55, and the completion by the
participant of five years of service.
The following table illustrates the estimated annual benefits payable under
the Defined Benefit Plan as of December 31, 1993 upon retirement at age 65 for
the final average compensation and years of service classification specified.
As described further below, the amounts set forth reflect that participants'
years of
12
service credited for purposes of benefit calculations were frozen as of
December 31, 1993. Benefits after December 31, 1993, however, may still
increase due to increases in compensation levels.
QUAKER CITY FEDERAL SAVINGS AND LOAN ASSOCIATION
DEFINED BENEFIT PLAN
YEARS OF SERVICE
FINAL AVERAGE ---------------------------------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------- --------------- --------------- --------------- --------------- ---------------
$ 50,000 $13,465 $17,953 $22,442 $24,942 $27,442
75,000 21,715 28,953 36,192 39,942 43,692
100,000 29,965 39,953 49,942 54,942 59,942
125,000 38,215 50,953 63,692 69,942 76,192
150,000 48,465 61,953 77,442 84,942 92,442
175,000 47,565 63,420 79,275 86,942 94,608
200,000 47,565 63,420 79,275 86,942 94,608
225,000 47,565 63,420 79,275 86,942 94,608
250,000 47,565 63,420 79,275 86,942 94,608
275,000 47,565 63,420 79,275 86,942 94,608
300,000 47,565 63,420 79,275 86,942 94,608
350,000 47,565 63,420 79,275 86,942 94,608
400,000 47,565 63,420 79,275 86,942 94,608
Upon establishment of the Defined Benefit Plan, benefits payable to non-
executive officers and other employees under the Defined Benefit Plan were
determined by taking into account the participant's final average compensation,
including regular pay, overtime and bonuses, Social Security benefits and years
of credited service. In conjunction with the establishment by the Association
in 1993 of an employee stock ownership plan (the "ESOP"), effective December 31,
1993 benefit calculations under the Defined Benefit Plan from January 1, 1994
forward are based upon current compensation levels and credited service through
December 31, 1993 only. The benefit amounts listed above were computed on a
single life annuity basis, which is the normal form of payment under the Defined
Benefit Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Association maintains a non-qualified Supplemental Executive Retirement
Plan ("SERP") for certain employees and their beneficiaries whose benefits from
the Association's Defined Benefit Plan and the tax qualified ESOP are reduced by
reason of the annual limitation on benefits and contributions imposed by Section
415 of the Code and the limitations imposed on compensation taken into
consideration in the determination of benefits under the Defined Benefit Plan
and the ESOP due to Section 401(a)(17) of the Code. The SERP provides
additional benefits to participants to ensure that they receive an aggregate
annual benefit from the Defined Benefit Plan, the ESOP and Social Security of an
amount equal to 65% of such participants' final average compensation at age 65.
The following table illustrates the estimated annual benefits payable under
the Defined Benefit Plan and the SERP (collectively, the "Retirement Plans") as
of December 31, 1993 upon retirement at age 65 for the final average
compensation and years of service classification specified. The amounts set
forth reflect that
13
participants' years of service credited for purposes of benefit calculations
under the Defined Benefit Plan were frozen as of December 31, 1993.
QUAKER CITY FEDERAL SAVINGS AND LOAN ASSOCIATION
TARGETED RETIREMENT INCOME
YEARS OF SERVICE
FINAL AVERAGE ---------------------------------------------------------------------------------------
COMPENSATION 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------- --------------- --------------- --------------- --------------- ---------------
$ 50,000 $ 8,275 $ 16,400 $ 16,400 $ 16,400 $ 16,400
75,000 20,463 32,650 32,650 32,650 32,650
100,000 32,650 48,900 48,900 48,900 48,900
125,000 44,838 65,150 65,150 65,150 65,150
150,000 57,025 81,400 81,400 81,400 81,400
175,000 69,213 97,650 97,650 97,650 97,650
200,000 81,400 113,900 113,900 113,900 113,900
225,000 93,588 130,150 130,150 130,150 130,150
250,000 105,775 146,400 146,400 146,400 146,400
275,000 117,963 162,650 162,650 162,650 162,650
300,000 130,150 178,900 178,900 178,900 178,900
350,000 154,525 211,400 211,400 211,400 211,400
400,000 178,900 243,900 243,900 243,900 243,900
Benefits payable to executive officers under the Defined Benefit Plan and
the SERP have, since the establishment thereof until December 31, 1993, been
determined by taking into account the executive's final average compensation,
Social Security benefits and years of credited service. The compensation
covered by the Retirement Plans is comprised of salary and bonuses, but does not
include the other possible components of compensation set forth in the Summary
Compensation Table presented earlier in this Proxy Statement. As set forth
above, in connection with the Association's establishment of the ESOP in 1993,
effective December 31, 1993 benefit calculations under the Defined Benefit Plan
from January 1, 1994 forward are based upon current compensation levels and
credited service through December 31, 1993 only. The benefit amounts listed
above were computed on a single life annuity basis, which is the normal form of
payment under the Retirement Plans.
The approximate years of service and covered compensation, as of January 1,
1998, for the Named Executive Officers under the Retirement Plans are as
follows:
COVERED
NAME SERVICE COMPENSATION
---- ------- ------------
J. L. Thomas...................... 36 $250,900
Frederic R. McGill................ 6 344,722
Dwight L. Wilson.................. 21 163,277
Harold L. Rams.................... 22 141,643
Kathryn M. Hennigan............... 5 130,942
NON-EMPLOYEE DIRECTORS' OPTION PLAN
Non-employee directors ("Outside Directors") of the Company and the
Association are eligible to receive stock options under the Quaker City Bancorp,
Inc. 1993 Stock Option Plan for Outside Directors (the "1993 Directors' Option
Plan"). The purpose of the 1993 Directors' Option Plan is to promote the growth
and
14
profitability of the Company and the Association by providing an incentive in
the form of stock options to Outside Directors of outstanding competence to
achieve long-term objectives of the Company and the Association by encouraging
their acquisition of an equity interest in tile Company.
The 1993 Directors' Option Plan authorized the granting of non-qualified
stock options for a total of 161,719 shares of Common Stock (as adjusted for the
Stock Dividends) to Outside Directors. Stock options for an aggregate of
153,634 shares of Common Stock (as adjusted for the Stock Dividends) were
granted to the six Outside Directors at the date of the Conversion at an
exercise price of $7.50 ($4.80, as adjusted for the Stock Dividends) per share,
which was the offering price of the Common Stock in the initial public offering
of the Company. To the extent options for shares are available for grants under
the 1993 Directors' Option Plan, on each anniversary of the effective date of
the 1993 Directors' Option Plan, each subsequently elected Outside Director will
be granted, non-qualified stock options to purchase 4,041 shares of Common Stock
(as adjusted for the Stock Dividends) or a number of options to purchase such
lesser number of shares as remain in the Directors Option Plan. If options for
sufficient shares are not available to fulfill the grant of options to an
Outside Director, and thereafter options become available, such persons shall
receive options to purchase an amount of shares of Common Stock, determined by
dividing pro rata among such persons the number of options available. There are
8,085 shares of Common Stock (as adjusted for the Stock Dividends) remaining
under the 1993 Directors' Option Plan available for future option grants.
All options granted under the 1993 Directors' Option Plan in connection
with the Conversion became exercisable January 1, 1995; options granted to a
subsequently elected Outside Director will become exercisable on the first
business day of January following that date on which such subsequent Outside
Director is qualified and first begins to serve as a Director, provided.
however, that in the event of death, disability or retirement of the participant
or upon a change in control of the Company or the Association, all options
previously granted would automatically become exercisable. Each option granted
under the Directors' Option Plan expires upon the earlier of 10 years following
the date of grant, or one year following the date the Outside Director ceases to
be a director.
1997 STOCK INCENTIVE PLAN
The 1997 Stock Incentive Plan provides for the grant of Awards in the form
of stock options (including incentive stock options or non-qualified stock
options), restricted stock, stock appreciation rights, stock payments, dividend
equivalents, stock bonuses, stock sales, phantom stock and other stock-based
benefits. The persons eligible to receive an Award under the 1997 Stock
Incentive Plan include directors, officers, employees, consultants, and advisors
of the Company and its affiliated entities. On July 24, 1997, the date that the
1997 Stock Incentive Plan was adopted by the Board of Directors, subject to
subsequent stockholder approval, the Board of Directors granted non-qualified
stock options with respect to 6,250 shares of Common Stock (as adjusted for the
1998 Stock Dividend) to each non-employee Director on July 24, 1997 at an
exercise price of $20.50 per share, which was the closing share price for the
Common Stock on the Nasdaq National Market on such date. The exercise price of
such options as adjusted for the Stock Dividend is now $16.40. All such options
vest over a period of three years, with one-third becoming exercisable on each
of July 24, 1998, 1999, and 2000. Each of the options granted to directors to
date under the 1997 Stock Incentive Plan expires ten years following the date of
grant. A total of 110,000 shares of Common Stock (as adjusted for the 1998
Stock Dividend) remains available for future Award grants to all eligible
persons under the 1997 Stock Incentive Plan. Pursuant to the terms of the 1997
Stock Incentive Plan, no one eligible person may be granted Awards with respect
to more than 100,000 shares of Common Stock in any one calendar year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee consists of Messrs. Cannon
(Chairman), Miller and Harvey. None of such members is, or formerly was, an
officer or employee of the Company or any of its subsidiaries and
15
none had any relationship with the Company requiring disclosure herein under
applicable rules. In addition, to the Company's knowledge, no executive officer
of the Company serves as a director or a member of the compensation committee of
another entity.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
ADMINISTRATION
The compensation program is administered by the Compensation Committee of
the Company's Board of Directors, which is composed of three outside, non-
employee directors. The Chairman of the Board, Chief Executive Officer and the
Senior Vice President, Administrative Services, serve as advisors to the
Compensation Committee. Following review and approval by the Compensation
Committee, all issues pertaining to employment-related contracts are submitted
to the full Board of Directors for approval.
The following is the Compensation Committee report addressing the
compensation of the Company's executive officers for the 1998 fiscal year.
PHILOSOPHY
The goals and objectives of the executive compensation policies remain the
same as last year. The Compensation Committee's executive compensation policies
are designed to provide competitive levels of compensation that integrate pay
with the Company's annual and long-term performance goals, reward above average
corporate performance, recognize individual initiative and achievements and
assist the Company in attracting and retaining qualified executives. Targeted
levels of executive compensation are set at levels the Compensation Committee
believes to be consistent with others in the financial services industry, with
executives' compensation packages increasingly being weighted toward programs
contingent upon the Company's long-term (three years or more) performance. As a
result, the executives' actual compensation levels in any particular year may be
above or below those of the Company's competitors, depending upon the Company's
performance.
The Company's compensation strategy continues to support the concept of
pay-for-performance, associating the goal of variable pay for variable
performance. A mix of compensation elements, with an emphasis on tying long-
term incentives to corporate performance, is designed to meet this goal. The
mix of compensation elements varies between executive levels within the
organization, with compensation opportunities of senior executives relying more
heavily on annual and long-term incentive compensation.
With regard to Section 162(m) of the Code, which limits the deductibility
of certain executive officer compensation in excess of $1 million, the Company
intends to take all necessary steps to cause the compensation paid to executive
officers to be deductible by the Company.
PERFORMANCE TO DATE
The Company's compensation strategy is based on the philosophy that Company
executives should be compensated within competitive norms for their level of
responsibility within the organization. The Company has determined the
competitive marketplace for different executive levels within the organization.
Generally, the competitive marketplace for senior executives has been defined as
financial institutions with assets between $500 million and $1 billion that are
located in California.
It should be noted that the Company wishes to compare itself on a broader
basis for corporate performance purposes, and thus the peer group referenced
above for comparison purposes in regard to cash compensation is not identical to
that used in the Stock Price Performance Graph which appears immediately after
this report.
16
The Compensation Committee conducted its annual review of officers' base
salary levels in June of 1997. As a result of the Compensation Committee
review, senior executives received raises ranging from 2% to 11% for fiscal
1998. These raises in base salaries reflected the impact of increased job
responsibilities and improved performance.
In the spring of 1997, a competitive review of the current cash
compensation program (base salary and short-term incentive cash compensation)
for Company executives was performed by an independent outside consulting firm,
KPMG Peat Marwick LLP ("KPMG"). The findings of such review were used by the
Compensation Committee in its executive salary reviews for fiscal 1998 and
fiscal 1999. The Compensation Committee plans to retain an outside firm to
perform a new independent review of the executive cash compensation program in
the spring of 1999.
Annual incentive compensation for both the Chief Executive Officer and the
Chairman of the Board was based solely on corporate goals. For fiscal year
1998, the target incentive for the Chief Executive Officer was 45% of base
salary, while that of the Chairman of the Board was on a profitability-based
graduated scale. For fiscal 1998, these goals pertained to performance in the
following areas: net profit, asset quality, operating expense ratios, regulatory
and compliance ratings, and quality of customer service. In addition, a
profitability threshold required for any corporate bonus award continues to be
an integral part of the incentive compensation plan. Incentive compensation for
fiscal 1998 for other executive officers of the Company, with a target of 25% of
base salary, was based 80% upon corporate and 20% upon personal goal
achievement. The annual incentive program also included a profitability
threshold necessary for the payment of any bonus based on corporate goals. In
July of 1998, executive officers received bonuses approved by the Board of
Directors based on both management objectives and their personal goal
achievement, as applicable, during fiscal year 1998.
The third part of executive compensation is the long-term compensation
program, including incentive stock options, non-qualified stock options and
stock grants. Stock options have been granted under both the Company's 1993
Management Option Plan and the 1997 Incentive Stock Plan and stock grants are
awarded under the Association's RRP. The purpose of these plans is to encourage
management stability as well as stock ownership of the Company.
Under the 1993 Management Option Plan, senior executives received stock
options which offer them the possibility of future gains, depending on the
executive's continued employment by the Company or the Association and the long-
term price appreciation of the Company's Common Stock. At the Conversion,
senior executive officers were granted options under the 1993 Management Option
Plan that vested over a period of three years, with one-third becoming
exercisable on each of January 1, 1995, 1996, and 1997. All shares of Common
Stock reserved under the 1993 Management Option Plan are subject to outstanding
options and no shares remain available under the 1993 Management Option Plan for
future option grants. Under the 1997 Stock Incentive Plan, senior executive
officers, except for Mr. Kadowaki, received non-qualified stock options which
vest over a period of three years, with one third becoming exercisable on each
of July 7, 1998, 1999, and 2000. Mr. Kadowaki received non-qualified stock
options upon his appointment in April, 1998 as Senior Vice President, Income
Property Lending of the Association. One-third of Mr. Kadowaki's non-qualified
stock options will become exercisable on each of April 21, 1999, 2000, 2001.
Awards under the 1997 Stock Incentive Plan may be granted in the form of stock
options, restricted stock, stock appreciation rights, stock payments, dividend
equivalents, stock bonuses, stock sales, phantom stock and/or other stock based
benefits. A total of 110,000 shares of Common Stock (as adjusted for the 1998
Stock Dividend) remains available for future grants of Awards under the 1997
Stock Incentive Plan. Pursuant to the terms of the 1997 Stock Incentive Plan,
no one eligible person may be granted Awards with respect to more than 100,000
shares of Common Stock in any one calendar year.
At the Conversion, in addition to options granted under the 1993 Management
Option Plan, stock grants were awarded to senior executives under the RRP.
Awards granted to Mr. Thomas vested over a three-year
17
period, with rights to acquire one-third of the awarded shares on each of
January 1, 1995, 1996 and 1997, and awards granted to all other executive
officers vest over a five-year period, with rights to acquire one-fifth of the
awarded shares on each January first of 1995 through 1999. The Compensation
Committee does not contemplate making additional grants to the current group of
senior executives until at least 1998.
CHIEF EXECUTIVE OFFICER COMPENSATION
The base salary for Mr. McGill for fiscal year 1998 was increased by 12%
due to his increased responsibility as Chief Executive Officer, effective July
1, 1996. Mr. McGill's target short term incentive level was increased from 40%
to 45% of base salary as a result of the Committee's implementation of a
recommendation of the 1995 executive compensation study by KPMG. The study
concluded that the target short-term incentive level for Mr. McGill should be
increased to 45% for fiscal year 1998. The annual incentive bonus payout is
based on the same corporate goal achievement, including a profitability
threshold, as all other executives. In July of 1998, Mr. McGill received an
incentive bonus of $99,722, approved by the Board of Directors, and based on
corporate goal achievement during fiscal year 1998.
The executive cash compensation study performed by KPMG in the spring of
1997 reaffirmed the appropriateness of the 45% of base salary short-term
incentive target for Mr. McGill. The competitive review found Mr. McGill's base
salary to be 20% below the 50th percentile of base salaries for competitor
organizations. As a result, for fiscal 1999, Mr. McGill will receive a base
salary of $255,000, an 8.5% increase over the previous year.
In an initial grant under the 1997 Stock Incentive Plan, the Compensation
Committee awarded Mr. McGill non-qualified options to purchase 62,500 shares of
Common Stock (as adjusted for the 1998 Stock Dividend). The number of options
granted to Mr. McGill under the 1997 Stock Incentive Plan was based upon several
factors, including past performance, present and future responsibility of his
position and further aligning the Chief Executive Officer's interests with those
of the Company's stockholders.
CONCLUSION
The Committee believes that the current compensation policies for the
Company and the Association are both effective and appropriate. For fiscal
years 1996, 1997 and 1998, when the profit threshold was met, there was in place
a compensation mix which increasingly relies on incentive compensation for
corporate goal achievement.
1998 COMPENSATION COMMITTEE
David T. Cannon
Wayne L. Harvey
Edward L. Miller
The report of the Compensation Committee shall not be deemed incorporated
by any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933, as amended (the "Securities Act"),
or under the Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
18
STOCK PRICE PERFORMANCE GRAPH
The stock price performance graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or the Exchange Act, except
to the extent that the Company specifically incorporates this information by
reference and shall not otherwise be deemed filed under such Acts.
The graph below compares the cumulative total stockholder return of the
Company's Common Stock with the cumulative total return of the NASDAQ National
Market System equity index and Media General's Savings and Loan Industry Group
index since December 30, 1993, when the Company's Common Stock was first
registered under the Exchange Act, through June 30, 1998. The graph assumes that
$100 was invested on December 30, 1993 in the Common Stock and each index and
that all dividends were reinvested. No cash dividends have been declared on the
Company's Common Stock since the Company's formation in September 1993.
Stockholder returns over the indicated period should not be considered
indicative of future stockholder returns.
COMPARISON OF CUMULATIVE TOTAL RETURN OF
COMPANY, INDUSTRY INDEX AND BROAD MARKET
[PERFORMANCE GRAPH APPEARS HERE]
Measurement Period QUAKER CITY SAVINGS & NASDAQ
(Fiscal Year Covered) BANCORP, INC. LOAN MARKET INDEX
- ------------------- ------------- --------- ------------
Measurement Pt- 1993 $100 $100 $100
FYE 1994 $114.67 $105.68 $100.75
FYE 1995 $122.67 $121.80 $118.17
FYE 1996 $146.00 $154.78 $148.75
FYE 1997 $234.17 $250.46 $179.19
FYE 1998 $306.67 $338.71 $237.52
1. Quaker City Bancorp, Inc. returns were calculated based on the closing sale
prices per share of the Common Stock as follows (as adjusted for the Stock
Dividends): 12/30/93 (initial trading day), $6.00; 6/30/94, $6.88; 6/30/95,
$7.36; 6/30/96, $8.76, 6/30/97, $14.05, 6/30/98, $18.40.
2. The $4.80 per share (as adjusted for the Stock Dividends) initial public
offering price of the Company's Common Stock was not used in calculating the
Quaker City Bancorp, Inc. graph points.
3. The Company paid the Stock Dividend on or about June 30, 1998 to
stockholders.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the Record Date, (i) the name of each
person believed by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) the total number of shares of Common Stock
beneficially owned by each such person and (iii) the percentage of all Common
Stock outstanding held by each such person.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS (1)(2)
- --------------------- -------------------------------- ----------------------- ------------------------
Common Stock Quaker City Federal Savings and 415,071 shares(3)(4) 7.16%
Loan Association Employee Stock
Ownership Plan and Trust ("ESOP")
7021 Greenleaf Avenue
Whittier, CA 90602
Common Stock Warburg, Pincus 504,686 shares(5) 8.70%
Counsellors, Inc.
466 Lexington Avenue
New York, NY 10017
- -----------------------
(1) Share amounts have been adjusted for the Stock Dividends.
(2) As of the Record Date, there were 5,799,226 shares of Common Stock (as
adjusted for the Stock Dividends) outstanding.
(3) Shares of Common Stock were acquired by the ESOP in the Conversion. A
committee which consists of non-employee members of the Board of Directors
of the Association administers the ESOP (the "ESOP Committee"). An
unrelated third party has been appointed as the corporate trustee for the
ESOP ("ESOP Trustee"). The ESOP Committee may instruct the ESOP Trustee
regarding investment of funds contributed to the ESOP. The ESOP Trustee
must vote all allocated shares held in the ESOP in accordance with the
instructions of the participating employees. Under the ESOP, unallocated
shares held in the suspense account will be voted by the ESOP Trustee in a
manner calculated to most accurately reflect the instructions received from
participants regarding the allocated stock so long as such vote is in
accordance with the provisions of the Employee Retirement Income Security
Act of 1974, as amended. As of the Record Date, 256,335 shares of Common
Stock (as adjusted for the Stock Dividends) in the ESOP had been allocated,
but not distributed, to participating employees, including 62,072 shares (as
adjusted for the Stock Dividends) allocated to executive officers as
described in the footnotes to the Security Ownership of Management table as
of the Record Date. As of the Record Date, 19,738 shares of Common Stock in
the ESOP had been distributed.
(4) Includes unallocated as well as allocated but unvested ESOP shares. While
allocated but unvested shares are voted by participants, they are subject to
forfeiture until fully vested.
(5) Based upon information reported by Warburg, Pincus Counsellors, Inc. on
Schedule 13 G filed in January 1998.
RELATED PARTY TRANSACTIONS
Section 11 of the Home Owners' Loan Act requires that all loans or
extensions of credit by the Association to executive officers and directors of
the Association, of the Company and of the Company's other subsidiaries
(collectively, "Insiders") or to companies which an Insider controls ("Related
Interests"), must be made on substantially the same terms (including interest
rates and collateral) as, and must follow credit underwriting procedures not
less stringent than, those prevailing at the time for comparable transactions
with the general public, and must not involve more than the normal risk of
repayment or present other unfavorable features. In addition, loans made to an
Insider or Related Interest in excess of the lesser of (a) $500,000, or (b) the
greater of $25,000 or 5% of the Association's capital and surplus, must be
approved in advance by a majority of the entire Board of Directors of the
Association, with interested directors abstaining from participating directly or
indirectly in the voting. The aggregate loans by the Association to an Insider
and his or
20
her Related Interests generally may not exceed 15% of the Association's capital,
and the aggregate of all loans by the Association to all of its Insiders and
their Related Interests generally may not exceed 100% of the Association's
capital.
It is the policy of the Association to offer loans to executive officers
and directors on their principal residence and to offer to extend a line of
credit for overdraft protection on a checking account held at the Association.
The Association's policy provides that all loans to its executive officers and
directors shall be made in the ordinary course of business, shall be made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with all other employees and
shall not involve more than the normal risk of collectibility or present other
unfavorable features.
During fiscal 1998, directors David Cannon and Wayne Harvey and executive
officers Rick McGill, Kathryn Hennigan, and Karen Tannheimer had loans from the
Association. The largest amount of indebtedness of each during fiscal year 1998
and the outstanding balance of each is as listed below:
NAME LARGEST FY INDEBTEDNESS BALANCE AS OF JUNE 30, 1998
- ---- ----------------------- ---------------------------
Cannon $ 17,619.38 $ 12,540.29
Harvey 68,500.00 46,500.00
McGill 345,000.00 0.00(1)
Hennigan 227,150.00 226,767.25(2)
Tannheimer 192,000.00 192,000.00(2)
- --------------------
(1) The loan made to Mr. McGill was approved by and sold to an investor,
servicing released.
(2) Ms. Hennigan's and Ms. Tannheimer's loans have been sold to FNMA; the
Association retains the servicing.
The loans were made by the Association in conformance with the Association
policy on loans to executive officers, directors, and employees.
In connection with the Conversion of the Association and the commencement
of operations of the Company, the Association and the Company entered into two-
year change in control agreements with executive officers Hank K. Kadowaki,
Karen A. Tannheimer and Robert C. Teeling. The terms of such agreements are the
same as those of the change in control agreements entered into by the
Association and the Company with Messrs. Wilson and Rams and Ms. Hennigan
described above under "COMPENSATION AND OTHER INFORMATION--Employment Agreements
and Change in Control Arrangements."
As part of the Conversion, an ESOP was established by the Association. The
ESOP borrowed $3,105,000 from the Company to purchase 646,875 shares of Common
Stock (as adjusted for the Stock Dividends) of the Company. As of the Record
Date, 371,954 shares of Common Stock (as adjusted for the Stock Dividends) held
by the ESOP were unallocated to individual participant accounts. Such shares
constituted 6.4% of the outstanding Common Stock as of the Record Date. The
ESOP loan will be repaid principally from the Association's discretionary
contributions to the ESOP over a 10-year period. At June 30, 1998, the
outstanding balance of the loan was $1,630,125.
Mr. Miller is a partner of the law firm of Bewley, Lassleben & Miller. The
Company retained such law firm during fiscal 1998 and has continued to retain
the firm in fiscal 1999. The amount of fees paid to the firm in fiscal 1998 did
not exceed five percent of the law firm's gross revenues for the firm's last
full fiscal year.
21
ELECTION OF DIRECTORS
At the Annual Meeting, stockholders of the Company will be asked to vote on
the election of two directors. The two nominees receiving the highest number of
votes at the Annual Meeting will be elected directors of the Company. To fill
these board positions, the enclosed proxy, unless indicated to the contrary,
will be voted FOR the nominees listed below and on the enclosed proxy card. All
directors elected at the Annual Meeting will be elected to three-year terms and
will serve until the annual meeting of stockholders to be held in the year 2001
and until their successors have been duly elected and qualified.
Set forth below are the names of persons nominated by the Company's Board
of Directors for election as directors at the Annual Meeting. Your proxy,
unless otherwise indicated, will be voted FOR Messrs. McGill and Gobar. For a
description of Mr. McGill's and Mr. Gobar's principal occupation and business
experience during the last five years and present directorships, please see
"DIRECTORS AND EXECUTIVE OFFICERS--Directors," above.
FIRST FIRST TERM AS
BECAME BECAME COMPANY
DIRECTOR OF DIRECTOR OF DIRECTOR
NAME CURRENT OCCUPATION ASSOCIATION COMPANY EXPIRES
- --------------------- ---------------------------------- ----------- ------------- --------
NOMINEES FOR ELECTION
Alfred J. Gobar President and Chairman, AJGA, Inc. 1992 1993 1998
Frederic R. McGill President and Chief Executive Officer 1995 1995 1998
of the Company and of the Association
CONTINUING DIRECTORS
David T. Cannon D.T. Cannon Associates, a marketing and 1984 1993 1999
management consulting firm; retired
Western Regional Director for
Industrial Relations of Eastman Kodak
Company
Wayne L. Harvey C.P.A., Managing Partner, Harvey & 1981 1993 2000
Parmelee
David K. Leichtfuss President, Broadview Mortgage 1991 1993 1999
Edward L. Miller Partner, law firm of Bewley, Lassleben 1985 1993 2000
& Miller
J.L. Thomas Chairman of the Board of the Company 1975 1993 2000
and of the Association
The Company has been advised by each nominee named in this Proxy Statement
that he is willing to be named as such herein and is willing to serve as a
director if elected. However, if any of the nominees should be unable to serve
as a director, the enclosed proxy will be voted in favor of the remainder of
those nominees not opposed by the stockholder on such proxy and may be voted for
a substitute nominee selected by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE NOMINEES LISTED
---
ABOVE.
22
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
INTRODUCTION
The Company's Certificate of Incorporation currently authorizes the
issuance of ten million (10,000,000) shares of Common Stock, par value one cent
($.01) per share, and two million (2,000,000) shares of Preferred Stock, par
value one cent ($.01) per share. The Board of Directors in September, 1998,
adopted a resolution proposing that the Certificate of Incorporation be amended
to increase the authorized number of shares of Common Stock to twenty million
(20,000,000), subject to stockholder approval of the amendment.
CURRENT USE OF SHARES
On September 22, 1998, the Record Date for the Annual Meeting, 5,799,226
shares of Common Stock were outstanding and approximately 700,000 shares were
reserved for future issuance under the Company's employee and/or director
benefit plans. Based upon the foregoing number of outstanding and reserved
shares of Common Stock, the Company currently has approximately 3,500,000 shares
remaining available for other purposes.
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has adopted resolutions setting forth (i) the
proposed amendment to the first sentence of paragraph 4 of the Company's
Certificate of Incorporation (the "Amendment"); (ii) the advisability of the
Amendment; and (iii) a call for submission of the Amendment for approval by the
Company's stockholders at the Meeting.
The following is the text of the first sentence of paragraph 4 of the
Certificate of Incorporation of the Company, as proposed to be amended:
A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is twenty-two million (22,000,000)
consisting of:
1. Two million (2,000,000) shares of Preferred Stock, par value one
cent ($.01) per share (the "Preferred Stock"); and
2. Twenty million (20,000,000) shares of Common Stock, par value one
cent ($.01) per share (the "Common Stock").
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Board of Directors believes that it is in the Company's best interest
to increase the number of shares of Common Stock that Quaker City Bancorp, Inc.
is authorized to issue in order to give the Company additional flexibility to
maintain a reasonable stock price with future stock splits and stock dividends.
On two occasions since the Company's initial public offering in 1993, the Board
of Directors has declared and paid a Common Stock dividend (referred to herein
as the Stock Dividends). Most recently, the Board declared the 1998 Stock
Dividend, a 5-for-4 Common Stock dividend paid in June, 1998. The Board of
Directors also believes that the availability of additional authorized but
unissued shares will provide the Company with the flexibility to issue Common
Stock for other proper corporate purposes which may be identified in the future,
such as to raise equity capital, to adopt additional employee benefit plans or
reserve additional shares for issuance under such plans, and to make
acquisitions through the use of stock. Other than as permitted or required
under the Company's employee benefit plans and under outstanding options, the
Board of Directors has no immediate plans, understandings, agreements, or
commitments to issue additional Common Stock for any purpose.
23
The Board of Directors believes that the proposed increase in the
authorized Common Stock will make available sufficient shares for use should the
Company decide to use its shares for one or more of such previously mentioned
purposes or otherwise. No additional action or authorization by the Company's
stockholders would be necessary prior to the issuance of such additional shares,
unless required by applicable law or the rules of any stock exchange or national
securities association trading system on which the Common Stock is then listed
or quoted. The Company reserves the right to seek a further increase in
authorized shares from time to time in the future as considered appropriate by
the Board of Directors.
Under the Company's Certificate of Incorporation, the Company's
stockholders do not have preemptive rights with respect to Common Stock. Thus,
should the Board of Directors elect to issue additional shares of Common Stock,
existing stockholders would not have any preferential rights to purchase such
shares. In addition, if the Board of Directors elects to issue additional shares
of Common Stock, such issuance could have a dilutive effect on the earnings per
share, voting power, and shareholdings of current stockholders.
The proposed Amendment to increase the number of authorized shares of
Common Stock could, under certain circumstances, have an anti-takeover effect,
although this is not the intention of this proposal. For example, in the event
of a hostile attempt to take over the control of the Company, it may be possible
for the Company to endeavor to impede the attempt by issuing shares of the
Common Stock, thereby diluting the voting power of the other outstanding shares
and increasing the potential cost to acquire control of the Company. However,
certain existing provisions of the Company's Certificate of Incorporation as
well as the change of control provisions of federal banking laws and
regulations, to which any change of control of the Company would be subject, may
have a similar effect. The Amendment therefore may have the effect of
discouraging unsolicited takeover attempts. By potentially discouraging
initiation of an unsolicited takeover attempt, the proposed Amendment may limit
the opportunity for the Company's stockholders to dispose of their shares at the
higher price generally available in takeover attempts or that may be available
under a merger proposal. The proposed Amendment may have the effect of
permitting the Company's current management, including the current Board of
Directors, to retain its position, and place it in a better position to resist
changes that stockholders may wish to make if they are dissatisfied with the
conduct of the Company's business. However, the Board of Directors is not aware
of any attempt to take control of the company and the Board of Directors has not
presented this proposal with the intent that it be utilized as a type of anti-
takeover device.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Meeting, assuming a quorum is present,
is necessary for approval of the Amendment. Therefore, abstentions and broker
non-votes (which may occur if a beneficial owner of stock where shares are held
in a brokerage or bank account fails to provide the broker or the bank voting
instructions as to such shares) effectively count as votes against the
Amendment. Unless a contrary choice is specified, proxies solicited by the Board
of Directors will be voted for approval of the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND
---
THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM TEN MILLION (10,000,000) TO TWENTY MILLION
(20,000,000).
24
THE COMPANY'S RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
KPMG has been the independent certified public accounting firm for the
Association since 1969 and for the Company since commencement of its business
operations following the Conversion of the Association from mutual to stock form
on December 30, 1993, and have been selected by the Company to continue to serve
as the accountants for the Company for fiscal 1999. Representatives of KPMG
will attend the Annual Meeting with an opportunity to make a statement if they
desire to do so and will be available to respond to appropriate questions.
STOCKHOLDERS' PROPOSALS
Any stockholder of the Company wishing to have a proposal considered for
inclusion in the Company's proxy solicitation materials relating to the
Company's 1999 annual meeting of stockholders must give notice of such proposal
in writing to the Corporate Secretary of the Company at its principal executive
offices and such notice must be received on or before May 31, 1999. The notice
must comply with Section 6 of Article I of the Company's Bylaws (a copy of which
is available upon request to the Corporate Secretary of the Company), which
section requires that the notice contain a brief description of such proposal
and the reason for conducting such business at the annual meeting, the name and
address, as they appear on the Company's books, of the stockholder making such
proposal, the number of shares of Common Stock beneficially owned by such
stockholder and any material interest of such stockholder in such proposal. The
Board of Directors will review proposals from eligible stockholders which it
receives by that date and will determine whether any such proposal will be
included in its 1999 proxy solicitation materials. An eligible stockholder is
one who upon submission of the proposal is the record or beneficial owner of at
least 1% or $1,000 in market value of securities entitled to vote at the 1999
annual meeting of stockholders, who has held such securities for at least one
year and who shall continue to own such securities through the date on which the
meeting is held.
OTHER MATTERS
At the time of preparation of this Proxy Statement, the Board of Directors
of the Company was not aware of any other matters to be brought before the
Annual Meeting. No eligible stockholder had submitted notice of any proposal 90
days before the date of the Annual Meeting. However, if any other matters are
properly presented for action, in the absence of instructions to the contrary,
it is the intention of the persons named in the enclosed form of proxy to vote,
or refrain from voting, in accordance with their respective best judgment on
such matters.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act ("Section 16") and the rules
promulgated thereunder (the "Rules") and requirements of the National
Association of Securities Dealers, Inc. (the "NASD"), officers and directors of
the Company and persons who beneficially own more than 10% of the Common Stock
of the Company are required to file with the SEC and the NASD and furnish to the
Company reports of ownership and change in ownership with respect to all equity
securities of the Company.
Based solely on its review of the copies of such reports received by it
during or with respect to the fiscal year ended June 30, 1998 and/or written
representations from such reporting persons, the Company believes that all
reports required to be filed by such reporting persons during or with respect to
the fiscal year ended June 30, 1998 were timely filed.
25
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report to Stockholders for the fiscal year ended June
30, 1998, including audited financial statements, is being mailed to
stockholders along with these proxy materials. This year's Annual Report to
Stockholders includes the Annual Report on Form 10-K as filed with the SEC.
Exhibits to the Annual Report on Form 10-K may be obtained from the Company upon
payment of the Company's reasonable expenses to furnish such exhibits. To
obtain any such exhibits, contact Kathryn Hennigan, Corporate Secretary, Quaker
City Bancorp., Inc., 7021 Greenleaf Avenue, Whittier, California 90602.
By order of the Board of Directors
/s/ KATHRYN M. HENNIGAN
KATHRYN M. HENNIGAN
Corporate Secretary
Whittier, California
October 5, 1998
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
If your shares are held in the name of a brokerage firm, bank nominee or
other institution, only it can vote your shares. Accordingly, please contact
the person responsible for your account and give instructions for your shares to
be voted.
If you have any questions, or have any difficulty voting your shares,
please contact Morrow & Co. by calling 1-800-856-8309.
26
- --------------------------------------------------------------------------------
REVOCABLE PROXY
QUAKER CITY BANCORP, INC.
The undersigned hereby appoints Frederic R. (Rick) McGill and Dwight L.
Wilson, or either of them, each with full power of substitution, as the lawful
proxies of the undersigned and hereby authorizes such persons to represent and
to vote as designated below all shares of the common stock of Quaker City
Bancorp, Inc. (the "Company") which the undersigned would be entitled to vote
if personally present at the 1998 Annual Meeting of Stockholders of the Company
to be held on November 18, 1998 and at any adjournments or postponements
thereof (the "1998 Annual Meeting").
1. ELECTION OF DIRECTORS
[_] FOR all nominees [_] WITHHOLD AUTHORITY to
listed below (except vote for all nominees
as indicated to the listed below
contrary below)
ALFRED J. GOBAR
FREDERIC R. (RICK) MCGILL
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name here:
- --------------------------------------------------------------------------------
2. Approval of the proposed Amendment to the Quaker City Bancorp, Inc.
Certificate of Incorporation to increase the number of authorized shares of
Common Stock of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the 1998 Annual Meeting.
[_] FOR [_] AGAINST [_] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. IMPORTANT--
PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
(Continued on other side)
================================================================================
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS.
The undersigned acknowledges receipt of the Notice of Annual Meeting and
Proxy Statement for the 1998 Annual Meeting.
When signed as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name
by President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Whether or not you plan to attend the 1998 Annual Meeting, you are urged to
execute, date and return this proxy, which may be revoked at any time prior to
its use.
Dated:_________________, 1998
_____________________________
(Signature of Stockholder)
_____________________________
(Signature of Additional
Stockholder(s))
Please sign your name exactly
as it appears hereon, date and
return this proxy in the reply
envelope provided. If you
receive more than one proxy
card, please sign, date and
return all cards received.