<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1999
REGISTRATION NO. 333-51883
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
POST-EFFECTIVE AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
(Name of Small Business Issuer in its Charter)
------------------------------
<TABLE>
<S> <C> <C>
MARYLAND 6282 52-2097010
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------------
401 EAST PRATT STREET
SUITE 2800
BALTIMORE, MARYLAND 21202
(410) 625-9656
(Address and Telephone Number of Principal Executive Office)
------------------------------
NATHAN A. CHAPMAN, JR., PRESIDENT
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
401 EAST PRATT STREET
28TH FLOOR
BALTIMORE, MARYLAND 21202
(410) 625-9656
(Name, Address and Telephone Number of Agent for Service)
------------------------------
COPY TO:
ELIZABETH R. HUGHES, ESQ.
VENABLE, BAETJER AND HOWARD, LLP
1800 MERCANTILE BANK & TRUST BUILDING
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201-2978
(410) 244-7608
------------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this Registration Statement is effective.
------------------------------
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM IS TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER REGISTRATION STATEMENT FOR THE SAME
OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
THIS REGISTRATION STATEMENT RELATES TO THE REGISTRATION OF AN INDEFINITE NUMBER
OF SHARES SOLELY FOR MARKET-MAKING TRANSACTIONS.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
Filed Pursuant to
Rule 424(b)(3)
Registration No. 333-1883
<TABLE>
<S> <C>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
[LOGO] COMMON STOCK
</TABLE>
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 2
Chapman Capital Management Holdings, Inc. common stock, par value $0.001 per
share, (the "Common Stock") is quoted on the Nasdaq SmallCap Market under the
symbol "CMGT."
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This Prospectus has been prepared for and is to be used by The Chapman Co.
in connection with offers and sales of the shares of Common Stock related to
market-making transactions, at prevailing prices, related prices or negotiated
prices. The Company will not receive any of the proceeds of such sales. The
Chapman Co. may act as a principal or agent in such transactions.
------------------------
THE CHAPMAN CO.
The date of this Prospectus is March 23, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Risk Factors.............................................................................................. 2
Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 5
Business.................................................................................................. 9
Management................................................................................................ 14
Principal Stockholders.................................................................................... 16
Certain Transactions...................................................................................... 17
Description of Capital Stock.............................................................................. 18
Shares Eligible for Future Sale........................................................................... 20
Plan of Distribution...................................................................................... 20
Stockholder Information................................................................................... 20
Transfer Agent and Registrar.............................................................................. 21
Legal Matters............................................................................................. 21
Experts................................................................................................... 21
Additional Information.................................................................................... 21
Index to Financial Statements............................................................................. F-1
</TABLE>
------------------------
Domestic Emerging Markets-Registered Trademark- and DEM-Registered Trademark-
are registered trademarks and DEM Profile-TM-, DEM Universe-TM-, DEM
Company-TM-, DEM Index -TM- and the stylized C-Eagle logo are trademarks of
Nathan A. Chapman, Jr.
<PAGE>
RISK FACTORS
The words "believes," "intends," "anticipates," and "expects," and similar
C-Eagle logo expressions are intended to identify forward-looking statements.
These forward-looking statements are based on our current expectations and are
subject to a number of risks and uncertainties. In light of these risks and
uncertainties, many of which are described in detail in the risk factors set
forth below, actual results could differ materially from the forward-looking
statements contained in this document.
NET LOSS; RISK OF INABILITY TO MANAGE GROWTH
We have experienced and expect to continue to experience significant growth
in our business activities and the number of our employees. This growth requires
increased investment in personnel, financial and management systems and controls
and facilities. In addition, we intend to add personnel to support the increase
in assets under management that we will seek in executing our strategies. Unless
we achieve revenue growth in line with our growth in expenses, we will continue
to incur operating losses. Furthermore, our inability to manage such growth
could have a material adverse effect on our continued operations. During 1998,
we had a net loss of $106,000.
Further, as is common in the investment advisory business, we are, and will
continue to be, highly dependent on the effective and reliable operation of our
communications and information systems. Any difficulty in the operation of
existing systems, the implementation of new systems or the training of personnel
could adversely affect our ability to manage growth. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Software Issue."
DEPENDENCE ON KEY INVESTMENT MANAGEMENT CLIENTS
All of our agreements with our advisory clients are terminable by the client
upon short notice (typically 30-60 days prior written notice). If the DEM-MET
Trust or any of our key investment management clients were to terminate their
advisory arrangements with us or if large investors of the DEM-MET Trust were to
withdraw their funds, our advisory fee revenue would be materially and adversely
affected.
The DEM-MET Trust, with $265.5 million in assets under management,
represents approximately 42.8% of our assets under management as of February 28,
1999, 58.6% of our revenues in 1998 and [ ]% of our net advisory and
administrative fees in 1998 after deducting fees paid by the Company to
sub-advisers on behalf of the DEM-MET Trust. The largest of four investors in
the DEM-MET Trust represents approximately 30.2% of our assets under management
as of February 28, 1998. Excluding the DEM-MET Trust and its clients, the
Company's two largest clients represent 26.8% of the Company's assets under
management as of February 28, 1999 and 14.4% of the Company's revenues for 1998.
HIGHLY COMPETITIVE INDUSTRY
The investment advisory business is extremely competitive. We encounter
intense competition in all aspects of the investment advisory business and
compete directly with other firms, a significant number of which have greater
capital, experience and other resources than ours. Competition also exists for
experienced personnel including technical personnel and account executives. In
addition to competition from firms currently in the investment advisory
business, recently there has been increasing competition from other sources,
such as commercial banks and insurance companies offering financial services.
UNPROVEN NATURE OF DEM AND DEM MULTI-MANAGER STRATEGIES
We have implemented and intend to use substantial resources to promote our
DEM and DEM Multi-Manager strategies. The Domestic Emerging Markets, or DEM,
strategy seeks investment in
2
<PAGE>
domestic companies that meet the DEM Profile in that they are controlled by
African-Americans, Asian-Americans, Hispanic-Americans and women. The DEM
Multi-Manager strategy seeks investment management clients who wish to allocate
investment responsibility for their assets among multiple investment managers
that meet the DEM Profile. As of February 28, 1999, we had approximately $119.1
million and $265.5 million in assets under management using the DEM and
DEM-Multi-Manager investment strategies, respectively.
The success of the DEM and DEM Multi-Manager strategies will be dependent
upon our ability to attract funds earmarked for investment in such strategies on
both an institutional and retail basis. The DEM strategy is further dependent on
our ability to identify appropriate investments from the universe of DEM
companies. Because the DEM and DEM Multi-Manager strategies are in the initial
stages of introduction, their market acceptance is unknown and there can be no
assurance that we will be able to attract significant amounts of investment
capital for management under such strategies. Moreover, our belief that these
strategies offer a significant opportunity for the growth of our business is not
based upon marketing studies, or demographic or feasibility reports, but is
based solely upon the judgment of our management team and our experience to date
from our limited marketing of DEM and DEM Multi-Manager products. Further, we
have and will continue to incur significant marketing, legal and accounting
expenses in the creation of new investment products. Such expenses are
ordinarily incurred significantly in advance of the introduction of such
products. If such products do not gain broad market acceptance, we would likely
lose such initial investments. Although, we have identified approximately 180
publicly-traded companies that meet the DEM Profile, there can be no assurance
that the investment portfolios of such companies will attract initial or
continued investment or that the companies meeting the DEM Profile will be able
to maintain continued growth.
DEPENDENCE ON KEY PERSONNEL; DUTIES TO OTHER COMPANIES
For the foreseeable future, we will place substantial reliance upon the
personal efforts and abilities of Nathan A. Chapman, Jr., our President, who
will not devote his full time to our activities. The loss of the services of Mr.
Chapman may have a material adverse effect on our business, operations, revenue
and/or business prospects.
POTENTIAL ADVERSE EFFECTS OF CHANGES IN ECONOMY AND MARKET CONDITIONS
The financial markets and businesses operating in the securities industry
are highly volatile and are directly affected by, among other factors, domestic
and foreign economic conditions and general trends in business and finance, all
of which are beyond our control. There can be no assurance that broad market
performance will be favorable in the future. Any decline in the financial
markets or a lack of sustained growth may result in a corresponding decline in
performance by our investment products and separate accounts, which may
adversely affect assets under management and/or fees. Our revenues from
investment management are directly related to fluctuations in the dollar amount
of assets under management.
RELATIONSHIPS WITH OTHER CHAPMAN ENTITIES AND POTENTIAL CONFLICTS OF INTEREST
We act as investment advisor, pursuant to investment advisory agreements,
for two active registered investment portfolios, the DEM Equity Fund, and The
Chapman U.S. Treasury Money Fund, each an open-end portfolio of The Chapman
Funds, Inc. Our revenues in connection with these related-party agreements
accounted for 12.4% and 12.7% of our revenues in the years ended December 31,
1997 and 1998, respectively. At our request, Nathan A. Chapman, Jr., our
President and Chairman of the Board; Earl U. Bravo, Sr., our Vice President,
Secretary and Assistant Treasurer; and M. Lynn Ballard, our Treasurer and
Assistant Secretary; serve as President and Chairman of the Board; Secretary and
Assistant Treasurer; and Treasurer and Assistant Secretary, respectively, of The
Chapman Funds, Inc. In addition, several of our key executives, including Mr.
Chapman, are also officers and/or
3
<PAGE>
directors of holding companies owning all of the outstanding equity securities
of The Chapman Co. and The Chapman Insurance Agency Incorporated. The common
management and/or ownership among the Company and these other companies may
involve potential conflicts of interest with respect to the terms of business
transactions, allocations of shared expenses for overhead (including
compensation of shared employees, lease payments and other expenses) and the
allocation of business opportunities between us and such other companies.
Further, because our key executives are also senior executives of other
companies, they will not be able to devote all of their time to our business
affairs. Although there is no written agreement, we expect that Mr. Chapman will
devote no less than 33% of his time to our operations and entities that he
serves at our request. All business transactions and allocations of overhead
between us and such other companies are approved by a committee of the Board of
Directors composed of independent, outside directors. Furthermore, the
compensation of our President will be approved by the Compensation Committee of
the Board of Directors, a majority of the members of which are independent,
outside directors.
EFFECT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE SALE/CONTROL BY PRINCIPAL
STOCKHOLDER
Nathan A. Chapman, Jr. directly holds 2,285,143 shares, or approximately
68.1%, of the outstanding shares of Common Stock. All of such shares are
available for resale in the public market under Rule 144 promulgated pursuant to
the Securities Act. As of February 28, 1998, an additional 151,620 shares, or
approximately 4.5% of the outstanding Common Stock, where held in inventory by a
subsidiary of an affiliate of the Company and Mr. Chapman, The Chapman Co., in
its capacity as market-maker for the Common Stock. All of the shares held by The
Chapman Co. are available for immediate resale pursuant to this prospectus.
Sales of a significant number of shares of Common Stock in the public market
could have a material adverse effect on the market price of the Common Stock.
Further, due to his share ownership, Mr. Chapman controls the outcome of all
matters submitted to our stockholders for approval, including the election of
all of our directors.
REGULATORY RISKS
Our business, and the investment management industry generally, are subject
to regulation at both the federal and state levels. Pursuant to the National
Securities Markets Improvement Act of 1996, regulatory oversight of investment
advisors is divided between the Securities and Exchange Commission and state
regulatory authorities. Because our wholly-owned subsidiary, Chapman Capital
Management, Inc., or CCM, has assets under management in excess of $25 million,
CCM is required to be registered with, and is subject to regulation by, the
Securities and Exchange Commission and, with the exception of state anti-fraud
regulations, CCM is generally exempt from registration and regulation at the
state level. These regulations are designed primarily for the protection of our
clients rather than our stockholders. Failure of CCM or its employees to comply
with any of the laws, rules or regulations of any state or federal regulatory
authority could result in a fine, injunction, suspension or expulsion from the
industry, which could have a material adverse impact upon us. Although we have
implemented procedures designed to achieve compliance with such laws, rules and
regulations, we cannot be sure that a failure to comply will not have a material
adverse effect upon us. Furthermore, amendments to existing statutes and
regulations or the adoption of new statutes and regulations could require us to
alter our methods of operation at costs which could be substantial.
NO DIVIDENDS
To date, we have not paid any cash dividends on our Common Stock and do not
expect to declare or pay any cash dividends in the foreseeable future. We intend
to retain all earnings, if any, for the foreseeable future for our continued
growth.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. CONSOLIDATED FINANCIAL STATEMENTS AND
THE NOTES THERETO INCLUDED ELSEWHERE IN THIS DOCUMENT. THE DISCUSSION OF
RESULTS, CAUSES AND TRENDS SHOULD NOT BE CONSTRUED TO IMPLY ANY CONCLUSION THAT
SUCH RESULTS OR TRENDS WILL NECESSARILY CONTINUE IN THE FUTURE. WHEN USED IN
THIS DOCUMENT, THE WORDS "BELIEVES," "INTENDS," "EXPECTS," "ANTICIPATES" AND
SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE LARGELY BASED ON THE CURRENT EXPECTATIONS OF
MANAGEMENT AND ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES. IN LIGHT OF
THESE RISKS AND UNCERTAINTIES, MANY OF WHICH ARE DESCRIBED IN THE "RISK FACTORS"
SECTION OF THIS DOCUMENT, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
OVERVIEW AND GENERAL INDUSTRY CONDITIONS
Advisory and administrative revenue is earned by the Company through its
investment advisory and administrative services operations. For the fiscal year
ended December 31, 1998, the Company generated revenue of $3,218,326 and loss
before income taxes of $151,000. For the fiscal year ended December 31, 1997,
the Company generated revenue of $2,286,615 and income before income taxes of
$88,101.
The Company's primary source of revenue is advisory and administrative fees.
The Company's principal business activities are by their nature affected by many
factors, including general economic and financial conditions, movement of
interest rates and competitive conditions. Although the Company seeks to
maintain cost controls, a significant portion of the Company's expenses are
fixed and do not vary significantly with the factors listed above. As a result,
substantial fluctuations can occur in the Company's revenue and net income from
period to period.
5
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, summary income
statement data:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1998 1997
------------------------- -------------------------
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
AMOUNTS REVENUES AMOUNTS REVENUES
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Advisory and administrative fees............................. $ 3,136,456 97.5% $ 2,284,054 99.9%
Other income................................................. 81,870 2.5 2.561 0.1
------------ ----- ------------ -----
Total revenues........................................... 3,218,326 100.0 2,286,615 100.0
------------ ----- ------------ -----
OPERATING EXPENSES:
Management fees.............................................. 1,177,681 36.6 869,355 38.0
Compensation and benefits.................................... 856,945 26.6 594,993 26.0
Professional fees............................................ 179,427 5.6 195,066 8.5
Administrative support....................................... 72,000 2.2 72,000 3.1
Interest expense............................................. 25,802 0.8 13,522 0.6
Amortization expenses........................................ 228,000 7.1 228,000 10.0
Other operating expenses..................................... 829,471 25.8 225,578 9.9
------------ ----- ------------ -----
Total operating expenses................................. 3,369,326 104.7 2,198,514 96.1
------------ ----- ------------ -----
(Loss) income before income tax (benefit) allocation......... (151,000) (4.7) 88,101 3.9
Income tax (benefit) allocation.............................. (45,000) (1.4) 40,000 1.8
------------ ----- ------------ -----
Net (loss) income............................................ ($ 106,000) (3.3%) $ 48,101 2.1%
------------ ----- ------------ -----
------------ ----- ------------ -----
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997.
Total revenue increased by $931,711, or 40.8%, to $3,218,326 in 1998 from
$2,286,615 in 1997. Advisory and administrative fee revenue increased by
$852,402, or 37.3%, to $3,136,456 in 1998 from $2,284,054 in 1997 reflecting
increased fees as a result of an increase in total assets under management due
largely to investment performance, the addition of the DEM Equity Fund, new
separate accounts under the DEM strategy, and additional assets from a DEM-MET
client.
Total expense increased by $1,170,812, or 53.3%, to $3,369,326 in 1998 from
$2,198,514 in 1997. As a percentage of total revenue, total expense increased to
104.7% in 1998 compared to 96.1% in 1997 reflecting the Company's efforts to
expand its operations.
Management fee expense, which consists primarily of the Company's payments
to sub-advisors in connection with the Company's multi-manager investment
product, the DEM-MET Trust, increased by $308,326, or 35.5%, to $1,177,681 in
1998 from $869,355 in 1997. The increase in such fees reflects an increase in
assets under management in the DEM-MET Trust, including approximately $40
million of new assets added by an existing trust client.
Compensation and benefits expense increased by $261,952, or 44.0%, to
$856,945 in 1998 from $594,993 in 1997 due primarily to the addition of new
employees connected with the Company's efforts to expand its operations, annual
pay increases and bonuses. As a percentage of total revenue, compensation and
benefits expense increased to 26.6% for 1998 from 26.0% for 1997.
Interest expense increased by $12,280, or 90.8%, to $25,802 in 1998 from
$13,522 in 1997 substantially due to the cost of debt to affiliates that was
outstanding prior to the public offering.
6
<PAGE>
Other operating expenses increased by $603,893, or 267.7%, to $829,471 for
1998 from $225,578 for 1997. This increase is attributable to additional travel,
advertising, publicity and business development expenses connected with the
Company's efforts to expand its operations.
The Company's income tax provision decreased by $85,000, or 212.5%, to a tax
benefit of $45,000 in 1998 from a tax provision of $40,000 in 1997 due to the
operating loss incurred during the year.
Net loss of $106,000 was incurred for 1998 as compared to net income of
$48,101 for 1997 as a result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through capital contributions from
its principal stockholder, loans from affiliates, cash flow from operations and
the public offering of its stock.
A majority of the Company's assets are liquid and consist primarily of cash
and cash equivalents and receivables from advisory clients. A relatively small
percentage of the Company's total assets are fixed. The Company's total assets
as of December 31, 1998 and December 31, 1997 were $5,647,742 and $1,085,308,
respectively.
The final payment of $150,000 on a noncompete agreement pertaining to the
DEM-MET Trust is due on demand. Management expects that the Company's liquid
assets and cash provided by operations will be sufficient to make this demand
payment. The Company may seek lines of credit in the future.
The Company's overall capital and funding needs are continually reviewed to
ensure that the capital base can support the estimated needs of the business.
Based upon these reviews, the Company believes its capital base is sufficient to
implement the Company's DEM and DEM Multi-Manager strategies for the foreseeable
future.
The Company's cash was $4,241,523 as of December 31, 1998 as compared to
$8,677 as of December 31, 1997.
EFFECTS OF INFLATION
The Company's assets are to a large extent liquid in nature and,
accordingly, may be significantly affected by inflation. The Company's expenses,
such as employee compensation and occupancy expenses are subject to inflation
and the effects of inflation may not be readily recoverable in the prices of
services offered to the Company's customers. To the extent inflation results in
rising interest rates or has adverse effects upon the securities market, it may
adversely affect the Company's financial position, results of operations and
assets under management.
YEAR 2000 SOFTWARE ISSUE
As the Year 2000 approaches, existing software programs and operating
systems must be reviewed to determine if they can accommodate information that
employs dates after December 31, 1999. As of February 28, 1999, the Company has
incurred direct Year 2000 compliance costs of $16,500, to cover assessment of
systems, internal testing, point-to-point testing, training, and replacement and
modification of existing systems, of which $11,000 has been paid. The Company's
Year 2000 compliance costs consist of direct expenses incurred in respect of
software, consulting and employee time and the Company's share of compliance
expenses for upgraded computers, software, and communication systems to be paid
or financed by Chapman Holdings, Inc., an affiliate of the Company. The Company
will reimburse Chapman Holdings, Inc. for its share of these Year 2000 expenses
through increased charges for administrative support under its expense
allocation agreement with Chapman Holdings, Inc. See "Certain Transactions."
7
<PAGE>
During 1999, the Company's Year 2000 compliance costs are estimated at
approximately $65,000. The Company estimates that over the next three years its
total Year 2000 compliance costs, direct and allocated by Chapman Holdings,
Inc., will be approximately $145,000
Management has prepared a written plan detailing the Company's software and
operating systems compliance issues for the Year 2000. The plan identifies
critical and non-critical operating systems of the Company and addresses
external interfaces with third-party computer systems. The Company is currently
working with its hardware and software vendors and other third parties to
prepare for the Year 2000. The Company anticipates that most of the necessary
hardware and software renovations needed to render the Company Year 2000
compliant have been or will be completed by the first quarter of 1999.
Management plans to test its systems during the second quarter of 1999 to
determine the effect of its compliance efforts. According to the Company's plan,
the testing phase is scheduled to be completed by June 30, 1999.
The table below summarizes the status of key elements of the Company's Year
2000 compliance plan:
<TABLE>
<CAPTION>
PHASE PERCENTAGE OF COMPLETION
- -------------------------------- -------------------------------------
<S> <C>
Assessment...................... 90%
Remediation and Renovation...... 90%
Testing......................... 25%
Contingency Planning............ 33%
</TABLE>
The Company has relationships with third parties that may have computer
systems that are not Year 2000 compliant. The Company has identified the third
parties upon which it relies for mission-critical systems and has contacted or
is contacting such third parties to confirm that their systems are in compliance
with the Year 2000 requirements.
While the Company believes that it is taking prudent and necessary action to
comply with Year 2000 requirements, there can be no assurance that the Year 2000
issue will not result in information or communications systems interruptions.
Any such interruptions could be expected to have a material adverse effect on
the Company's business, financial condition, results of operations and business
prospects and may subject the Company to liability to its clients. The Company
is currently building upon its existing contingency plan in the event that the
Company or third parties do not successfully complete their compliance efforts,
or if vendors or third parties controlling systems critical to the Company are
unable to confirm that their systems will be Year 2000 compliant. These efforts
may result in additional costs in excess of current allocations and estimates.
8
<PAGE>
BUSINESS
GENERAL
Chapman Capital Management Holdings, Inc. (the "Company") is an
African-American owned and controlled holding company. The Company's
wholly-owned operating subsidiary, Chapman Capital Management, Inc. ("CCM"), is
an investment management company that is registered with the Securities and
Exchange Commission (the "Commission") as an investment adviser. CCM manages the
assets of registered investment companies and the funds of individual and
institutional investors on a separate account basis. As of February 28, 1999,
CCM had approximately $619.0 million in total assets under management. (Unless
the context otherwise indicates, the Company and CCM are hereinafter referred to
collectively as the "Company")
The Company manages assets for two registered open-end investment
portfolios, the DEM Equity Fund and The Chapman U.S. Treasury Money Fund, each a
portfolio of The Chapman Funds, Inc. The DEM Equity Fund and The Chapman U.S.
Treasury Money Fund are sometimes referred to herein as the "Funds." In December
1996, the Company established a private group trust, the Domestic Emerging
Markets-Minority Equity Trust Fund for Qualified Employee Benefit Plans (the
"DEM-MET Trust") for which it provides investment management services.
The Company is headquartered at the World Trade Center--Baltimore, 401 East
Pratt Street, 28th Floor, Baltimore, Maryland 21202 and its telephone number is
(410) 625-9656. The Company was incorporated in Maryland on January 8, 1998.
CCM, a District of Columbia corporation, was established as an investment
advisor in 1988.
STRATEGY
The Company has implemented a strategic initiative called the Domestic
Emerging Markets ("DEM") strategy which seeks investment in domestic companies
controlled by African-Americans, Asian-Americans, Hispanic-Americans and women
(the "DEM Profile"). The Company believes that there exists a substantial
demand, especially from government entities and large institutions, to invest in
companies that meet the DEM Profile ("DEM Companies") and has designed its
investment products to provide a single source for meeting this objective while
achieving a competitive rate of return.
In addition, in December 1996, the Company established and currently acts as
advisor to the DEM-MET Trust. As advisor, the Company allocates a portion of the
investment responsibility for the trust's assets among investment management
companies that meet the DEM Profile. The Company introduced this strategy, the
DEM Multi-Manager strategy, with the DEM-MET Trust and will seek to increase its
assets under management through the development of additional products under
this strategy.
The Company's DEM and DEM Multi-Manager strategies are in the early stages
of implementation. The Company has not conducted any marketing surveys to test
their marketability nor has the Company engaged in any significant marketing of
these strategies. Therefore, the viability of the DEM and DEM Multi-Manager
strategies and their level of market acceptance is largely unknown.
INVESTMENT PRODUCTS
The Company currently manages two registered investment portfolios, the DEM
Equity Fund and The Chapman U.S. Treasury Money Fund, each a portfolio of The
Chapman Funds, Inc. The Company has formed and manages one private investment
trust, the DEM-MET Trust. The Company also advises corporate, institutional and
individual investors on a separate account basis.
DEM EQUITY FUND is a non-diversified portfolio of The Chapman Funds, Inc., a
diversified, open-end management investment company registered under the
Investment Company Act of 1940, as
9
<PAGE>
amended (the "Investment Company Act"). The principal investment objective of
the DEM Equity Fund is aggressive long-term growth through investment in equity
securities of companies meeting the DEM Profile. As of February 28, 1999, the
DEM Equity Fund had approximately $9.96 million in assets. The DEM Equity Fund
commenced operations in April 1998.
THE CHAPMAN U.S. TREASURY MONEY FUND, also a portfolio of The Chapman Funds,
Inc., invests solely in short-term direct obligations of the U.S. Government and
repurchase agreements collateralized fully by direct obligations of the U.S.
Government. This fund is intended primarily for state and local governments and
their authorities and agencies. As of February 28, 1999, The Chapman U.S.
Treasury Money Fund had approximately $74.4 million in assets. The Chapman U.S.
Treasury Money Fund began operations in June 1989.
DEM-MET TRUST was organized in 1996 under New York law. The DEM-MET Trust is
intended to qualify as a tax-exempt pooled trust for qualified employee benefit
plans and certain governmental plans. The DEM-MET Trust is the first product
introduced by the Company that employs the DEM Multi-Manager strategy. See
"--Strategy." The DEM-MET Trust allocates its assets to investment portfolios
managed by money managers meeting the DEM Profile. These money managers invest
their allocated assets in the securities of domestic and foreign issuers which
may consist of common stock, or other types of equity investments, or temporary
money market funds chosen by the Company. The Company acts as investment advisor
to the DEM-MET Trust and in such capacity is responsible for selecting and
monitoring the sub-advisors, all of whom meet the DEM Profile. As of February
28, 1999, the Company had sub-advisory relationships with fourteen investment
advisors, all of which meet the DEM Profile. The Company evaluates such
sub-advisors monthly and reallocates assets among existing sub-advisors and new
sub-advisors as necessary. The DEM-MET Trust was created in December 1996
pursuant to an agreement between The Chapman Co. and Bankers Trust Company, as
custodial trustee. As of February 28, 1999, the DEM-MET Trust had approximately
$265.5 million in assets.
SEPARATE ACCOUNTS The Company also provides investment advisory services to
separate accounts under individual investment advisory agreements. The Company
manages equity and debt portfolios with varied investment objectives including
long term capital appreciation and current income. As of February 28, 1999,
approximately 40.5% of the separate accounts under management incorporate the
DEM strategy as an investment objective. The Company will continue to attempt to
differentiate itself from other investment managers by providing the DEM
strategy as an investment objective. As of February 28, 1999, the Company
managed approximately $269.1 million in assets for separate accounts, of which
$109.1 million was invested pursuant to the DEM Strategy.
Compensation for individual investment advisory services is typically based
upon assets under management.
All of the Company's investment advisory services including portfolio
management, marketing, research and customer service are provided from the
Company's Baltimore headquarters and each of Company's affiliated investment
companies maintains its office at the Baltimore headquarters.
MARKETING AND CUSTOMER SERVICE
The Company's marketing strategy is to provide a single source for investing
in DEM companies while achieving a competitive rate of return. The Company
aggressively markets to large corporations, government entities and other
institutions seeking investment in DEM Companies.
The Company targets its marketing efforts to the various types of customers
that use its investment advisory and asset management services. The Company's
separate accounts are typically large institutional investors. The Company
markets to these accounts through customer support activities and personal sales
efforts by officers of the Company. This strategy has also been utilized with
the DEM-MET Trust due to the small number of large investors that have invested
in the trust.
10
<PAGE>
The Company's proprietary investment products are distributed by The Chapman
Co., an affiliate of the Company. To date, the Company's investment product
marketing activities have been providing "wholesale" marketing assistance to
support The Chapman Co.'s direct retail selling efforts. The Company intends to
offer proprietary investment funds to banks, insurance companies, providers of
401(k) deferred compensation plans and other institutions ("Institutional
Resellers") for resale to their customers. The Company will provide support to
The Chapman Co. in marketing to Institutional Resellers and to the Institutional
Resellers' own retail sales forces. The Company may also undertake some limited
advertising of its proprietary investment products.
In addition to separate accounts and proprietary investment products, the
Company will seek to enter into agreements with other investment advisors
whereby the Company will act as a sub-advisor with respect to their proprietary
investment products. The Company will provide wholesale marketing assistance to
the distributors of such third-party proprietary investment products to ensure
that such products are effectively marketed by the third-party distributors to
the investment community.
RESEARCH
As of February 28, 1999, the Company employed two portfolio managers. The
Company intends to hire additional portfolio managers to support its existing
investment advisory and management services and to facilitate the introduction
and maintenance of new investment products.
The Company currently employs a buy-side analyst to assist the portfolio
managers in investment research, monitoring of investment opportunities and the
development and maintenance of the Company's proprietary DEM valuation and
screening model. The Company also utilizes the research services of The Chapman
Co. for coverage on certain companies meeting the DEM Profile. The Company
intends to expand its research staff by hiring additional buy-side analysts.
INDUSTRY
Revenues in the investment management industry are fee-based and determined
primarily by assets under management. Therefore, the principal determinant of
growth in the industry is the growth of assets under management. The major
factors which influence changes in assets under management are changes in the
market value of securities; net cash flow into or out of existing accounts;
gains of new or losses of existing accounts; and the introduction of new
products by the industry or by particular firms.
In general, assets under management in the industry have increased steadily.
According to the Investment Company Institute, the combined assets of the
nation's mutual funds increased by $1,062.2 billion in 1998 to a total of $5.530
trillion under management. Assets under management rose approximately 24% for
the year 1998, reflecting both the performance of the stock markets as well as
new investment by mutual fund owners. Net new cash flow into mutual funds rose
for the fourth straight year to a record $478.9 billion in 1998 with increases
in all fund categories including equity, bond and income, and money market.
Although as of February 28, 1999, the Company's total assets under
management attributable to mutual funds are approximately 13.6% of its total
assets under management, the Company intends to emphasize the creation of new
mutual fund investment products as part of its ongoing strategy.
GOVERNMENT REGULATION
The Company's business is subject to various federal and state laws and
regulations. These laws and regulations are primarily intended to protect
investment advisory clients and stockholders of registered investment companies.
Under these laws and regulations, agencies that regulate investment advisors
have broad administrative powers, including the power to limit, restrict, or
prohibit an advisor from carrying on its business in the event that it fails to
comply with applicable laws and regulations.
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<PAGE>
Possible sanctions that may be imposed include the suspension of individual
employees, limitations on engaging in certain lines of business for specified
periods of time, revocation of investment advisor and other registrations,
censures, and fines. The Company believes that it is in substantial compliance
with all material laws and regulations.
The Company is registered with the Commission under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), and is subject to examination by
the Commission. Under Section 206 of the Advisers Act, it is unlawful for any
investment advisor to: (i) employ any device, scheme, or artifice to defraud any
client or prospective client; (ii) engage in any transaction, practice, or
course of business which operates as a fraud or deceit upon any client or
prospective client; or (iii) engage in any act, practice, or course of business
which is fraudulent, deceptive or manipulative. The Advisers Act imposes
numerous other obligations on registered investment advisors including fiduciary
duties, recordkeeping requirements, operational requirements, and disclosure
obligations. The Commission is authorized to institute proceedings and impose
sanctions for violations of the Advisers Act, ranging from censure to
termination of an investment adviser's registration. The failure of the Company
to comply with the requirements of the Commission could have a material adverse
effect on the Company.
An investment advisor to a registered investment company, its principals,
and its employees may also be subject to proceedings initiated by the Commission
to impose remedial sanctions for violation of any provision of the federal
securities laws and the regulations adopted thereunder, and the Commission may
prohibit such investment advisor to an investment company from continuing to act
in such capacity. Stockholders of registered investment companies or the
Commission may also bring an action against the officers, directors, and
investment advisor for breach of fiduciary duty in establishing the compensation
paid to the investment advisor.
The Funds are registered with the Commission under the Investment Company
Act and the sale of shares in the Funds has been registered under the Securities
Act of 1933, as amended (the "Securities Act"). Investment companies such as The
Chapman Funds, Inc. and any future registered investment companies established
and/or advised by the Company, are subject to considerable substantive
regulation. Such companies must comply with periodic reporting requirements.
Proxy solicitations are subject to the general proxy rules as well as to special
proxy rules applicable only to investment companies. Shares of open-end
investment companies such as the DEM Equity Fund and The Chapman U.S. Treasury
Money Fund, can only be offered at a uniform public offering price based on the
current net asset value per share plus the sales load. No more than 60% of the
directors of registered investment companies can be interested persons, defined
to include, among others, persons affiliated with the management company or
underwriter, and a majority of the directors must not be affiliated with the
underwriter. The advisory agreement must have initially been approved by a
majority of the outstanding shares and, after two years, must be annually
approved, either by the board or by the outstanding voting shares. The advisory
agreement must be subject to termination upon 60 days notice by the board or by
the outstanding voting shares. The underwriting agreement must be annually
approved by the board or by a vote of a majority of the outstanding voting
shares, and must provide for automatic termination in the event of an
assignment. With limited exceptions, transactions between the investment company
and an affiliate can be entered into only if approved by the Commission, after
notice and opportunity for hearing, as fair and equitable.
The Company derives a large portion of its revenues from its investment
company management agreements. Under the Advisers Act, the Company's investment
management agreements terminate automatically if assigned without the client's
consent. Under the Investment Company Act, advisory agreements with registered
investment companies such as the Funds terminate automatically upon assignment.
The term "assignment" is broadly defined and includes direct assignments as well
as assignments that may be deemed to occur, under certain circumstances, upon
the transfer, directly or indirectly, of a controlling interest in the Company.
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<PAGE>
COMPETITION
The Company's investment advisory business competes with a number of larger,
more established investment advisors and securities firms. Competition is
influenced by various factors, including product offering, quality of service
and price. All aspects of Company's advisory business are competitive, including
competition for assets to manage. Large national firms, often with more
personnel, have much greater marketing, financial, technical, research, and
other capabilities. These firms offer a broader range of financial services than
the Company and compete not only with the Company and among themselves but also
with commercial banks, insurance companies and others for retail and
institutional clients. The investment funds managed by the Company are similarly
subject to competition from nationally and regionally distributed funds offering
equivalent financial products with returns equal to or greater than those
offered by the Company's affiliated investment funds.
The Company's investment management operations compete with a large number
of other investment management firms, commercial banks, insurance companies,
broker/dealers and other financial service firms. Most of these firms are larger
and have access to greater resources than the Company. The investment advisory
industry is characterized by relatively low cost of entry and the formation of
new investment advisory entities which may compete directly with the Company is
a frequent occurrence. The Company directly competes with many firms which are
of similar or larger size. The Company's ability to increase and retain assets
under management could be materially adversely affected if client accounts or
the Company's affiliated investment funds under-perform specified market
benchmarks. The ability of the Company to compete with other investment
management firms also is dependent, in part, on the relative attractiveness of
their investment philosophies and methods under prevailing market conditions.
A large number of investment products including mutual funds, are sold to
the public by investment management firms, broker/dealers, insurance companies
and banks in competition with the investment products offered by the Company.
Many of the Company's competitors apply substantial resources to advertising and
marketing their investment products which may adversely affect the ability of
the Company's investment products to attract new assets. The Company expects
that there will be increasing pressures among investment advisors to obtain and
hold market share.
PERSONNEL
At February 28, 1999, the Company had approximately nine full-time employees
and shares three employees with affiliated companies. None of the Company's
personnel is covered by a collective bargaining agreement. Management considers
the Company's relationship with its employees to be good.
PROPERTY
The principal executive offices of the Company are located at the World
Trade Center--Baltimore, 401 East Pratt Street, 28th Floor, Baltimore, Maryland
21202 where the Company shares approximately 10,000 square feet of office space
under a lease maintained by The Chapman Co. The Chapman Co.'s lease for these
premises expires in 2000. The Company is allocated furniture and equipment
leased by The Chapman Co. from an affiliated entity.
LEGAL PROCEEDINGS
Many aspects of the Company's business involve substantial risks of
liability, including exposure under federal and state securities laws. The
Company maintains an errors and omissions insurance policy in the amount of $1
million insuring it against these risks.
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<PAGE>
MANAGEMENT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL POSITIONS
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Nathan A. Chapman, Jr................................ 41 President, Chairman of the Board and Director
Earl U. Bravo, Sr.................................... 50 Vice President, Secretary, Assistant Treasurer and
Director
Theron Stokes........................................ 47 Director
Robert L. Wallace.................................... 42 Director
Maria Markham Thompson............................... 41 Chief Financial Officer
M. Lynn Ballard...................................... 55 Treasurer and Assistant Secretary
</TABLE>
The Board of Directors has designated an Audit Committee, currently
consisting of its two independent Directors. The Audit Committee reviews the
scope of accounting audits, reviews with the independent public accountants the
corporate accounting practices and policies and recommends to whom reports
should be submitted within the Company, reviews with the independent public
accountants their final report, reviews with the independent public accountants
overall accounting and financial controls, and is available to the independent
public accountants during the year for consultation purposes. The Board of
Directors has also designated a Compensation Committee of the Board of
Directors, currently consisting of the two independent Directors. The
Compensation Committee reviews the performance of senior management, approves
the compensation of the President, recommends appropriate compensation levels
for officers other than the President and approves the issuance of stock options
pursuant to the Company's stock option plan. All Directors and officers of the
Company serve until their successors are duly elected and qualify.
NATHAN A. CHAPMAN, JR. has been President and Director since 1986 of The
Chapman Co., President and Director since 1988 of Chapman Capital Management,
Inc., President and Director of Chapman Holdings, Inc. since 1997, President and
Director of Chapman Capital Management Holdings, Inc. since 1998 and President
and Director of The Chapman Funds, Inc. since 1988. Mr. Chapman is a Certified
Public Accountant, a General Securities Principal, Registered Options Principal,
and Registered Municipal Principal.
EARL U. BRAVO, SR. has been Secretary and Assistant Treasurer since 1997 of
The Chapman Co., Senior Vice President, Secretary, Assistant Treasurer and
Director of Chapman Holdings, Inc. since 1997, Vice President, Secretary,
Assistant Treasurer and Director of Chapman Capital Management Holdings, Inc.
since 1998. Mr. Bravo is Secretary and Assistant Treasurer of The Chapman Funds,
Inc. Mr. Bravo has been employed in various senior executive positions with The
Chapman Co. and Chapman Capital Management, Inc. since 1990. Mr. Bravo is a
General Securities Principal, Financial and Operations Principal, and Registered
Representative.
THERON STOKES has been an attorney for the Alabama Education Association
since 1993 and has been a Director of Chapman Capital Management Holdings, Inc.
since 1998.
ROBERT L. WALLACE has been President of the BiTH Group, Inc. since 1993. Mr.
Wallace is the author of "Black Wealth Through Black Entrepreneurship." He has
been a Director of Chapman Capital Management Holdings, Inc. since 1998.
MARIA MARKHAM THOMPSON has been Chief Financial Officer of the Company since
1998 and portfolio manager and administrator of Chapman Capital Management, Inc.
since 1997. Ms. Thompson was in private practice as a certified public
accountant from 1996 to 1997 and was Director of the Maryland Water Quality
Financing Administration from 1989 to 1996, during which she also served as
Director of Finance and Central Services for the Maryland Department of the
Environment for 18 months.
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<PAGE>
M. LYNN BALLARD has been Treasurer and Assistant Secretary since 1997 of The
Chapman Co., Treasurer and Assistant Secretary of Chapman Holdings, Inc. since
1997 and Chapman Capital Management Holdings, Inc. since 1998. Ms. Ballard has
been employed as a senior financial executive of The Chapman Co. and Chapman
Capital Management, Inc. since 1988. Ms. Ballard is Treasurer and Assistant
Secretary of The Chapman Funds, Inc.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid by
the Company during the last three fiscal years, for services rendered in all
capacities to the Company and its subsidiary, Chapman Capital Management, Inc.,
to the chief executive officer and the other most highly paid executive officers
of the Company whose total annual salary and bonus exceeded $100,000 during the
year ended December 31, 1998. No other executive officer of the Company received
salary and bonus of $100,000 or more during such years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- ----------------------------------------------------------------------------------- --------- ---------- ---------
<S> <C> <C> <C>
Nathan A. Chapman, Jr. President................................................... $ 100,000 $ 50,000
1998 79,500 25,000
1997 1996 72,000 72,000
</TABLE>
The Board of Directors of the Company has established the 1998 Chapman
Capital Management Holdings, Inc. Omnibus Stock Plan (the "Plan") to enable the
Company to grant equity compensation to the Company's directors, officers,
employees and consultants. Pursuant to the Plan, 150,000 shares have been
reserved for award thereunder. The Plan is administered by the Compensation
Committee of the Board of Directors. No securities have been issued pursuant to
the Plan as of the date of this statement.
COMPENSATION OF DIRECTORS
Directors of the Company receive no cash compensation for their service to
the Company as directors; however, they are reimbursed for all out-of-pocket
expenses relating to attendance at meetings of the Board of Directors and any
committee thereof. Members of the Board of Directors are eligible to receive
stock options pursuant to the Company's Stock Option Plan.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Common Stock as of February 28, 1999 by (i)
each person known by the Company to own beneficially 5% or more of its
outstanding shares of Common Stock, (ii) each director, (iii) each executive
officer, and (iv) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the Company believes that the beneficial
owners of the Common Stock listed below, based on information furnished by such
owners, have sole voting and investment power with respect to such shares,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP SHARES OUTSTANDING
----------------------- -------------------- ---------------------
<S> <C> <C>
Nathan A. Chapman, Jr.................................................. 2,438,245 shares(1) 72.6%
401 E. Pratt Street
Baltimore, MD 21202
Earl U. Bravo, Sr...................................................... 2,375 shares *
401 E. Pratt Street
Baltimore, MD 21202
Theron Stokes.......................................................... 8,750 shares *
401 E. Pratt Street
Baltimore, MD 21202
Robert L. Wallace...................................................... -0- shares *
401 E. Pratt Street
Baltimore, MD 21202
All Directors and Executive Officers as a Group........................ 2,449,370 shares 73.0%
</TABLE>
- ------------------------
* Represents less than one percent of the outstanding shares of Common Stock.
(1) Includes 151,620 shares, or 4.5% of the outstanding shares, held in
inventory by The Chapman Co., as market-maker for the Common Stock, and
1,482 shares held in investment advisory accounts over which the Company's
subsidiary, CCM has dispository discretion. Such shares have no voting
rights as long as they are held by a subsidiary of the Company. The Chapman
Co. is a wholly-owned subsidiary of Chapman Holdings, Inc ("CHI") and Mr.
Chapman is President and Director of each of The Chapman Co. and CHI and
Chairman and majority stockholder of CHI. Mr. Chapman disclaims beneficial
ownership of the shares held by The Chapman Co. and CCM.
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<PAGE>
CERTAIN TRANSACTIONS
On January 8, 1998, the Company, a newly-formed Maryland corporation, issued
shares of Common Stock to The Chapman Co. in exchange for all of the outstanding
equity securities of CCM, a registered investment advisor. Accordingly, CCM is
currently a wholly-owned direct subsidiary of the Company. On February 26, 1998,
The Chapman Co. and its sole stockholder, CHI effected a tax-free spin-off
transaction pursuant to which all the outstanding shares of Common Stock of the
Company was distributed to CHI and, immediately following such distribution,
such Common Stock was distributed to the then-existing stockholders of CHI.
The Chapman Co. is registered as a broker-dealer with the Commission and in
approximately one-half of the states and the District of Columbia. The Chapman
Co. is a member firm of the National Association of Securities Dealers, Inc.
with revenue primarily deriving from brokerage services, corporate finance and
government finance activities.
Nathan A. Chapman, Jr., the President, Chairman of the Board, a Director and
controlling stockholder of the Company, is the President, Chairman of the Board
and a Director of CHI and The Chapman Co. and controlling stockholder of CHI. At
the request of the Company, Mr. Chapman also serves as President and Director of
CCM and The Chapman Funds, Inc. Earl U. Bravo, Sr., the Vice President,
Secretary, Assistant Treasurer and a Director of the Company, is Senior Vice
President, Secretary, and Assistant Treasurer of CHI and The Chapman Co. and a
Director of CHI. M. Lynn Ballard, the Treasurer and Assistant Secretary of the
Company is Treasurer and Assistant Secretary of CHI and The Chapman Co. At the
request of the Company, Mr. Bravo and Ms. Ballard serve as Secretary and
Assistant Treasurer and Treasurer and Assistant Secretary, respectively, of CCM
and The Chapman Funds, Inc. Mr. Bravo also serves as Vice President of CCM.
The Chapman Funds, Inc., a multi-series open-end management investment
company, is registered under the Investment Company Act and was organized by the
Company. DEM, Inc., a closed-end investment company, organized by the Company,
was liquidated in September 1998 pursuant to the vote of its stockholders. Until
such liquidation, at the request of the Company, Mr. Chapman served as President
and Director, Mr. Bravo served as Vice President and Secretary and Ms. Ballard
served as Treasurer of DEM, Inc.
Until liquidation, the Company served as the investment advisor and
administrator of DEM, Inc. In connection therewith, the Company was paid
$138,614 and $149,669 in advisory and administrative fees in the years ended
December 31, 1997 and December 31, 1998, respectively.
The Company is the investment advisor and administrator of The Chapman U.S.
Treasury Money Fund, a portfolio of The Chapman Funds, Inc. In connection
therewith, the Company was paid $144,935 and $190,635 in advisory and
administrative fees in the years ended December 31, 1997 and December 31, 1998,
respectively.
The Company is the investment advisor and administrator of the DEM Equity
Fund, a portfolio of The Chapman Funds, Inc. The DEM Equity Fund became active
in April 1998 and the Company was paid $69,356 in advisory and administrative
fees in the year ended December 31, 1998.
The Company has entered into agreements with The Chapman Funds, Inc. on
behalf of four additional portfolios, the DEM Index Fund, the DEM Fixed Income
Fund, the DEM Multi-Manager Bond Fund and the DEM Multi-Manager Equity Fund, to
provide investment advisory and administration services; however, such funds are
not currently active. However, the Company has a $88,071 receivable as of
December 31, 1998, due from these portfolios related to costs paid on their
behalf.
In December 1995, Mr. Chapman loaned CCM $100,000, payable on demand, for
the purchase of common stock of an affiliate. In March 1996, Mr. Chapman loaned
CCM an additional $45,000,
17
<PAGE>
payable on demand. These loans provided for a fixed interest payment of $14,500,
or an effective flat rate of 10% of the principal. On June 30 1998, the Company
repaid these loans in full.
The Company executed a 10-year note to CHI as of October 31, 1997 in the
amount of $763,367 which accrued interest at 6.68% per annum. The proceeds of
this loan were used by CCM to pay start-up costs in connection with its
development of a proprietary investment product and for a non-competition
agreement. On August 14, 1998, the Company repaid this loan in full.
During the third quarter of 1998, the Company made two advances to Mr.
Chapman totaling $110,000. Such advances are evidenced by a three-year note in
the amount of $65,000, which bears interest at 5.48% per annum, and a demand
note in the amount of $45,000, which bears interest at 5.48% per annum. As of
December 31, 1998, Mr. Chapman owed the Company a total of $118,547 on such
notes.
Mr. Chapman is President and Treasurer and Mr. Bravo is Secretary of Chapman
General Partner One, Inc., the general partner of Chapman Limited Partnership I
(the "Partnership"). The Chapman Co. leases furniture and equipment from the
Partnership, with part of such cost being allocated to the Company. The lease
requires monthly payments of $9,846 and contains one year renewable terms, at
the option of The Chapman Co., through September 2000, at which time The Chapman
Co. can purchase the furniture and equipment at fair market value. Rent expense
allocated to the Company under this lease agreement was $39,384 in 1997 and
$59,076 in 1998. Management believes that the terms of these transactions were
substantially as favorable to the Company as those available from
non-affiliates.
On November 10, 1998, The Chapman Co. erroneously deposited $291,207 in the
Company's securities account. As of December 31, 1998, the Company owed The
Chapman Co. $97,634 of this amount. The Company repaid The Chapman Co. in full
on January 12, 1999.
The Company shares office space, certain employees and other overhead with
certain other entities controlled by Mr. Chapman including The Chapman Co. and
The Chapman Insurance Agency Incorporated, a licensed insurance agency that has
not engaged in significant operations to date. Pursuant to an expense allocation
agreement, the Company is allocated compensation and benefits expense based upon
the estimated percentage of such employees' time spent performing services for
the Company. The Company is charged for other expenses based on actual or
estimated usage. Pursuant to such expense allocation arrangements the Company
owed CHI, $28,782 and $187,272 as of December 31, 1997 and 1998, respectively.
The Company treats such outstanding allocation amounts as normal expenses to be
paid in the ordinary course of business. The common management and/or ownership
among the Company and other entities controlled by Mr. Chapman may involve
potential conflicts of interest. See "Risk Factors--Certain Transactions;
Relationships With Other Chapman Entities; Conflicts of Interest."
As of June 9, 1998, the Company and Mr. Chapman entered into a
non-exclusive, royalty-free service mark licensing agreement pertaining to CCM's
and the Company's use of the DEM, Domestic Emerging Markets, DEM Index, DEM
Profile, DEM Universe, DEM Company, DEM Multi-Manager, Chapman, and stylized
C-Eagle trademarks that are owned by Mr. Chapman.
The Company intends that all transactions with affiliates of the Company
will be approved by a majority of the Board of Directors, including a majority
of the disinterested, independent Directors.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, par value $0.001 per share.
18
<PAGE>
Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Stockholders do not
have cumulative voting rights. Holders of Common Stock are entitled to receive
ratably such dividends as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In the
event of a dissolution, liquidation or winding-up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities. Holders of Common Stock have no right to convert their Common
Stock into any other securities. The Common Stock has no preemptive or other
subscription rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are duly
authorized, validly issued, fully paid and nonassessable.
MARYLAND LAW AND CERTAIN CHARTER PROVISIONS
The Charter of the Company, provides that the Company shall indemnify its
currently acting and its former directors and officers against any and all
liabilities and expenses incurred in connection with their services in such
capacities to the maximum extent permitted by the Maryland General Corporation
Law, as from time to time amended (the "MGCL"). If approved by the Board of
Directors, the Company may indemnify its employees, agents and persons who serve
or have served, at its request as a director, officer, partner, trustee,
employee or agent of another corporation, partnership, joint venture or other
enterprise to the extent determined to be appropriate by the Board of Directors.
The Company shall advance expenses to its directors and officers entitled to
mandatory indemnification to the maximum extent permitted by the Maryland
General Corporation Law and may in the discretion of the Board of Directors
advance expenses to employees, agents and others who may be granted
indemnification.
Pursuant to the Agency Agreement the Company has agreed to indemnify the
Agent and the Agent has agreed to indemnify the Company and its directors,
officers and controlling persons against certain civil liabilities that may be
incurred in connection with this Offering, including certain liabilities under
the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Furthermore, the Charter of the Company provides that, to the fullest extent
permitted by the MGCL as it may be amended from time to time, no director or
officer of the Company shall be liable to the Company or its stockholders for
monetary damages arising out of events occurring at the time such person is
serving as a director or officer, regardless of whether such person is a
director or officer at the time of a proceeding in which liability is asserted.
Under current Maryland law, the effect of this provision is to eliminate the
rights of the Company and its stockholders to recover monetary damages from a
director or officer except (i) to the extent that it is proved that the director
or officer actually received an improper benefit, or profit in money, property,
or services for the amount of the benefit or profit in money, property or
services actually received, or (ii) to the extent that a judgment or other final
adjudication adverse to the person is entered in a proceeding based on a finding
in the proceeding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. In situations to which the Charter provision
applies, the remedies available to the Company or a stockholder are limited to
equitable remedies such as injunction or rescission.
19
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The Company has 3,351,334 shares of Common Stock outstanding, of which
2,285,143 shares or approximately 68.1% are directly held by Nathan A. Chapman,
Jr. All of the shares directly held by Mr. Chapman are currently available for
resale in the public market, under Rule 144, promulgated pursuant to the
Securities Act. As of February 28, 1998, an additional 151,620 shares, or
approximately 4.5% of the outstanding Common Stock, were held in inventory by a
subsidiary of an affiliate of the Company and Mr. Chapman, The Chapman Co., in
its capacity as market-maker for the Common Stock. All of the shares held by The
Chapman Co. are available for immediate resale pursuant to this prospectus. No
prediction can be made as to the effect, if any, that sales of shares of Common
Stock or the availability of such shares for sale will have on the market prices
prevailing from time to time. Nevertheless, the possibility that substantial
amounts of Common Stock may be sold in the public market may adversely affect
the prevailing market price for the Common Stock and could impair the Company's
ability to raise capital through the sale of its equity securities.
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including any affiliate of the Company, who beneficially owns
"restricted shares" for a period of at least one year is entitled to sell within
any three-month period, shares equal in number to the greater of: (i) 1% of the
then-outstanding shares of Common Stock; or (ii) the average weekly trading
volume of the Common Stock during the four calendar weeks preceding the filing
of the required notice of sale with the Commission. In addition, any person (or
persons whose shares are aggregated) who is not, at the time of the sale, nor
during the preceding three months, an affiliate of the Company, and who has
beneficially owned restricted shares for at least two years, can sell such
shares under Rule 144 without regard to the notice, manner of sale, public
information or volume limitations described above.
PLAN OF DISTRIBUTION
This Prospectus may be used by The Chapman Co., a subsidiary of an affiliate
of the Company, in connection with offers and sales related to market-making
transactions in shares of Common Stock effected from time to time. The Chapman
Co. may act as principal or agent in such transactions, including as agent for
the counterparty when acting as principal or as agent for both counterparties,
and may receive compensation in the form of discounts and commissions, including
from both counterparties when it acts as agent for both. Such sales will be made
at prevailing market prices at the time of sale, at prices related thereto or at
negotiated prices. For a description of certain relationships and transactions
between The Chapman Co. and its affiliates and the Company, see "Management,"
"Certain Transactions" and "Principal Stockholders." The Company has been
advised by The Chapman Co. that, subject to applicable laws and regulations, The
Chapman Co. currently intends to make a market in the Common Stock. However, The
Chapman Co. is not obligated to do so and any market-making activity will be
subject to the limits imposed by the Securities Act and the Securities Exchange
Act of 1934, as amended. There can be no assurance that an active trading market
will be sustained. The Chapman Co. has informed the Company that it does not
intend to confirm sales to any accounts over which it exercises discretionary
authority without the prior specific written approval of such transactions by
the customer.
STOCKHOLDER INFORMATION
The Company's Common Stock is quoted on The Nasdaq SmallCap Market under the
symbol "CMGT." As of February 28, 1999, there were approximately 45 holders of
record and approximately 428 beneficial owners of the Company's Common Stock.
20
<PAGE>
PRICE RANGE PER SHARE
Set forth below is the range of high and low bid information on the Nasdaq
SmallCap Market for the Company's Common Stock for each quarter since the
Company's initial public offering. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission, an may not represent actual
transactions.
<TABLE>
<CAPTION>
1998
------------------
QUARTER HIGH LOW
- ------------------------------------------------------------------------------ ------- -------
<S> <C> <C>
January to March.............................................................. N/A N/A
April to June................................................................. N/A N/A
July to September*............................................................ 8 7
October to December........................................................... 8 3/8 7 1/16
</TABLE>
* The Common Stock commenced trading on the Nasdaq SmallCap Market in August,
1998.
DIVIDENDS
The Company has never declared or paid cash or other dividends on its Common
Stock and does not anticipate doing so in the foreseeable future. The payment of
dividends, if any, in the future is within the discretion of the Board of
Directors and will depend upon the Company's earnings, if any, its financial
condition, and other relevant factors. The Company intends to retain any
earnings in the foreseeable future for the Company's continued growth.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is UMB Bank, N.A.
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for the
Company by Venable, Baetjer and Howard, LLP.
EXPERTS
The audited consolidated financial statements of the Company included in
this Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Commission in Washington, DC, a Registration
Statement under the Securities Act with respect to the shares of Common Stock
offered by this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and this offering, reference is
made to the Registration Statement, including the exhibits filed therewith,
copies of which may be obtained at prescribed rates from the Commission at the
public reference facilities maintained by the Commission at Judiciary Plaza
Building, 450 Fifth Street, NW, Washington, DC 20549. Descriptions contained in
this Prospectus as to the contents of any contract or other documents filed as
an exhibit to the Registration Statement are not necessarily complete and each
such description is qualified by reference to such contract or document. The
Commission maintains a Web site on the Internet that will contain all future
reports, proxy and information statements and other information that the Company
is required to file electronically with the Commission. The address of the
Commission's Web site is http://www.sec.gov.
The Company will furnish to its stockholders annual reports containing
financial statements for each fiscal year audited by an independent accounting
firm.
21
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheet as of December 31, 1998......................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 1998 and 1997....................... F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the years ended December 31, 1998
and 1997................................................................................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997....................... F-6
Notes to the consolidated financial statements............................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Chapman Capital Management Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Chapman
Capital Management Holdings, Inc. (a Maryland corporation) and Subsidiary as of
December 31, 1998, and the related consolidated statements of operations,
changes in stockholders' equity, and cash flows for the two years ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Chapman
Capital Management Holdings, Inc. and Subsidiary as of December 31, 1998, and
the results of their operations and their cash flows for the two years ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ARTHUR ANDERSEN LLP
Baltimore, Maryland,
March 5, 1999
F-2
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents............................................................................................. $4,241,523
Investments........................................................................................................... 150,000
Management fees receivable:
From proprietary funds.............................................................................................. 107,086
From individually managed accounts.................................................................................. 256,855
Receivables from affiliates........................................................................................... 120,047
Advances to officer................................................................................................... 118,547
Office equipment, net................................................................................................. 20,805
Prepaids and other assets............................................................................................. 122,879
Intangible assets, net................................................................................................ 465,000
Deferred tax asset.................................................................................................... 45,000
----------
Total assets...................................................................................................... $5,647,742
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses................................................................................. $ 171,923
Due to affiliated company............................................................................................. 284,906
Due to officer........................................................................................................ --
Income taxes payable.................................................................................................. --
Noncompete agreement obligation....................................................................................... 150,000
----------
Total liabilities................................................................................................. 606,829
----------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 20,000,000 shares authorized, 3,351,334 issued and outstanding....................... 3,351
Additional paid-in capital.......................................................................................... 5,238,883
Accumulated deficit................................................................................................. (201,321)
----------
Total stockholders' equity........................................................................................ 5,040,913
----------
Total liabilities and stockholders' equity........................................................................ $5,647,742
----------
----------
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Advisory and administrative fees.................................................... $ 3,136,456 $ 2,284,054
Other income........................................................................ 81,870 2,561
------------ ------------
Total revenues.................................................................... 3,218,326 2,286,615
------------ ------------
OPERATING EXPENSES:
Management fees..................................................................... 1,177,681 869,355
Compensation and benefits........................................................... 856,945 594,993
Professional fees................................................................... 179,427 195,066
Administrative support.............................................................. 72,000 72,000
Interest expense.................................................................... 25,802 13,522
Amortization expense................................................................ 228,000 228,000
Other operating expenses............................................................ 829,471 225,578
------------ ------------
Total operating expenses.......................................................... 3,369,326 2,198,514
------------ ------------
(Loss) income before income tax (benefit) allocation.............................. (151,000) 88,101
INCOME TAX (BENEFIT) ALLOCATION....................................................... (45,000) 40,000
------------ ------------
Net (loss) income................................................................... $ (106,000) $ 48,101
------------ ------------
------------ ------------
BASIC AND DILUTIVE EARNINGS PER SHARE DATA:
Net (loss) income................................................................... $ (.04) $ .02
------------ ------------
------------ ------------
Weighted Average Shares Outstanding................................................... 2,810,839 2,486,543
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL STOCKHOLDERS'
COMMON PAID-IN ACCUMULATED (DEFICIT)
STOCK CAPITAL DEFICIT EQUITY
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1996.................................. $ 2,487 $ -- $ (143,422) $ (140,935)
Net income................................................ -- -- 48,101 48,101
----------- ------------ ------------ ------------
BALANCE, December 31, 1997.................................. 2,487 -- (95,321) (92,834)
Proceeds from initial public offering..................... 864 5,238,883 -- 5,239,747
Net loss.................................................. -- -- (106,000) (106,000)
----------- ------------ ------------ ------------
BALANCE, December 31, 1998.................................. $ 3,351 $ 5,238,883 $ (201,321) $5,040,913
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.................................................................... $ (106,000) $ 48,101
Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:
Depreciation and amortization...................................................... 231,455 231,982
Deferred tax asset................................................................. (45,000) --
Effect of changes in assets and liabilities-
Management fees receivable....................................................... (110,939) (71,508)
Receivable from affiliates....................................................... (84,514) (30,654)
Advances to officer.............................................................. (46,547) (84,200)
Prepaids and other assets........................................................ (114,234) (4,326)
Accounts payable and accrued expenses............................................ 20,926 134,295
Due to affiliated company........................................................ (515,766) 151,104
Income taxes payable............................................................. (48,000) (134,000)
------------ -----------
Net cash (used in) provided by operating activities............................ (818,619) 240,794
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of office equipment......................................................... (19,056) (5,250)
Sale of investments.................................................................. 9,247 --
Purchase of investments.............................................................. (150,000) (29)
------------ -----------
Net cash used in investing activities.......................................... (159,809) (5,279)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering................................................ 6,053,335 --
Issuance costs....................................................................... (813,588) --
Proceeds from officer................................................................ (28,473) (85,000)
Payment of noncompete agreement...................................................... -- (150,000)
------------ -----------
Net cash provided by (used in) financing activities............................ 5,211,274 (235,000)
------------ -----------
NET INCREASE IN CASH................................................................... 4,232,846 515
CASH, beginning of year................................................................ 8,677 8,162
------------ -----------
CASH, end of year...................................................................... $ 4,241,523 $ 8,677
------------ -----------
------------ -----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. ORGANIZATION:
Chapman Capital Management Holdings, Inc. is an investment advisory and
investment management company.
During February 1998, Chapman Capital Management, Inc. became the
wholly-owned subsidiary of Chapman Capital Holdings Management, Inc. ("CCMH,"
the "Company"), a newly formed corporation. CCMH was the wholly-owned subsidiary
of The Chapman Co. until it spun off from The Chapman Co. as part of the initial
public offering (IPO) of Chapman Holdings, Inc. on February 26, 1998.
The Chapman Co., an affiliated company pays for routine operating expenses
and provides certain management, data processing, accounting and administrative
services to the Company, for which The Chapman Co. is reimbursed. As of December
31, 1998, the Company owed The Chapman Co. $284,906 for the costs of these
services. The Chapman Co. also pays for salary and benefit expenses of which the
Company is allocated a portion. The Chapman Co. allocates those salary and
benefit expenses to the Company based on actual salaries related to the Company
and based on cost sharing arrangements approved by the Board of Directors. These
financial statements may not necessarily be indicative of the financial results
that would have existed had the Company been operated as an unaffiliated
corporation.
2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
The accompanying financial statements are presented on the accrual basis of
accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
ACQUISITION
In December 1996, the Company acquired DEM-MET, a tax-exempt pooled interest
trust for qualified employee benefit plans. As part of the acquisition of this
trust, the Company entered into a noncompete agreement for $300,000 and paid
$640,000 in costs related to acquiring the trust. These amounts are included in
intangible assets (see Note 4).
During 1998 and 1997, the Company paid Bankers Trust management fees for
managing the trust. Those fees are included in management fees in the
accompanying statements of operations for the years ended December 31, 1998 and
1997.
CASH AND CASH EQUIVALENTS
Included in cash and cash equivalents is $4,046,298 of cash invested in the
Chapman U.S. Treasury Money Fund, a fund managed by Chapman Capital Management,
Inc.
F-7
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INVESTMENTS
Investments consist of common stock of another company. As this company does
not have a readily available market, management believes costs approximate
market value.
OFFICE EQUIPMENT
Office equipment is depreciated using the straight-line method over the
estimated useful life of 3 to 5 years. As of December 31, 1998, accumulated
depreciation was $10,257.
FINANCIAL INSTRUMENTS
The carrying amounts reported in the consolidated balance sheet for cash,
investments, receivables, accounts payable and accrued expenses approximate fair
value.
EARNINGS PER SHARE
As of December 31, 1997, the Company adopted Financial Accounting Standards
Board Statement No. 128, "Earnings Per Share" (SFAS No. 128). Under SFAS No.
128, a company must disclose basic earnings per share (the principal difference
being that common stock equivalence would not be considered in the compilation
of basic earnings per share) and diluted earnings per share. The Company adopted
this pronouncement which required restatement of all prior periods presented.
Earnings per share are based on the weighted average number of common and
dilutive common equivalent shares outstanding during the period the calculation
is made. Common equivalent shares consist of shares issuable upon the exercise
of stock warrants, using the treasury stock method. The weighted average shares
outstanding as of December 31, 1998 and 1997, are the weighted average common
shares outstanding of 2,810,839 and 2,486,543, respectively.
SEGMENT REPORTING
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" as of December 31, 1998, and has determined
that the Company has only one segment, investment advisory and investment
management services. The Company came to this conclusion because the Company
operates in one regulatory environment and has only one management group that
manages the entire Company. Information on the Company's operating results are
provided as one segment to the key decision-maker to make decisions.
COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income" and
has determined that the Company does not have any comprehensive income
adjustments for the periods presented, and therefore, comprehensive income
equals net income.
INCOME TAXES
The Company accounts for income taxes under the separate company liability
method, whereby deferred income taxes are recognized for the tax consequences of
temporary differences by applying
F-8
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
enacted statutory tax rates applicable to future years to differences between
the financial statement carrying amounts and the tax bases of existing assets
and liabilities.
Prior to the Company being spun off from its Parent, the Company was
included in the consolidated Federal income tax return of its Parent on a cash
basis. The Parent allocated Federal tax expense to the Company based on its
portion of consolidated taxable income and its taxes on that income if the
Company were taxed on a stand-alone basis.
3. INITIAL PUBLIC OFFERING:
On August 14, 1998, the Company consummated an initial public offering (the
Offering) of its common stock, pursuant to which the Company sold 864,791 shares
and received net proceeds, after offering costs, of approximately $5,240,000.
4. INTANGIBLE ASSETS:
Intangible assets consists of a noncompete agreement and start-up costs (see
Note 2). The $300,000 noncompete agreement is being amortized over 3 years, the
term of the agreement. The $640,000 in acquisition costs is being amortized over
5 years. The noncompete agreement will be paid in two equal installments.
Accumulated amortization as of December 31, 1998 and 1997, is $475,000 and
$247,000, respectively.
5. COMMON STOCK:
The Company effected a 25% stock split effected as a stock dividend. As
such, all share data related to the Company prior to the stock split have been
restated.
6. TRANSACTIONS WITH AFFILIATES:
The Company provides investment advisory and administrative services to The
Chapman Funds, Inc. (the Funds), an affiliated group of mutual funds, under an
investment advisory and administrative services agreement which sets forth the
services to be provided and the fees to be charged. The agreement also provides
that expense reimbursements be made to the Funds for specified expenses and to
the extent that any Funds' expenses exceed specified limitations. Included in
the accompanying statements of operations for the years ended December 31, 1998
and 1997, are advisory management fees related to The Chapman Funds totaling
$259,991 and $144,935, respectively.
The Company provided investment advisory and administrative services to DEM,
Inc. (DEM), a registered non-diversified closed-ended management investment
company, under an investment advisory and administrative services agreement
which sets forth the services to be provided and the fees to be charged. During
the fourth quarter of 1998, DEM was dissolved. Included in the accompanying
statements of operations for the years ended December 31, 1998 and 1997, is an
advisory management fee related to DEM totaling $149,669 and $138,614,
respectively.
Included in management fees receivable as of December 31, 1998, is $107,086
due from proprietary funds for services provided under the above described
agreement.
F-9
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
6. TRANSACTIONS WITH AFFILIATES: (CONTINUED)
Included in receivables from affiliates as of December 31, 1998, is $31,976
due from Chapman Insurance Agency ("CIA") for expenses paid on their behalf.
Also included in receivables from affiliates as of December 31, 1998, is $88,071
due from newly created funds using the DEM strategy. The receivable from these
new funds represents reimbursement of start-up costs paid on their behalf.
As of December 31, 1998, the Company had outstanding advances to the
majority stockholder of the Company of $118,547.
As of December 31, 1998 and 1997, the Company owes The Chapman Co. $284,906,
which is recorded as due to affiliated company in the accompanying consolidated
balance sheets.
The Chapman Co. has entered into an agreement in which it leases furniture
and equipment from Chapman Limited Partnership, an entity in which certain
officers and stockholders of The Chapman Co. are partners. The Chapman Co.
allocates a portion of the $9,846 monthly payment to the Company based on the
space used by the Company. The Chapman Co. allocated $59,076 and $39,384 in
lease expense for the years ended December 31, 1998 and 1997, respectively.
These amounts are included in other operating expenses in the statements of
operations for the years ended December 31, 1998 and 1997, respectively.
7. INCOME TAXES:
A reconciliation of the statutory income taxes to the recorded income tax
(benefit) provision for the years ended December 31, 1998 and 1997, is as
follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Statutory tax (at 35% rate)............................................ $ (53,000) $ 30,800
Effect of state income taxes........................................... (7,500) 4,000
Effect of graduated tax rate........................................... 5,500 --
Effect of permanent book to tax differences............................ 10,000 5,200
---------- ---------
Income tax (benefit) provision......................................... $ (45,000) $ 40,000
---------- ---------
---------- ---------
</TABLE>
The components of the income tax (benefit) provision for the years ended
December 31, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
1998 1997
---------- ---------
<S> <C> <C>
Current................................................................ $ -- $ 40,000
Deferred............................................................... (45,000) --
Discontinued operations................................................ -- --
---------- ---------
Income tax (benefit) provision......................................... $ (45,000) $ 40,000
---------- ---------
---------- ---------
</TABLE>
The Company's deferred income tax assets as of December 31, 1998, consists
of the following:
<TABLE>
<S> <C>
Deferred tax asset:
NOL carryforward................................................. $ 25,000
Other............................................................ 20,000
---------
Net deferred tax asset recorded on the consolidated balance
sheet........................................................ $ 45,000
---------
---------
</TABLE>
F-10
<PAGE>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
8. STATEMENT OF CASH FLOWS--SUPPLEMENTAL DISCLOSURE:
Supplemental cash flow disclosures for the years ended December 31, 1998 and
1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Dividend reinvestment in affiliate...................................... $ -- $ 29
Cash paid for:
Interest.............................................................. 25,495 5,000
Income taxes.......................................................... 114,000 174,000
</TABLE>
9. CONCENTRATION OF CREDIT RISKS:
One client accounted for 59% of the Company's advisory and administrative
fees during the year ended December 31, 1998. Two clients accounted for 72% of
the Company's advisory and administrative fees for the year ended December 31,
1997. As of December 31, 1998, receivables due from this client was $67,746.
10. STOCK OPTIONS PLANS:
In 1998, the Company established the Chapman Capital Management Holdings,
Inc. Omnibus Stock Plan (the Plan) to enable the Company to grant equity
compensation to the Company's directors, officers, employees and consultants.
Under the Plan, 150,000 shares of common stock have been reserved for issuance
upon exercise of stock options granted. The price per share of each option
exercised will be determined by the Compensation Committee of the Board of
Directors. No options have been issued pursuant to this Plan as of December 31,
1998.
F-11
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person is authorized to give any information
or make any representations in connection with this offering other than those
contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or the Agent. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
by this Prospectus, or an offer to sell or a solicitation of an offer to buy any
securities by anyone in any jurisdiction in which such offer or solicitation is
not authorized or is unlawful. The delivery of this Prospectus shall not, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date of this Prospectus.
[LOGO]
CHAPMAN CAPITAL
MANAGEMENT HOLDINGS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
THE CHAPMAN CO.
March 23, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2-418 of the Maryland General Corporation Law (the "MGCL") provides
that the Registrant may indemnify any director who was, is or is threatened to
be made a named defendant or respondent to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director of the
Registrant, or while a director, is or was serving at the request of the
Registrant as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
other enterprise or employee benefit plan, against reasonable expenses
(including attorneys' fees), judgments, penalties, fines and settlements,
actually incurred by the director in connection with such action, suit or
proceeding, unless it is established that: (i) the act or omission of the
director was material to the matter giving rise to such action, suit or
proceeding, and was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the director actually received an improper personal
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful. If the action, suit or proceeding was one by or in the
right of the Registrant, no indemnification shall be made with respect to any
action, suit or proceeding in which the director shall have been adjudged to be
liable to the Registrant. A director also may not be indemnified with respect to
any action, suit or proceeding charging improper personal benefit to the
director, whether or not involving action in the director's official capacity,
in which the director is adjudged to be liable on the basis that a personal
benefit was improperly received. Unless limited by the Registrant's Charter: (i)
a court of appropriate jurisdiction, upon application of a director, may order
such indemnification as the court shall deem proper if it determines that the
director is fairly and reasonably entitled to indemnification in view of all of
the relevant circumstances, regardless of whether the director has met the
standards of conduct required by MGCL Section 2-418; and (ii) the Registrant
shall indemnify a director if such director is successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above.
However, with respect to any action, suit or proceeding by or in the right of
the Registrant or in which the director was adjudged to be liable on the basis
that a personal benefit was improperly received, the Registrant may only
indemnify the director for any expenses (including attorneys' fees) incurred in
connection with such action, suit or proceeding.
MGCL Section 2-418 further provides that unless limited by the Registrant's
Charter, the Registrant: (i) shall (a) indemnify an officer of the Registrant if
such officer is successful on the merits or otherwise in defense of any action,
suit or proceeding referred to above, and (b) indemnify an officer of the
Registrant if a court of appropriate jurisdiction, upon application of an
officer, shall order indemnification; (ii) may indemnify and advance expenses to
an officer, employee or agent of the Registrant to the same extent that it may
indemnify directors; and (iii) may indemnify and advance expenses to an officer,
employee or agent who is not a director to such further extent, consistent with
law, as may be provided by the Charter, Bylaws, general or specific action of
the Registrant's Board of Directors or contract.
The Charter of the Registrant, provides that the Registrant shall indemnify
its currently acting and its former directors and officers against any and all
liabilities and expenses incurred in connection with their services in such
capacities to the maximum extent permitted by the MGCL, as from time to time
amended. If approved by the Board of Directors, the Registrant may indemnify its
employees, agents and persons who serve and have served, at its request as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture or other enterprise to the extent determined to be
appropriate by the Board of Directors. The Registrant shall advance expenses to
its directors and officers entitled to mandatory indemnification to the maximum
extent permitted by the MGCL and may in the discretion of the Board of Directors
advance expenses to employees, agents and others who may be granted
indemnification.
II-1
<PAGE>
The Registrant's Charter provides that, to the fullest extent permitted by
the MGCL, as amended or interpreted, no director or officer of the Registrant
shall be personally liable to the Registrant or its stockholders for monetary
damages in connection with events occurring at the time such person served as a
director or officer.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant estimates that expenses payable by it in connection with the
offering described in this Registration Statement will be as follows:
<TABLE>
<S> <C>
Printing and engraving expenses.................................................... $ 10,000
Accounting fees and expenses....................................................... 2,000
Legal fees and expenses............................................................ 2,000
Miscellaneous...................................................................... 5,000
---------
Total.......................................................................... $ 19,000
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the following securities were issued by
theCompany without registration under the Securities Act:
On January 8, 1998, the Company issued 1,989,235 shares of Common stock to
The Chapman Co. in exchange for all of the outstanding shares of capital stock
of Chapman Capital Management, Inc. This transaction was exempt from
registration under the Securities Act under Section 4(2) because it did not
involve a public offering. Such transaction was completed without an
underwriter.
On April 30, 1998, the Company issued 497,308 shares of Common Stock to its
stockholders of record as of April 29, 1998 as a stock dividend. This
transaction was exempt from registration under the Securities Act because it did
not involve the sale of a security.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement between the Company and The Chapman Co. (1)
1.2 Form of Qualified Independent Underwriter Agreement between the Company and Ferris Baker Watts
Incorporated (1)
1.3 Form of Escrow Agreement between the Company and UMB Bank, N.A (1)
3.1 Articles of Incorporation (2)
3.2 Bylaws (3)
4 Form of Common Stock Certificate (4)
5 Opinion of Venable, Baetjer and Howard, LLP (1)
10.1 Advisory and Administrative Services Agreement between Chapman Capital Management, Inc. and DEM
Equity Fund dated October 28, 1997 (2)
10.2 Advisory and Administrative Services Agreement between Chapman Capital Management, Inc. and The
Chapman Funds, Inc. dated April 30, 1997 (2)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.3 Advisory and Administrative Services Agreement between Chapman Capital Management, Inc. and DEM,
Inc. dated November 30, 1995 (2)
10.4 Chapman Capital Management Holdings, Inc. 1997 Omnibus Stock Plan (2)
10.5 Advisory Agreement for Separate Account dated June 1, 1995 (1)
10.6 Agreement & Declaration of Trust between Chapman Capital Management, Inc. and Bankers Trust Company
dated September 1996 (2)
10.7 Agreement between Bankers Trust Company and Chapman Capital Management, Inc. dated November 1, 1996
(2)
10.8 Agreement between Bankers Trust Company and Chapman Capital Management, Inc. dated November 1,
1996, Tremont Partners, Inc. and Stamberg Prestia, Ltd. (2)
10.9 Agreement between the Company and Chapman Holdings, Inc. as to Allocation of Shared Expenses dated
as of June 19, 1998 (1)
10.10 License Agreement between the Company. and Nathan A. Chapman, Jr. dated as of June 9, 1998 (1)
10.11 Lock-up Agreement between the Company and Nathan A. Chapman, Jr. dated December 28, 1997 (1)
10.12 $100,000 Promissory Note of Nathan A. Chapman, Jr. to the Company dated May 1, 1998 (4)
10.13 $285,587 Promissory Note of Nathan A. Chapman, Jr. to the Company dated March 11, 1998 (4)
21 Subsidiaries of Company (2)
23.1 Consent of Arthur Andersen, LLP (3)
23.2 Consent of Venable, Baetjer and Howard, LLP (included in Exhibit 5)
24 Power of Attorney (3)
27 Financial Data Schedule (3)
</TABLE>
- ------------------------
(1) Incorporated by reference to Pre-Effective Amendment 2 to the Company's
Registration Statement on Form SB-2 (File No. 333-51883) as filed with the
Securities and Exchange Commission on June 22, 1998.
(2) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (File No. 333-51883) as filed with the Securities and Exchange
Commission on May 5, 1998.
(3) Filed herewith.
(4) Incorporated by reference to the Company's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1998, as filed with the Securities and
Exchange Commission.
ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement;
II-3
<PAGE>
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement (or the most recent
post-effective amendment thereof); and notwithstanding the forgoing, any
increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of Prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
the volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any additional or changed material information with
respect to the plan of distribution.
(2) That, for the purpose of determining liability under the Securities
Act of 1933, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Post-Effective
Amendment 3 to the Registration Statement to be signed on its behalf by the
undersigned, in the city of Baltimore, state of Maryland, on March 23, 1999.
<TABLE>
<S> <C> <C>
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
By: /s/ NATHAN A. CHAPMAN, JR.
----------------------------------------
Nathan A. Chapman, Jr.
PRESIDENT AND CHAIRMAN OF THE BOARD
</TABLE>
In accordance with the requirements of the Securities Act of 1933, this
Post-Effective Amendment 3 to the Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE AND CAPACITY DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<S> <C> <C>
/s/ NATHAN A. CHAPMAN, JR.
- ------------------------------------------- President and Chairman of the Board March 23, 1999
Nathan A. Chapman, Jr. (Principal Executive Officer)
/s/ MARIA MARKHAM-THOMPSON Chief Financial Officer (Principal
- ------------------------------------------- Financial Officer and Principal March 23, 1999
Maria Markham-Thompson Accounting Officer)
The Entire Board of Directors
Nathan A. Chapman, Jr.
Theron Stokes
Earl U. Bravo
Robert L. Wallace
By: /s/ NATHAN A. CHAPMAN, JR.
-----------------------------------------
Nathan A. Chapman, Jr. March 23, 1999
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------------- --------------------------------------------------------------------------------------- -----------
<C> <S> <C>
3.2 By-laws of the Company.
23.1 Consent of Arthur Andersen LLP
24 Power of Attorney.
27 Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 3.2
MARCH 10, 1999
BYLAWS
OF
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.
The annual meeting of the stockholders of the Corporation shall be
held on such date within the month of May as may be fixed from time to time by
the Board of Directors. Not less than ten nor more than 90 days' written or
printed notice stating the place, day and hour of each annual meeting shall be
given in the manner provided in Section 1 of Article IX hereof. The business to
be transacted at the annual meetings shall include the election of directors,
consideration and action upon the reports of officers and directors, and any
other business within the power of the Corporation. All annual meetings shall be
general meetings at which any business may be considered without being specified
as a purpose in the notice unless otherwise required by law.
SECTION 2. SPECIAL MEETINGS CALLED BY CHAIRMAN OF THE BOARD, PRESIDENT OR
BOARD OF DIRECTORS.
At any time in the interval between annual meetings, special meetings
of stockholders may be called by the Chairman of the Board, or by the President,
or by the Board of Directors. Not less than ten days' nor more than 90 days'
written notice stating the place, day and hour of such meeting and the matters
proposed to be acted on thereat shall be given in the manner provided in Section
1 of Article IX. No business shall be transacted at any special meeting except
that specified in the notice.
SECTION 3. SPECIAL MEETING CALLED BY STOCKHOLDERS.
Upon the request in writing delivered to the Secretary by the
stockholders entitled to cast at least 25% of all the votes entitled to be cast
at the meeting, it shall be the duty of the Secretary to call forthwith a
special meeting of the stockholders. Such request shall state the purpose of
such meeting and the matters proposed to be acted on thereat, and no other
business shall be transacted at any such special meeting. No such meeting shall
be required to be called for the election of directors except under the
circumstances set forth in Section 10 of Article I or Sections 7(b) or 7(c) of
Article II of these Bylaws. The Secretary shall inform such stockholders of the
reasonably estimated costs of preparing and mailing the notice of the meeting,
and upon payment to the
<PAGE>
Corporation of such costs, the Secretary shall give not less than ten nor more
than 90 days' notice of the time, place and purpose of the meeting in the manner
provided in Section 1 of Article IX. Unless requested by stockholders entitled
to cast a majority of all the votes entitled to be cast at the meeting, a
special meeting need not be called to consider any matter which is substantially
the same as a matter voted on at any special meeting of the stockholders held
during the preceding 12 months.
SECTION 4. PLACE OF MEETINGS.
All meetings of stockholders shall be held at the principal office of
the Corporation in the State of Maryland or at such other place within the
United States as may be fixed from time to time by the Board of Directors and
designated in the notice.
SECTION 5. QUORUM.
At any meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of the votes thereat shall constitute a
quorum. In the absence of a quorum, the Chairman of the meeting or stockholders
present in person or by proxy acting by majority vote and without notice other
than by announcement at the meeting, may adjourn the meeting from time to time,
but not for a period exceeding 120 days after the original record date, until a
quorum shall attend.
SECTION 6. ADJOURNED MEETINGS.
A meeting of stockholders convened on the date for which it was called
(including one adjourned to achieve a quorum as above provided in Section 5 of
this Article) may be adjourned (in the manner provided in said Section 5) from
time to time without further notice other than by announcement at the meeting to
a date not more than 120 days after the original record date, and any business
may be transacted at any adjourned meeting which could have been transacted at
the meeting as originally called.
SECTION 7. VOTING.
A plurality of all the votes cast at a meeting of stockholders duly
called and at which a quorum is present shall be sufficient to elect a director.
Each share of stock may be voted for as many individuals as there are directors
to be elected and for whose election the share is entitled to be voted.
A majority of the votes cast at a meeting of stockholders, duly called
and at which a quorum is present, shall be sufficient to take or authorize
action upon any other matter which may properly come before the meeting, unless
more than a majority of votes cast is required by statute or by the Charter. The
Board of Directors may fix the record date for the determination of stockholders
entitled to vote in the manner provided in Article VIII, Section 3 of these
Bylaws. Unless otherwise provided in the Charter, each
2
<PAGE>
outstanding share of stock, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of stockholders.
SECTION 8. PROXIES.
A stockholder may vote the shares owned of record either in person or
by proxy. The proxy shall be in writing and shall be signed by the stockholder
or by the stockholder's duly authorized attorney-in-fact or be in such other
form as may be permitted by the Maryland General Corporation Law, including
documents conveyed by electronic transmission. A copy, facsimile transmission or
other reproduction of the writing or transmission may be substituted for the
original writing or transmission for any purpose for which the original
transmission could be used. Every proxy shall be dated, but need not be sealed,
witnessed or acknowledged. No proxy shall be valid after 11 months from its
date, unless otherwise provided in the proxy. In the case of stock held of
record by more than one person, any co-owner or co-fiduciary may execute the
proxy without the joinder of the co-owner(s) or co-fiduciary(ies), unless the
Secretary of the Corporation is notified in writing by any co-owner or
co-fiduciary that the joinder of more than one is to be required. At all
meetings of stockholders, the proxies shall be filed with and verified by the
Secretary of the Corporation, or, if the meeting shall so decide, by the
Secretary of the meeting.
SECTION 9. ORDER OF BUSINESS.
At all meetings of stockholders, any stockholder present and entitled
to vote in person or by proxy shall be entitled to require, by written request
to the Chairman of the meeting, that the order of business shall be as follows:
(1) Organization.
(2) Proof of notice of meeting or of waivers thereof. (The
certificate of the Secretary of the Corporation, or the affidavit of any other
person who mailed or published the notice or caused the same to be mailed or
published, shall be proof of service of notice.)
(3) Submission by Secretary of the Corporation to the Chairman of the
meeting of a list of the stockholders entitled to vote, present in person or by
proxy.
(4) A reading of unapproved minutes of preceding meetings and action
thereon.
(5) Reports.
(6) If an annual meeting, or a special meeting called for that
purpose, the election of directors.
3
<PAGE>
(7) Unfinished business.
(8) New business.
(9) Adjournment.
SECTION 10. REMOVAL OF DIRECTORS.
At any properly called annual or special stockholders' meeting, the
stockholders, by the affirmative vote of a majority of all the votes entitled to
be cast for the election of directors, may remove any director or directors from
office, with or without cause, and may elect a successor or successors to fill
any resulting vacancies for the remainder of the term of the removed directors.
SECTION 11. INFORMAL ACTION BY STOCKHOLDERS.
Any action required or permitted to be taken at any meeting of
stockholders may be taken without a meeting if a consent in writing setting
forth such action is signed by all the stockholders entitled to vote thereon, a
written waiver of any right to dissent is signed by each stockholder entitled to
notice of, but not the right to vote on, such action and such consent is filed
with the records of stockholders' meetings.
SECTION 12. ADVANCE NOTICE OF MATTERS TO BE PRESENTED AT AN ANNUAL MEETING OF
STOCKHOLDERS.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting as set forth
below. To be properly brought before an annual meeting, such business must (1)
be specified in the notice of the meeting (or any supplement thereto) given by
the Corporation pursuant to Section 1 of Article IX of these bylaws, or (2) be
brought before the meeting by or under the direction of the Board of Directors
(or the Chairman of the Board or the President), or (3) be properly brought
before the meeting by a stockholder. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary. To be timely, such stockholder's notice must be delivered to or
mailed and received by the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 120th day and not
later than the close of business on the 90th day prior to the date of the annual
meeting; provided, however, that in the event that during the prior year the
Corporation did not hold an annual meeting, or if the date of the annual meeting
has changed more than 30 days from the first anniversary of the prior year's
annual meeting (other than as a result of adjournment), than such stockholder's
notice must be delivered to or mailed and received by the Secretary at the
principal executive offices of the Corporation not earlier than the close of
business on the 120th day prior to such annual meeting and not later than the
close of business on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which
4
<PAGE>
public announcement of the date of such annual meeting is first made. For
purposes of this section, "public announcement" shall mean disclosure in a press
release reported by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of
the Securities Exchange Act of 1934, as amended. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address of the stockholder proposing
such business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 12.
The Chairman of the meeting shall have the authority, if the facts
warrant, to determine that business was not properly brought before the meeting
in accordance with the provisions of this Section 12, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
SECTION 13. ADVANCE NOTICE OF NOMINEES FOR DIRECTORS.
Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors at any meeting of
stockholders. Nominations of persons for election to the Board of Directors of
the Corporation may be made at an annual meeting of stockholders or at a special
meeting of stockholders as to which the notice of meeting provides for election
of directors, by or under the direction of the Board of Directors, or by any
nominating committee or person appointed by the Board of Directors, or by any
stockholder of the Corporation entitled to vote for the election of directors at
the meeting who complies with the notice procedures set forth in this Section
13. Such nominations, other than those made by or under the direction of the
Board of Directors or by any nominating committee or person appointed by the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary. In the event that such stockholder's notice pertains to an annual
meeting of stockholders, to be timely, such stockholder's notice must be
delivered to or mailed and received by the Secretary at the principal executive
offices of the Corporation not earlier than the close of business on the 120th
day and not later than the close of business on the 90th day prior to the date
of the annual meeting; provided, however, that in the event that during the
prior year the Corporation did not hold an annual meeting, or if the date of the
annual meeting has changed more than 30 days from the first anniversary of the
prior year's annual meeting (other than as a result of adjournment), than such
stockholder's notice must be delivered to or mailed and received by the
Secretary at the principal executive offices of the
5
<PAGE>
Corporation not earlier than the close of business on the 120th day prior to
such annual meeting and not later than the close of business on the later of the
90th day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such annual meeting is first made. In the
event that such stockholder's notice pertains to a special meeting of
stockholders, to be timely, such stockholder's notice must be delivered to or
mailed and received by the Secretary at the principal executive offices of the
Corporation not later than the close of business on the later of the 90th day
prior to such special meeting or the 10th day following the day on which public
announcement of the date of such special meeting is first made. For purposes of
this section, "public announcement" shall mean disclosure in a press release
reported by the Dow Jones News Service, Associated Press or comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Securities Exchange Act of 1934, as amended. Such stockholder's notice shall set
forth: (a) as to each person whom the stockholder proposes to nominate for
election as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of stock of the Corporation which
are beneficially owned by the person, and (iv) any other information relating to
the person that is required to be disclosed in solicitations for proxies for
election of directors pursuant to the rules and regulations under the Securities
Exchange Act of 1934; and (b) as to the stockholder giving the notice, (i) the
name and address of the stockholder and (ii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein.
The Chairman of the meeting shall have the authority, if the facts
warrant, to determine that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
ARTICLE II
DIRECTORS
SECTION 1. POWERS.
The business and affairs of the Corporation shall be managed under the
direction of its Board of Directors. All powers of the Corporation may be
exercised by or under the authority of the Board of Directors except as
conferred on or reserved to the stockholders by law, by the Charter or by these
Bylaws. A director need not be a stockholder. The Board of Directors shall keep
minutes of its meetings and full and fair accounts of its transactions.
6
<PAGE>
SECTION 2. NUMBER; TERM OF OFFICE.
The number of directors of the Corporation shall be not less than
three or the same number as the number of stockholders (or one if there is no
stockholder), whichever is less; provided, however, that such number may be
increased and thereafter decreased from time to time by vote of a majority of
the entire Board of Directors. The number of directors shall not exceed ten
(10). The first directors of the Corporation shall hold their office until the
first annual meeting of the Corporation, or until their successors are elected
and qualify, and thereafter the directors shall hold office for the term of one
year, or until their successors are elected and qualify.
SECTION 3. ANNUAL MEETING; REGULAR MEETINGS.
As soon as practicable after each annual meeting of stockholders, the
Board of Directors shall meet for the purpose of organization and the
transaction of other business. No notice of the annual meeting of the Board of
Directors need be given if it is held immediately following the annual meeting
of stockholders and at the same place. Other regular meetings of the Board of
Directors may be held at such times and at such places, within or without the
State of Maryland, as shall be designated in the notice for such meeting by the
party making the call. All annual and regular meetings shall be general
meetings, and any business may be transacted thereat.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the
Chairman of the Board or the President, or by a majority of the directors.
SECTION 5. QUORUM; VOTING.
A majority of the Board of Directors shall constitute a quorum for the
transaction of business at every meeting of the Board of Directors; but, if at
any meeting there be less than a quorum present, a majority of those present may
adjourn the meeting from time to time, but not for a period exceeding ten days
at any one time or 60 days in all, without notice other than by announcement at
the meeting, until a quorum shall attend. At any such adjourned meeting at which
a quorum shall be present, any business may be transacted which might have been
transacted at the meeting as originally called. Except as hereinafter provided
or as otherwise provided by the Charter or by law, directors shall act by a vote
of a majority of those members in attendance at a meeting at which a quorum is
present.
SECTION 6. NOTICE OF MEETINGS.
Notice of the time and place of every regular and special meeting of
the Board of Directors shall be given to each director in the manner provided in
Section 2 of
7
<PAGE>
Article IX hereof. Subsequent to each Board meeting, and as soon as practicable
thereafter, each director shall be furnished with a copy of the minutes of said
meeting. At least 24 hours' notice shall be given of all meetings. The purpose
of any meeting of the Board of Directors need not be stated in the notice.
SECTION 7. VACANCIES.
(a) If the office of a director becomes vacant for any reason,
including increase in the size of the Board, such vacancy may be filled by the
Board by a vote of a majority of directors then in office, although such
majority is less than a quorum.
(b) If the vacancy occurs as a result of the removal of a director,
the stockholders may elect a successor at the meeting at which the removal
occurs.
(c) If the entire Board of Directors shall become vacant, any
stockholder may call a special meeting in the same manner that the Chairman of
the Board or the President may call such meeting, and directors for the
unexpired terms may be elected at such special meeting in the manner provided
for their election at annual meetings.
(d) A director elected by the Board of Directors to fill a vacancy
shall serve until the next annual meeting of stockholders and until a successor
is elected and qualifies. A director elected by the stockholders to fill a
vacancy shall serve for the unexpired term and until a successor is elected and
qualifies.
SECTION 8. RULES AND REGULATIONS.
The Board of Directors may adopt such rules and regulations for the
conduct of its meetings and the management of the affairs of the Corporation as
it may deem proper and not inconsistent with the laws of the State of Maryland,
these Bylaws and the Charter.
SECTION 9. EXECUTIVE COMMITTEE.
The Board of Directors may constitute an Executive Committee, composed
of at least two directors, from among its members. The Executive Committee shall
hold office at the pleasure of the Board of Directors. Between sessions of the
Board of Directors, such Committee shall have all of the powers of the Board of
Directors in the management of the business and affairs of the Corporation,
except those powers specifically denied by law. If any position on the Executive
Committee becomes vacant, or if the number of members is increased, such vacancy
may be filled by the Board of Directors. The taking of any action by the
Executive Committee shall be conclusive evidence that the Board of Directors was
not in session at the time of such action. The Executive Committee shall hold
formal meetings and keep minutes of all of its proceedings. A copy of such
minutes shall, after approval by the members of the
8
<PAGE>
Committee, be sent to all directors as a matter of information. Any action taken
by the Executive Committee within the limits permitted by law shall have the
force and effect of Board action unless and until revised or altered by the
Board. The presence of not less than a majority of the Committee shall be
necessary to constitute a quorum. Action may be taken without a meeting if a
unanimous written consent is signed by all of the members of the Committee, and
if such consent is filed with the records of the Committee. The Executive
Committee shall have the power to elect one of its members to serve as its
Chairman unless the Board of Directors shall have designated such Chairman.
SECTION 10. COMPENSATION.
The directors may receive a stated salary or an attendance fee for
each meeting of the Board of Directors or any committee thereof attended, plus
reimbursement of reasonable expenses of attendance. The amount of the salary or
attendance fee and any entitlement to reimbursement of expenses shall be
determined by resolution of the Board; provided, however, that nothing herein
contained shall be construed as precluding a director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 11. PLACE OF MEETINGS.
Regular or special meetings of the Board may be held within or without
the State of Maryland, as the Board may from time to time determine. The time
and place of meeting may be fixed by the party calling the meeting.
SECTION 12. INFORMAL ACTION BY THE DIRECTORS.
Any action required or permitted to be taken at any meeting of the
Board may be taken without a meeting, if a written consent to such action is
signed by all members of the Board and such consent is filed with the minutes of
the Board.
SECTION 13. TELEPHONE CONFERENCE.
Members of the Board of Directors or any committee thereof may
participate in a meeting of the Board or such committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
9
<PAGE>
ARTICLE III
OFFICERS
SECTION 1. IN GENERAL.
The Board of Directors may choose a Chairman of the Board from among
the directors. The Board of Directors shall elect a President, a Treasurer, a
Secretary, and may elect one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers as the Board may from time to time deem appropriate. All
officers shall hold office only during the pleasure of the Board or until their
successors are chosen and qualify. Any two of the above offices, except those of
President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity
when such instrument is required to be executed, acknowledged or verified by any
two or more officers. The Board of Directors may from time to time appoint such
other agents and employees with such powers and duties as the Board may deem
proper. In its discretion, the Board of Directors may leave unfilled any offices
except those of President, Treasurer and Secretary.
SECTION 2. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if one is elected, shall have the
responsibility for the implementation of the policies determined by the Board of
Directors and for the administration of the business affairs of the Corporation.
The Chairman shall preside over the meetings of the Board and of the
stockholders if present at the meeting. The Chairman shall be the Chief
Executive Officer of the Corporation if so designated by resolution of the
Board.
SECTION 3. PRESIDENT.
The President shall have the responsibility for the active management
of the business and general supervision and direction of all of the affairs of
the Corporation. In the absence of a Chairman of the Board, the President shall
preside over the meetings of the Board and of the stockholders if present at the
meeting, and shall perform such other duties as may be assigned by the Board of
Directors or the Executive Committee. The President shall have the authority on
the Corporation's behalf to endorse securities owned by the Corporation and to
execute any documents requiring the signature of an executive officer. The
President shall perform such other duties as the Board of Directors may direct
and shall be the Chief Executive Officer of the Corporation unless the Chairman
of the Board is so designated by resolution of the Board.
SECTION 4. VICE PRESIDENTS.
The Vice Presidents, in the order of priority designated by the Board
of Directors, shall be vested with all the power and may perform all the duties
of the
10
<PAGE>
President in the latter's absence. They may perform such other duties as may be
prescribed by the Board of Directors, the Executive Committee or the President.
SECTION 5. TREASURER.
The Treasurer shall have general supervision over the Corporation's
finances, and shall perform such other duties as may be assigned by the Board of
Directors or the President. Unless the Board designates another officer, the
Treasurer shall be the Chief Financial Officer of the Corporation. If required
by resolution of the Board, the Treasurer shall furnish a bond (which may be a
blanket bond) with such surety and in such penalty for the faithful performance
of duty as the Board of Directors may from time to time require, the cost of
such bond to be paid by the Corporation.
SECTION 6. SECRETARY.
The Secretary shall keep the minutes of the meetings of the
stockholders and of the Board of Directors and shall attend to the giving and
serving of all notices of the Corporation required by law or these Bylaws. The
Secretary shall maintain at all times in the principal office of the Corporation
at least one copy of the Bylaws with all amendments to date, and shall make the
same, together with the minutes of the meeting of the stockholders, the annual
statement of affairs of the Corporation and any voting trust or other
stockholders agreement on file at the office of the Corporation, available for
inspection by any officer, director or stockholder during reasonable business
hours. The Secretary shall perform such other duties as may be assigned by the
Board of Directors.
SECTION 7. ASSISTANT TREASURER AND SECRETARY.
The Board of Directors may designate from time to time Assistant
Treasurers and Secretaries, who shall perform such duties as may from time to
time be assigned to them by the Board of Directors or the President.
SECTION 8. COMPENSATION; REMOVAL; VACANCIES.
The Board of Directors shall have power to fix the compensation of all
officers of the Corporation. It may authorize any committee or officer, upon
whom the power of appointing subordinate officers may have been conferred, to
fix the compensation of such subordinate officers. The Board of Directors shall
have the power at any regular or special meeting to remove any officer if, in
the judgment of the Board, the best interests of the Corporation will be served
by such removal. The Board of Directors may authorize any officer to remove
subordinate officers. The Board of Directors may authorize the Corporation's
employment of an officer for a period in excess of the term of the Board. The
Board of Directors at any regular or special meeting shall have power to fill a
vacancy occurring in any office for the unexpired portion of the term.
11
<PAGE>
SECTION 9. SUBSTITUTES.
The Board of Directors may, from time to time in the absence of any
one of its officers or at any other time, designate any other person or persons
on behalf of the Corporation to sign any contracts, deeds, notes or other
instruments in the place or stead of any of such officers, and may designate any
person to fill any one of said offices, temporarily or for any particular
purpose; and any instruments so signed in accordance with a resolution of the
Board shall be the valid act of the Corporation as fully as if executed by any
regular officer.
ARTICLE IV
RESIGNATION
Any director or officer may resign from office at any time. Such
resignation shall be made in writing and shall take effect from the time of its
receipt by the Corporation, unless some time be fixed in the resignation, and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE V
COMMERCIAL PAPER, ETC.
All bills, notes, checks, drafts and commercial paper of all kinds to
be executed by the Corporation as maker, acceptor, endorser or otherwise, and
all assignments and transfers of stock, contracts, or written obligations of the
Corporation, and all negotiable instruments, shall be made in the name of the
Corporation and shall be signed by any one or more of the following officers as
the Board of Directors may from time to time designate: the Chairman of the
Board, the President, any Vice President, or the Treasurer, or such other person
or persons as the Board of Directors or Executive Committee may from time to
time designate.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall cover such period of 12
months as the Board of Directors may determine. In the absence of any such
determination, the accounts of the Corporation shall be kept on a calendar year
basis.
12
<PAGE>
ARTICLE VII.
SEAL
The seal of the Corporation shall be in the form of two concentric
circles inscribed with the name of the Corporation and the year and State in
which it is incorporated. The Secretary or Treasurer, or any Assistant Secretary
or Assistant Treasurer, shall have the right and power to attest to the
corporate seal. In lieu of affixing the corporate seal to any document, it shall
be sufficient to meet the requirements of any law, rule or regulation relating
to a corporate seal to affix the word "(SEAL)" adjacent to the signature of the
person authorized to sign the document on behalf of the Corporation.
ARTICLE VIII.
STOCK
SECTION 1. ISSUE.
Each stockholder shall be entitled to a certificate or certificates
which shall represent and certify the number and class of shares of stock owned
in the Corporation. Each certificate shall be signed by the Chairman of the
Board, the President or any Vice President and be countersigned by the Secretary
or any Assistant Secretary or the Treasurer or any Assistant Treasurer. The
signatures of the Corporation's officers and its corporate seal appearing on
stock certificates may be facsimiles if each such certificate is authenticated
by the manual signature of an officer of a duly authorized transfer agent. Stock
certificates shall be in such form, not inconsistent with law and the Charter,
as shall be approved by the Board of Directors. In case any officer of the
Corporation who has signed any certificate ceases to be an officer of the
Corporation, whether by reason of death, resignation or otherwise, before such
certificate is issued, then the certificate may nevertheless be issued by the
Corporation with the same effect as if the officer had not ceased to be such
officer as of the date of such issuance.
SECTION 2. TRANSFERS.
The Board of Directors shall have power and authority to make all such
rules and regulations as the Board may deem expedient concerning the issue,
transfer and registration of stock certificates. The Board of Directors may
appoint one or more transfer agents and/or registrars for its outstanding stock,
and their duties may be combined. No transfer of stock shall be recognized or
binding upon the Corporation until recorded on the books of the Corporation, or,
as the case may be, of its transfer agent and/or of its registrar, upon
surrender and cancellation of a certificate or certificates for a like number of
shares.
13
<PAGE>
SECTION 3. RECORD DATES FOR DIVIDENDS AND STOCKHOLDERS' MEETING.
The Board of Directors may fix a date not exceeding 90 days preceding
the date of any meeting of stockholders, any dividend payment date or any date
for the allotment of rights, as a record date for the determination of the
stockholders entitled to notice of and to vote at such meeting, or entitled to
receive such dividends or rights, as the case may be, and only stockholders of
record on such date shall be entitled to notice of and to vote at such meeting
or to receive such dividends or rights, as the case may be. In the case of a
meeting of stockholders, the record date shall be fixed not less than ten days
prior to the date of the meeting.
SECTION 4. NEW CERTIFICATES.
In case any certificate of stock is lost, stolen, mutilated or
destroyed, the Board of Directors may authorize the issuance of a new
certificate in place thereof upon such indemnity to the Corporation against loss
and such other terms and conditions as it may deem advisable. The Board of
Directors may delegate such power to any officer or officers of the Corporation
or to any transfer agent or registrar of the Corporation; but the Board of
Directors, such officer or officers or such transfer agent or registrar may, in
their discretion, refuse to issue such new certificate save upon the order of
some court having jurisdiction.
ARTICLE IX
NOTICE
SECTION 1. NOTICE TO STOCKHOLDERS.
Whenever by law or these Bylaws notice is required to be given to any
stockholder, such notice shall be in writing and may be given to each
stockholder by personal delivery or at the stockholder's residence or usual
place of business, or by mailing it, postage prepaid, and addressed to the
stockholder at the address appearing on the books of the Corporation or its
transfer agent. Such leaving or mailing of notice shall be deemed the time of
giving such notice.
SECTION 2. NOTICE TO DIRECTORS AND OFFICERS.
Whenever by law or these Bylaws notice is required to be given to any
director or officer, such notice may be given in any one of the following ways:
by personal delivery to such director or officer, by telephone communication
with such director or officer personally or by telephone facsimile transmission,
by telegram, cablegram, radiogram, first class mail or by delivery service
providing confirmation of delivery, addressed to such director or officer at the
address appearing on the books of the Corporation. The time when such notice
shall be consigned to a communication company for delivery shall be deemed to be
the time of the giving of such notice; if
14
<PAGE>
mailed, such notice shall be deemed given 48 hours after the time it is
deposited in the mail, postage prepaid.
SECTION 3. WAIVER OF NOTICE.
Notice to any stockholder or director of the time, place and/or
purpose of any meeting of stockholders or directors required by these Bylaws may
be dispensed with if such stockholder shall either attend in person or by proxy,
or if such director shall attend in person, or if such absent stockholder or
director shall, in writing filed with the records of the meeting either before
or after the holding thereof, waive such notice.
ARTICLE X
VOTING OF STOCK IN OTHER CORPORATIONS
Any stock in other corporations, which may from time to time be held
by the Corporation, may be represented and voted at any meeting of stockholders
of such other corporations by the President or a Vice-President or by proxy or
proxies appointed by the President or a Vice-President, or otherwise pursuant to
authorization thereunto given by a resolution of the Board of Directors adopted
by a vote of a majority of the directors.
ARTICLE XI.
INDEMNIFICATION
To the maximum extent permitted by the Maryland General Corporation
Law as from time to time amended, the Corporation may indemnify its currently
acting and its former directors, officers, agents and employees and those
persons who, at the request of the Corporation serve or have served another
corporation, partnership, joint venture, trust or other enterprise in one or
more of such capacities against any and all liabilities incurred in connection
with their services in such capacities to the extent determined appropriate by
the Board of Directors. To the extent required by the Charter or applicable law,
the Corporation shall indemnify such individuals.
ARTICLE XII.
AMENDMENTS
These Bylaws may be added to, altered, amended, repealed or suspended
by a vote of a majority of the Board of Directors at any regular or special
meeting of the Board.
15
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our firm included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
Baltimore, Maryland,
March 23, 1998
<PAGE>
Exhibit 24
CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned Director(s) and
Executive Officers of CHAPMAN CAPITAL MANAGEMENT HOLDINGS, INC., a Maryland
corporation, hereby constitute and appoint NATHAN A. CHAPMAN, JR., and EARL
U. BRAVO, SR. and either of them, the true and lawful agents and
attorney-in-fact of the undersigned with full power and authority in either
said agent and attorney-in-fact, to sign for the undersigned and in their
respective names as Directors and Executive Officers of Chapman Capital
Management Holdings, Inc., Post-Effective Amendment No. 3 to the Registration
Statement on Form SB-2, and any and all further amendments to said
Registration Statement, hereby ratifying and confirming all acts taken by
such agent and attorney-in-fact, as herein authorized.
Dated as of: March 18, 1999
/s/ NATHAN A. CHAPMAN, JR. /s/ THERON STOKES
- --------------------------------------- ---------------------------
Nathan A. Chapman, Jr., President Theron Stokes, Director
Chairman of the Board and
Director (Principal Executive Officer)
/s/ EARL U. BRAVO, SR. /s/ ROBERT L. WALLACE
- --------------------------------------- ---------------------------
Earl U. Bravo, Sr., Director Robert L. Wallace, Director
/s/ MARIA MARKHAM-THOMPSON
- ---------------------------------------
Maria Markham-Thompson,
Chief Financial Officer (Principal
Accounting and Financial Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements of the Company for the fiscal years ended December 31, 1998 and
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 4,241,523 0
<SECURITIES> 150,000 0
<RECEIVABLES> 602,535 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,161,937 0
<PP&E> 31,062 0
<DEPRECIATION> 10,257 0
<TOTAL-ASSETS> 5,647,742 0
<CURRENT-LIABILITIES> 606,829 0
<BONDS> 0 0
0 0
0 0
<COMMON> 3,351 0
<OTHER-SE> 5,037,562 0
<TOTAL-LIABILITY-AND-EQUITY> 5,647,742 0
<SALES> 3,128,326 2,286,615
<TOTAL-REVENUES> 3,128,326 2,286,615
<CGS> 3,369,326 2,198,514
<TOTAL-COSTS> 3,369,326 2,198,514
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 25,802 13,522
<INCOME-PRETAX> (151,000) 88,101
<INCOME-TAX> (45,000) 40,000
<INCOME-CONTINUING> (106,000) 48,101
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (106,000) 48,101
<EPS-PRIMARY> (0.04) 0.02
<EPS-DILUTED> 0 0
</TABLE>
